1、How Chinese consumers are changing shopping habits in response to COVID-19 May 2020 By Xin Huang, Dymfke Kuijpers, Lavonda Li, Sha Sha, Chenan Xia An analysis of point of sale data for over 100 million shoppers shows four key trends that are likely to persist post-crisis. China is ahead of the curve

2、 in its recovery from the recent COVID-19 outbreak, with many provinces slowly returning to normal levels of activity. Factories are restarting production and consumers are beginning to spend again. However, the crisis has had a dramatic and lingering impact on the nations shopping habits, with impl

3、ications for brands in China and globally. McKinsey worked with MIYA, a leading mobile payment solutions provider, to analyze point-of-sale (POS) data from 31,000 stores and 500 million+ transactions, covering 150+ cities, including Wuhan and Hubei, and 100 million+ shoppers. The data reveals four k

4、ey shifts that are persisting even as the peak impact of the virus abates. 1. Offline shopping is slowly recovering, but discretionary spend, night-time shopping, and epicenter spend are lagging Offline consumption is slowly recovering, after falling to around 39 percent of normal levels during the

5、peak period of the outbreak. Many local authorities loosened restrictions in the first week of March, giving shops an opportunity to welcome customers who had been isolated in their homes for as long as six weeks. Over the following days, activity picked up to around 79 percent of pre-crisis levels

6、(Exhibit 1). Exhibit 1 China offline consumption is still impacted after the outbreak 1On March 8, 21 provinces in China announced the lowering of the epidemic response level, covering over 70 percent of the countrys population Source: MIYA payment data engine 150 0 50 100 200 250 1/264/52/912/112/2

7、912/11/1912/15 12/221/51/122/23/12/16 2/233/83/153/22 3/29 100%125%79%39% Prior to COVID-19 Pre-Chinese New YearDuring COVID-19 peakAfter peak % First confrmed case in Wuhan 2020 new yearMost provinces lowered the emergency response level1 Wuhan lockdown Chinese Lunar New Year 2 China consumer point

8、 of sale: Whats really happening? Despite the partial rebound, there were significant variations, amid continuing pressure on discretionary categories. Supermarkets, convenience stores, and drugstores saw a spike in activity during the crisis, as consumers stocked up on essentials and cooked at home

9、. However, after the peak there was a divergence (Exhibit 2). Supermarket volumes fell, while convenience stores and drugstores continued to see positive momentum, driven by demand for medicines and a desire among many people to shop near their homes. Discretionary categories, such as food service o

10、utlets, apparel stores, and department stores were hit hard during the crisis and their recovery has been slow. A notable trend across categories during the outbreak was increased basket sizes in non- discretionary categories, reflecting consumer aversion to shopping trips and willingness to spend m

11、ore per visit to reduce travel frequency. Convenience store basket sizes rose 120 percent during the crisis, and remained 45 percent higher as the crisis abated. Discretionary categories, such as department and apparel stores, on the other hand, saw smaller basket sizes (Exhibit 3). Department store

12、 basket sizes were 54 percent smaller during the crisis, and have recovered only slightly in recent weeks, to a level that is around 33 percent smaller than before the crisis. Again, this may be a reflection of peoples reluctance to spend too long in crowded environments. Exhibit 2 Some channels hav

13、e fared better than others Source: MIYA payment data engine Daily Consumption, 100%=avg. in Dec 2019 18 18 16 During vs pre -57 -65 -67 -91 -80 Convenience Store Hypermarket/ Supermarket Food Specialized Retailer Drugstores/ Parapharmacies Foodservice Department Store Beauty Specialized Retailer App

14、arel Specialized Retailer-59 After vs pre -1 8 12 -10 -28 -33 -57 Hyper/supermarkets and CVS saw spikes in demand during the peak, as more people cooked at home. However, demand has normalized in recent weeks CVS and Drug Stores are still seeing higher-than-normal levels of demand, showing COVID-19

15、has a longer-lasting impact than the 2003 SARS crisis Food stores reopen rate is already 90+% -100%80%0% Drugstores/para pharmacies Wuhan Hubei other cities Tier 1 cities: BJ, SH, SZ, CQ Provincial capital cities1Other cities1 Beauty specialized retailer-91%-47%-34%-33% CVS25%36%16% -34%51% Hypermar

16、ket/supermarket-39%64%1%-6% N.AN.A Foodservice Food specialized retailer-25%10%4% -69%-41%-15%-30%N.A Apparel Department store -63%-61%-62%-54% -59%-53%-51% N.A N.A -32% -25%14% -69% 3% 34% 9% -1% 5China consumer point of sale: Whats really happening? 2. Channel shift to online, offline convenience,

17、 and drugstores A trend that emerged from the crisis is the accelerating growth of the online channel, which benefited from the lockdown, store closures, and the continued reluctance of consumers to engage in-person with sales and service staff (Exhibit 6). In the grocery category, there was a spike

18、 in online shopping during the peak, with consumers spending more time and money online. Some 74 percent of consumers bought additional groceries online at the peak and 21 percent spent more. Chinese consumers were ahead of consumers in other countries in respect of frequency of online shopping, inc

19、luding South Korea (51 percent increased frequency) and India (40 percent.) In recent weeks, online activity in China has moderated, but visits are still running at 15 percent above pre-crisis levels. Another emerging dynamic is that convenience stores have performed well in the wake of the outbreak

20、 (as they did at the peak), with tier 1 cities seeing the biggest uplifts (Exhibit 7). CVS daily consumption in tier 1 cities has run at around 36 percent above pre-crisis levels (as at December 2019). Again, this is likely the result of continuing caution in respect of travelling and mixing in larg

21、e groups. Some cities at the epicenter have seen the strongest rebounds in the hypermarket/ supermarket channel, recording a 64 percent rise in volumes compared with December. This has been driven by relatively tighter restrictions on movement than in the rest of the country, and limited alternative

22、 sources of food. Drugstores have fared particularly well in provincial capitals, but have seen a drop-off in tier 1 cities as the impacts of the outbreak have diminished. Exhibit 6 An acceleration in online grocery shopping Online grocery channel net reported behavior during COVID-19 vs before; net

23、 intent for after COVID-19 vs during (now)1 1Net behavior is calculated by subtracting the % of shoppers in the channel stating they have decreased visit frequency or spending in the channel from the % stating they increased frequency or spending 2Q: Among the below grocery shopping channels, which

24、ones do you visit more/less frequently during the COVID-19 outbreak compared to before? 3Q: Which store types have you increased/ decreased your spending per month during the COVID-19 outbreak compared to before 4Q: Within the below store types, which ones do you think you will visit more / less fre

25、quently after the COVID-19 outbreak stabilizes? Source: COVID-19 mobile survey, 3/21-3/25/2020 N = 5,013, sampled and balanced to match general population (except India, with higher focus on consuming class) During COVID-19 vs beforeAfter COVID-19 vs during Visit frequency2Spend3Visit frequency4 74

26、51 40 28 16 6 -1 Restrictions on online grocery imposed South Korea Thailand India China Indonesia Australia Japan 21 11 31 29 16 4 16 15 7 38 25 16 10 4 6 China consumer point of sale: Whats really happening? 3. Health and fitness is here to stay COVID-19 has emphasized the importance of staying fi

27、t and healthy, and changing attitudes are reflected in shopping behaviors that have persisted in recent weeks. Demand for dairy, vegetables, and eggs was 25-30 percent higher during the initial recovery phase than it was before the crisis. Supermarket and convenience store data shows that, aside fro

28、m fresh food, popular items during and after the peak of the crisis included grains, ready- to-cook meals, packaged food, and snacks. This reflected a degree of “stocking up” and, again, travel aversion. Demand for these has softened of late but is still running above pre-crisis levels. There was a

29、reduction in demand for personal care products and cosmetics in January and February, and these categories are only recovering slowly (Exhibit 8). As shoppers have gravitated toward local stores, they have expanded the range of items they buy, adding more grains and fresh foods to their baskets (Exh

30、ibit 9). If the trend continues, suppliers in these categories may need to plan for a less centralized distribution model, in which individual CVS stores are likely to carry fewer brands in any single type of product. Exhibit 7 Consumers in tier 1 cities spent more in CVS during and after the crisis

31、 1Cover selected cities: Beijing, Shanghai, Chongqing, Guangdong, Zhejiang, Jiangsu, Shanxi, Shandong, Jilin, Fujian, Sichuan, Jiangxi and Hubei Source: MIYA payment engine Supermarket channelCVS channel Consumers in tier 1 cities spent more in CVS during and after the crisis A Wuhan supermarket and

32、 CVS spending was less impacted during the peak than after, due to the continuing lock-down and supply issues Epicenter recovery impacted by store opening schedule Hubei/other cites supermarket and CVS growth is due to low opening rate of other food related channels AB B -16 29 27 10 19 -39 64 1 -6

33、-1 -26 5 68 36 18 -32 26 37 16 9 Hubeiother cities Tier 1 cities: BJ, SH, SZ, CQ Wuhan Provincial capital cities1 Other cities1 During vs pre During vs pre After vs pre After vs pre Based on observation of selected cities1 Avg. daily consumption in supermarkets vs CVS by city1, % 7China consumer poi

34、nt of sale: Whats really happening? Exhibit 8 People stocked up on essentials and bought more fresh foods People stocked up on essentials and bought more fresh foods Food Fresh Others Non-food grocery Alcohol non-essential consumption picks up recovery speed later Food frst during crisis: people bou

35、ght 60-80% more food and fresh produce, to prepare for staying at home during the lockdown Healthy trends in dairy, vegetables, fruit, and eggs both during and after the peak Cosmetics have seen a shift to on-line during and after the peak 8 China consumer point of sale: Whats really happening? Exhi

36、bit 9 Increased demand for grains and fresh food at CVS 3 3 Increased demand for grains and fresh food at CVS Supermarket channel CVS channel 747 6 8 369 9 4 558 4 7 97 2 2 2 2 4 465 6 16 58 836 31 29 88 143 4 6 7 7 Before- COVID During- COVID After- COVID Before- COVID During- COVID After- COVID 4

37、FreshDiaryTobaccoHousehold suppliesPackaged food Personal careGrainsAlcoholReady to eatOthers Source: MIYA payment engine Based on grocery basket analysis, data from supermarkets and CVS Category % in supermarkets and CVS, 100%=Total consumption in the time period 38 34 30 10 14 14 1010 11 13 13 13

38、1313 11 11 4. Shock to loyalty offline, partly offset by online engagement Given the physical constraints of the crisis, Chinese customers have been more willing to try new stores and new brands. After the peak, around 14 percent do not plan to revert to their pre-crisis store choices and about 6 pe

39、rcent do not plan to return to their previous brands (Exhibits 10 and 11). To engage with these dynamics, hard-hit categories such as apparel have ramped up their digital activities. One premium fashion retailer, for example, invested in online channels such as Tmall, store applications, and social

40、media. Its offline sales fell by about 50 percent in March, but its online sales grew by 60 percent. A large grocery retailer saw a 300 percent spike in demand for its home delivery service and has launched a major effort to triple its online business in 2020. In aggregate, the data shows that COVID

41、-19 has had a profound and persistent impact on the nations shopping habits. The implications for brands in China, and other countries that may follow Chinas path to recovery, can be summarized under four strategic pillars: 9China consumer point of sale: Whats really happening? Exhibit 10 More than

42、a quarter of shoppers have shifted away from their primary stores, of which 47% do not intend to switch back of which 47% do not intend to switch back 28% of consumers have switched to a diferent store Reason for switching stores Source: McKinsey engage your customers digitally end-to-end. Chinese c

43、onsumers increasingly demand an omnichannel experience, meaning they want more than to be sold to online. One premium apparel retailer has deployed a range of solutions, including enabling sales reps to use WeChat groups to reach out to VIP customers with individualized products (supported by a CRM

44、system), launching social media shows with with Key Opinion Leaders (KOLs), and ramping up content marketing. The bottom line is that companies must engage the entire organization to prepare for an omnichannel world. This requires a digital network architecture, backed by a dedicated operational set

45、 up, KPIs, and objectives and key results (OKR) frameworks that can help the organization define goals and track outcomes. Transform your business model. To increase operating efficiency and effectiveness, companies should aim to incorporate technology across the business. Before COVID-19, retailers

46、 were already deploying digital use cases, including seamless check out, pricing, promotions, assortment optimization, and robotic process automation in the back office. However, few retailers managed to scale across the value chain, typically because of factors including a lack of top-down ownershi

47、p and ambition, insufficient capabilities, siloed ways-of-working, outsourced IT functions, and legacy systems. COVID-19 has shown the need to transform the business model to be more tech-enabled, which will both help the company operate under the constraints of pandemics and meet customer safety ne

48、eds. The business case is there: tech can improve efficiency by 2-5 percent of sales and, depending on starting position, drive sales and make or break market share during a crisis. Retailers need to pursue a triple transformation of people (new capabilities and ways of working), technology (modular

49、izing core tech and deploying software-as-a-service across the value chain) and business (delivering value for the customer). 3. Align with consumer trends: healthy, local, and delivering value. The data shows that the trend toward healthier lifestyles accelerated during the COVID-19 outbreak. People also shopped local, both in terms of location and products. For companies with strong cash positions, there is an opportunity to respond, leveraging M Dymfke Kuijpers is a senior partner in the Singapore office; Lavonda Li is a consultant in the Shangh