Asian Market Update Series starts with China
As a result of COVID-19 there is a growing focus among Chinese consumers on self-reflection and purpose as well as health and wellbeing.
These were among the learnings shared during an online seminar on China – the first in Asialink Business’ Asian Market Update Series.
The event was opened by Mukund Narayanamurti (CEO, Asialink Business) and moderated by Nick Henderson (Director, China Practice, Asialink Business).
Expert insights were provided by guest speakers that included:
- Mark Tanner – Managing Director, China Skinny
- Kitty Liu – Managing Director China, Blackmores
- Will Zhao – CEO, eCargo Holdings Ltd.
The seminar explored current consumer sentiment and behaviour trends, as China recovers from COVID-19, as well as E-commerce trends, including product categories, shifts in purchasing behaviour and supply chain and logistics challenges for Australian exporters.
China Skinny is one of China’s best-known and fastest growing marketing and research agencies. Mr Tanner highlighted that during the COVID-19 lockdown period there had been a very obvious pivot online by consumers.
Health and wellbeing
After the initial shock of the pandemic, Chinese consumers quickly started to focus on their health and wellbeing while confined to home, with services such as live-streamed gym classes spiking in popularity. The new levels of consumer interest in fitness was also reflected by Nike which reported a five per cent increase in revenue for the first quarter of 2020. Demand also surged for immunity products such as vitamins and supplements as well as for beauty products and healthy foods.
Mr Tanner told how there were clear signs that the Chinese now seemed more content to spend time at home cooking and entertaining even after restrictions were eased. As a result, there were new levels of interest from consumers in home-related products such as furniture, art, décor, small kitchen appliances, extending to pre-prepared meals, wine and pet care.
Blackmores commenced operations in China in 2013 and the bulk of its sales are online. As a result of the pandemic, Ms Liu told how research showed that 75 per cent of Chinese now cared more about their health. As a result, vitamins, probiotics and minerals have been the best performing category, with 37 per cent sales growth.
Creative consumer engagement
Ms Liu said making long-term commitments to the Chinese market were essential to building trust as were creative consumer engagements across multiple channels such as livestreamed marketing events and podcasts.
Through the Blackmore’s Institute the company also provides research-based information to targeted Chinese consumer groups such as ‘green papers’ for career women’. Ms Liu said where Chinese women had traditionally focussed more on the needs of the broader family, there had been a shift where women were also taking their own health more seriously.
eCargo is an ASX-listed company after acquiring 85 per cent of Metcash’s China business which provides E-commerce enabling and operations outsourcing services. Mr Zhao said those aged in the 45-55 bracket had contributed significantly to the notable increases in online business.
He also believes that many of those who became first-time online shoppers during the pandemic would stick as permanent online customers.
Image: Shuttersock
Mr Zhao told how major road closures during the lockdowns had exposed logistical issues in China, particularly delays associated with last mile delivery services, but bottlenecks largely disappeared once roads were reopened.
There are however broader supply chain challenges as a result of disruptions to shipping and air freight services. Handling and distribution costs have also increased. Mr Zhao said this was presenting difficulties for those products with a shelf-life, in particular fresh foods.
As a result, the recovery of imported produce was proving slow. There had been some modest increases in volume during May, with hope of a return to more normal levels by the end of 2020.
Emphasis on food safety
Over the longer-term, however, Mr Tanner said he believed the prospects for fresh imported products would remain strong. There would be greater emphasis on food safety, traceability, and origin and in this respect markets such as Australia and New Zealand enjoyed good reputations among Chinese consumers.
Mr Zhao agreed that demand for fresh products would be there, citing Australian rock lobster as an example, but it would be more a question of if importers would be able to get products into the hands of consumers due to the supply chain issues.
More broadly, Ms Liu said there was strong demand for premium products and advised businesses to highlight the particular attributes of their offerings to ensure consumers were well-informed and could differentiate between products.
When asked about any negative consumer sentiment towards Australia, as a result of its advocacy for an international inquiry into the origins of COVID-19, Mr Tanner said Australia was certainly not isolated in this regard – joining the likes of the U.S. and European countries – and that there was a lot of depth to our relationship, which meant it would endure.
In summary, Nick Henderson said COVID-19 had produced a shift in China towards more discerning private consumption with a focus on health and wellbeing. And despite testing times in the bilateral relationship, opportunities would continue to present for Australia, but businesses needed to be nimble, think long-term, plan and execute well and also be adaptable to changing consumer sentiments and preferences.