1、Recover, restart and regrow: How consumer trends ignite transformation in Chinas New Retail 2020 Global Consumer Insights Survey China report Foreword So much has been said about the C-word these days. Hardly a day went by without news broadcasting cases of infection, jobless claims, business closur
2、es, and so on. Global supply chains were thrown off kilter following worldwide closure of production facilities. Even after China resumed capacity subsequently, new factory orders from overseas were halted while existing ones were hard to fulfil due to disrupted supply of intermediate products and r
3、aw materials. All these events took place against a rather unstable macro-economic backdrop. China-US trade tensions recently flared up with increases in tariff measures, airline bans, and other barriers. Aggregate demand weakened and oil prices continued to be volatile. Chinas total retail sales of
4、 consumer goods in the first half of 2020 declined by 11.4% year on year to 17.2 trillion yuan, according to National Bureau of Statistics. In the face of macro-economic headwinds, Chinese retailers are bearing the brunt of consequences as sales from brick-and-mortar shops plunged during the lockdow
5、n of major cities including Wuhan. The average Chinese consumers are left with an uncertain future; their worries include slower growth in living standards, job losses and lower incomes. 2| 2020 Global Consumer Insights Survey China report Figure 1: Business threats to organisations growth prospects
6、 cited by mainland China CEOs Availability of key skills Speed of technological change Real estate costs Supply chain disruption Volatile energy costs Supply chain disruption Cyber threats Changing consumer behaviour Availability of key skills Volatile energy costs 20192020 “Somewhat” or “extremely
7、concerned” 64% 68% 68% 61% 61% 47% 43% 46% 49% 49% Mainland China Source: PwCs Global CEO Survey PwCs Global CEO Survey is conducted every year with CEOs to collect their economic and business outlook for the coming year. The above results of China CEOs did not include the impacts of COVID-19 or rel
8、ated risk factors as an option in the questionnaire. Looking forward to 2021, we would expect their views to change significantly in terms of business threats and their degree of concern as impacted by the current pandemic. 32020 Global Consumer Insights Survey China report | Meanwhile, businesses i
9、n China are facing a myriad of imminent challenges brought by supply chain disruption, changing consumer behaviour, availability of key skills, volatile energy costs, amongst others, as suggested by PwCs 23rd CEO Survey. For Chinese consumers, taking routine trips to buy hygiene products with masks
10、and goggles on ones face was less than conventional before the outbreak of COVID-19. So was the rare experience of watching online classical concerts and having virtual client meetings with zero human interaction. Consumers have changed almost every facet of their behaviour, some of which may very w
11、ell be long-lasting. Given the dramatic shift in consumption patterns, never before has there been a period of time where brands and retailers are so worried and excited at the same time - with so much market turbulence, uncertainty, and yet new hotspots of opportunities. For one thing, shopping act
12、ivities of home-bound consumers are gaining traction online. More demand is being channelled towards e-commerce platforms. Chinas 2019 11/11 Singles Day, the worlds largest yearly online shopping event exceeded the sales volume of previous years setting a new record of 268.4 billion yuan ($US 38 bil
13、lion) in total sales volume on Alibabas Tmall, outpacing that of Cyber Monday and Black Friday combined. The number of internet users surged to over 904 million people as of the first quarter of 2020 during the nationwide lockdown period. Domestic consumption will be the key growth driver in the com
14、ing years amid global trade uncertainties. On 1 June 2020, the Chinese central government released the Master Plan for the Construction of Hainan Free Trade Port (“FTP”). The Plan sets forth a package of tailored made policy concessions on trade, investment and financing, and so on. The construction
15、 of a world- leading FTP is expected to bring a new wave of business opportunities in the consumer sector. PwC conducted the 2020 Global Consumer Insights Survey (GCIS) capturing the views of over 23,000 urban consumers globally (of which 1,500 are from mainland China) from October to November 2019,
16、 including a short survey conducted after the outbreak of COVID-19 to take the “pulse” of urban consumers to see how this pandemic has altered their behaviour. This report is based on the survey results of Chinese urban consumers and our in-house market intelligence and perspectives. Last year we ex
17、plored the theme of ROX (Return on Experience) and focused on how organisations can make customer centric solutions work for them. This year we take on a broader lens to explore the top seven emerging trends of the Chinese consumers market as it evolves against the global backdrop of social, politic
18、al and economic uncertainties, and analyse from the commercial perspective what these trends mean to retailers for their long-term success. This report is a story of challenges, resilience and recovery of the consumer space in transformation. I urge you to read it for a deep dive into our perspectiv
19、es of how retailers recover, restart, and regrow their business to ride on emerging consumer trends. Figure 2: Tmall 11/11 vs Black Friday vs Cyber Monday, Gross Merchandise Value (GMV) ($US billion) Source: Alibaba, Adobe Analysis and PwCAnalysis Black FridayCyber MondayTmall SinglesDay 30 5 8 6 13
20、 10 17 12 14 24 200162018 3 6 7 8 6 5 4 32 3 +36% CAGR (2014-2019) YoY (2019 vs. 2018) Tmall Singles Day 36%26% Black Friday + Cyber Monday 27%18% 38 16 2019 7 9 (Exchange rate: 1USD=RMB7.03) -Michael Cheng, PwC Asia Pacific, Mainland China and Hong Kong Consumer MarketsLeader 4| 2020 Glo
21、bal Consumer Insights Survey China report Reality check: Macro environmental changes through the lens of consumers 4| 2020 Global Consumer Insights Survey China report 52020 Global Consumer Insights Survey China report | 2020 has been a year of unprecedented challenges and unparalleled opportunities
22、. COVID-19 has brought global economy to a standstill. In a matter of weeks since the virus was first detected, hospitals were overloaded with patients followed by massive closure of factories, restaurants, movie theatres, and other public places. Panic-induced stockpiling has extended beyond emerge
23、ncy items to grocery basics and essentials, such as canned goods, bottled water, toilet paper and cleaning products. Social distancing and movement control have kept consumers homebound with unfulfilled needs and a future to worry about. The situation at home has been complicated by international ev
24、ents such as the ongoing trade tensions between US and China and the wide fluctuation in oil price, let alone the abrupt disruption of global supply chains affecting manufacturing outputs. The World Trade Organisation has predicted that global trade is set to contract up to 32% for the whole year in
25、 the aftermath of the health crisis. Nonetheless, the second quarter GDP growth in China recovered to positive territory, up 3.2% year-on-year after seeing the steepest decline of 6.8% last quarter. Decline in Q2 retail sales narrowed considerably to 3.9% year-on-year, compared to 19% in the previou
26、s quarter. The consumer confidence index showed a reduced reading of 115.8 in May 2020, the lowest since beginning of the year, according to National Bureau of Statistics, as consumers weigh purchasing decisions against an uncertain economic prospect. The surveyed urban unemployment rate in the coun
27、try receded to 5.7% in June, down from the high of 6.2% in February when the impacts were most severe. Figure 3: China GDP Growth, 2014 2020 Q2 Source: National Bureau of Statistics Figure 4: China Total Retail Growth Rate, 2014 2020 Q2 -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 2014 2015 2016 2017
28、2018 2019Q1 2020 Q2 2020 -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 2014 2015 2016 2017 2018 2019Q1 2020 Q2 2020 117 122 127 Source: National Bureau of Statistics 3.2% -3.9% 115.8 Source: National Bureau of Statistics Figure 5: China Consumer Confidence Index, 2018 2020 May 6| 2020 Globa
29、l Consumer Insights Survey China report 6% 37% 32% 24% 1% Spend much more Spend slightly more Spend around the same Spend slightly less Spend much less According to our survey, in the aftermath of the health crisis, one out of four consumers in China experienced a decrease in household income, while
30、 a half saw an increase in their household bills. However, the propensity to spend is still significantly higher than the global average of 33%. 43% of surveyed consumers in China expect to spend more in the next few months. 25% of consumers in China have experienced a decrease in household income h
31、alf have experienced an increase in household bills Figure 6: Expected change in household spend of Chinese consumers in the next few months Source: PwCs 2020 Global Consumer Insights Survey In fact, amid uncertainties surrounding the external environment, domestic consumption has been highlighted a
32、s the most critical driver for economic growth, as the country gradually shifts away from investment and export-driven economy towards a more internal growth model. Up to 58% of economic growth in 2019 came from increase in consumer spending. The orientation to encourage the willingness and financia
33、l capacity of domestic consumers has been reaffirmed in the latest Government Work Report released on May 22. According to the report, the Government has also given priority to “stabilising employment and ensuring standard of living” as ways to boost domestic consumption. China plans to create over
34、90 million jobs in 2020, while maintaining urban unemployment within 6%, with its stimulus measures including further tax cuts and reduced fees for businesses. As the first country taking the impact of COVID-19 and subsequently recovering from the health crisis, China has shown exceptional resilienc
35、e and adaptability. We have seen the rollouts of multiple stimulus measures to support and revive domestic consumption since the onset of the pandemic. Likewise, Chinese consumers are taking a confidence vote on the economy with their continued spending, as the country shifts its focus towards resta
36、rting the economy and revitalising affected sectors and businesses. In the following sections we discuss the seven emerging consumer trends for brands and retailers to take note of in their pursuit of market opportunities and sustainable growth. Impact of COVID-19 on income and spending 43% will spe
37、nd more 72020 Global Consumer Insights Survey China report | Seven emerging consumer trends to look out for Urban consumption in lower-tier cities as a new growth driver A new frontier of opportunities unearthed by Generation Z The evolution of digital platforms to appeal to digital- savvy Chinese c
38、onsumers Divergence of spending patterns across categories: luxury goods versus non-discretionary Supply chain reconfiguration and the rise of C2M model Seeking return on health and sustainability Inexorable shift to online-based consumption post COVID-19 1 2 3 4 5 6 7 72020 Global Consumer Insights
39、 Survey China report | 8| 2020 Global Consumer Insights Survey China report Urban consumption in lower-tier cities as a new growth driver Urban consumers, by their sheer size and numbers, are the propellers for Chinas enormous spending machine. According to estimates by National Bureau of Statistics
40、, some 850 million people, representing about 60% of Chinas total population, will be living in urban areas by 2020, up from about 650 million in 2010. Over the past decade, urbanisation has helped migrate millions of workers and consumers to developed areas especially tier two and tier three cities
41、. Lower-tier cities are the hidden gems of Chinese consumer market. Faster disposable income growth and stronger purchasing power are propelling spending in lower-tier markets. According to the National Bureau of Statistics, the growth of disposable income in lower- tier cities was 9.6% in 2019, hig
42、her than 7.9% in major cities though the difference in absolute income between two segments is still up to nearly 70%. The further penetration of e-commerce platforms including global ones are speeding consumers adoption of quality and more premium products. In particular, cross-border e-commerce pl
43、atforms have appealed to sophisticated consumers in lower-tier cities, with the whole market projected to reach $164 billion by end of 2020, according to Statista. A recent Alibaba study indicated that lower-tier markets have overtaken their first and second-tier counterparts in terms of sales of 3C
44、 products (which includes computers, communication devices, and consumer electronics). . Cross-border e-commerce platforms have appealed to sophisticated consumers in lower-tier cities 1 My city was well prepared to deal with the impact Figure 7: Most important features of city in China (ranked top
45、3) Figure 8: Perceived impacts of COVID-19 on city 38% 42% 50% Employment prospects Healthcare Safety and security Greatest % Ranked 1st My city is effectively managing the impact 10% 9% 87% 88% DisagreeNeither/norAgree Source: PwCs 2020 Global Consumer Insight Survey COVID-19s impacts on perception
46、 of Chinese cities In terms of features of a city that are important to urban dwellers in China, 50% of our surveyed consumers cited safety and security as the most critical factor when considering where to reside, followed by healthcare and employment prospects. Up to 88% said their respective city
47、 was well prepared to deal with the impacts of COVID-19. Contrary to higher-tier cities that are full of expats, and are more concerned about privacy and social distance, consumers in lower-tier cities are living in a close-knit social networks. Friend- circle and community are fundamental social me
48、chanisms, thus the recommendations and introductions from neighbours and friends play an important role in “seeding” new products and influencing peers final purchase decision. As a result, the phenomenon of “hit item” prevails in lower-tier cities due to their mindset to keep up with the mainstream
49、 and follow the trend. For example, sales of the top 1% local cosmetic brands contributed more than 60% of the total category revenue. The prosperous cosmetic market in lower-tier cities largely depends on the success of a few “hit items”. In addition, the stable and slow-paced lifestyle in lower-tier regions has led to rising demand for entertainment, education and travel. Since consumers in less developed cities enter parenthood earlier, they are very much willing to spend on educational programs and content. Their desire to provide
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