Ensuring Stable Domestic Consumption in China during the COVID-19 Pandemic

The COVID-19 pandemic has had a major negative impact on consumption in China. According to the National Bureau of Statistics, retail sales of consumer goods totaled 5.213 trillion yuan in the first two months of this year, down 20.5% from a year earlier. The massive reduction in the number of people going out travelling and shopping has seriously affected industries like hotels, catering, tourism, department stores, real estate, car sales, and movies, etc.

Despite the very palpable downturn in China’s markets, many industries have made efforts to realign their business strategies to tap into new growth opportunities. China's heavy investment in digital infrastructures such as 5G, Internet of things, big data and AI, has laid a solid foundation for accelerated economic recovery. China's tech and the digital economy are well-positioned to fill in the void created by flagging bricks and mortar retail. Innovative retail models such as Hema Fresh, Dingdong Fresh, Meituan "Safe Restaurant" and Jingdong Daojia are all poised to grow.

Encourage integrated online and offline consumption

Policy support: The "Opinions on Promoting Consumption Expansion, Capacity Enlargement, and Quality Improvement to Accelerate the Building of a Strong Domestic Market” jointly issued by the National Development and Reform Commission and other departments proposed to encourage the development of new models of integrated online and offline consumption.

During the peak of China’s COVID-19 outbreak, new retail became a driver of China's economic development. From January to February, China's online retail of physical goods increased by 3% year on year, accounting for 21.5% of all retail sales of consumer goods, up 5% year on year ^[1]. Bricks-and-mortar retailers are speeding up their online and home-delivery business through channels like third-party e-commerce platforms, live-streaming, WeChat Group, online mini-program mall, etc.

Among all the new consumption modes, live-streaming performed the best during the epidemic. According to data released by Taobao, the number of new stores on Taobao Live-streaming increased by 719% month-on-month in February, with about 30,000 new live-streaming stores opening each day. Since February, more than 100 new industries ^[2] are now represented on Taobao live streaming. Cloud house selling, cloud car selling, cloud supermarkets, cloud museums, and other "cloud businesses" are becoming increasingly popular.

Live-streaming has driven consumption in department stores and catering. Department retail group Yintai (Intime) launched a "BA Home Live-Streaming" campaign with Taobao. The number of online customers of in just 3 hours was equivalent to half a year's worth of customers in their bricks and mortar locations. The turnover of one live-streaming session was equal to a week's turnover in their bricks and mortar malls. Catering enterprises, including Xibei, Xiaolongkan, and Meizhoudongpo, have launched "Chef Live-Streaming" to interact with consumers while cooking. In about 10-minute of live-streaming, Xiaolongkan sold tens of thousands of pieces of self-heating hot pot, up 1200% year on year. 

A beauty advisor is selling cosmetics through live-streaming

Getting Back to Work

Policy support: China has implemented the phased reduction and exemption of three social security fees, including enterprise pension insurance, unemployment insurance, and industrial injury insurance, with a scale exceeding 500 billion yuan. 

In the early days of the outbreak, China began to arrange work resumption and introduced a series of policies to help companies and workers mitigate the impact of the epidemic. By March 28, the average work resumption rate of industrial enterprises above a designated size had reached 98.6%, and that of small and medium-sized enterprises had reached 76% ^[3].

Hand out consumer vouchers nationwide

Policy support: The Ministry of Commerce (MOFCOM) announced that it would step up efforts to guide more local governments to launch various types of consumption coupons to help stimulate consumption.

As of March 27, 39 regions across the country had issued consumption vouchers totaling billions of yuan. Catering, tourism, and retail are the key target sectors. Hangzhou is the city that issued the largest number of coupons. It handed out 1.68-billion-yuan in vouchers on March 27, and then issued another 150-million-yuan in vouchers on April 3, aiming to promote offline consumption. According to the statistics of the Hangzhou Bureau of Commerce, as of 16:30 on April 1, the consumer voucher policy has boosted local consumption by 949 million yuan ^[4].

Offline stores in Hangzhou prompts consumers to use consumption coupons.

As mobile payment is popular in China, many local governments choose to cooperate with Internet and e-commerce enterprises to issue online consumption coupons. For example, the Loyang district of Hefei city is cooperating with Alibaba. Chengyang district of Qingdao city is cooperating with Tencent. Qinhuai district of Nanjing city is cooperating with Meituan. 

Support takeaway service and contactless delivery

Policy support: The Ministry of Commerce and the National Health Commission have jointly issued the "Guidelines for the Prevention and Control of Operation and Service of Retail and Catering Enterprises during the COVID-19" in February. The guideline proposed to increase online delivery service and encourages delivery platforms to practice "contactless delivery."

Takeaway and delivery business has played an important role in boosting consumption during the epidemic. Data shows that the daily transaction volume of fresh food e-commerce Miss Fresh was about four times that of normal. Orders for Carrefour's home delivery business grew 597% year on year ^[5].

Meituan took the lead in launching the "contactless delivery" service nationwide, which reduced the chance of face-to-face contact between delivery drivers and consumers. It also introduced the “Safe Restaurant” assurance label. The “Safe restaurant” concept is a protocol developed to reduce the potential for chefs and delivery drivers to inadvertently spread COVID-19 involving regular temperature testing of staff, careful disinfection protocols, contactless delivery, etc. Data shows that restaurants with the “Safe Restaurant” label saw online visits increase by 20% month-on-month ^[6]. During the epidemic, Meituan's sales of food and necessities surged 400% in some cities ^[7]. 

Disclaimer: All images used are from the internet.