From infection to inflection

China’s response, recovery and return

The past month has evolved at speed, from epidemic to global pandemic, we’ve seen the closure of borders and shutting down of economies across the world, as every country seeks to control the impact of COVID-19.

For the world’s second largest economy, life in China has returned to a state of new normality. Economic data for March shows signs of a bounce back, cities have welcomed spring with the opening of parks and public spaces. In the context of this rapidly changing and disruptive environment, we examine how brands have responded to the crisis, from the initial response stage and immediate actions that were taken, and now moving into recovery and planning for a return to growth. 

This transition places China at a major inflection point. At the forefront of the digital revolution for the past decade, the past quarter has only added more fuel to the engines of digital transformation. Traditional business planning cycles have become shorter and marketers are required to adapt to new consumer behavior quicker than ever before.

In our latest report, we’ve looked at how consumers, business and brands are refocusing on what comes next and how we can continue to be both resilient and agile.

Responding to the new world of ‘in home’

Communication has moved ‘in home’. As we’ve seen since February, time spent with screens has surged and we’re still seeing an increase in the use of digital learning platforms as self quarantine became a time for self improvement. 42% of people surveyed have increased their use of online learning platforms and 31% are taking the time to learn something harder and more time consuming.

Transparency, simplicity, flexibility have been crucial. The best brands are the ones that have been the most understanding and empathetic; delivering messaging to connect their brands with current consumer needs. Brands like KFC have been winners as they’ve communicated clearly with a safety first message. Coca-Cola’s water brand Chunyue, found new direct channels to get an essential product to consumers.

Recover, rethink and reinvent

This is a time to explore new ways to connect and communicate.  To be positive and think about how to entertain.  However sharing should come with a sensitivity filter applied.

Using YouGov brand index data we were able to track how consumers attitudes evolved across the past quarter. Looking at the fundamentals of brand health on a moving basis we can see how consumers have reacted, with shifts in perception across quality, value, purchase intent, word of mouth, awareness, and satisfaction. Ecommerce platforms suffered during February when supply chain issues impacted national distribution, but were able to regain ground once courier services resumed consistently in March.

Despite downward pressure, the findings demonstrate an underlying resilence and a cautious optimism as we emerge from lockdown. This is a chance to optimise, observe and prepare; scenario planning is critical as we shift to a test and learn model for digital, live and ecommerce platforms.

Several brands, including IKEA, Prada, MiuMiu made their Tmall debut, supported with live content. This represented a break with years of resistance from these brands who have either focused on offline channels or tried to maintain owned digital commerce experiences.

After a bruising decline in sales in February with the overall auto industry hit by a 92% fall, March saw brands agressively look to new ways to drive trial. With supply and footfall to 4S stores badly impacted, the move to digitise accelerated. In addition to providing help for medical & essential workers with secure rental services, auto brands brought in ‘no touch’ test drives and reopened 4S stores. Planned and executed in just 14 days, we worked with Landrover to move the launch of the new Discovery Sport to an entirely digital experience with a 30 hour live broadcast on Douyin (TikTok). The campaign brought together 300 KOLs to tell the story and history of Discovery and enabling viewers to see, comment, interact and even purchase a voucher for a discount on deposit when purchased. Showing the power of following consumers and engaging where they are spending time, the launch exceeded all digital KPI’s and driving a 40% in showroom visits.

Although COVID-19 cases are under control, health remains a top of mind priority. Consider the role for safety and wellness messages in your communications. Operationally, collaboration is key, work with your internal stakeholders to break down silos and maximise efficiency. 

Return – are we there yet?

It’s critical to monitor and anticipate the demands of a return to ‘normal’. The balancing act is how we manage the contrasting dynamics of long and short term growth. There are mixed reports about where China is now on the road back to normality, and it’s too complicated to give a clear cut response. The fact is, ‘normal’ is not really what we can expect to experience.  Return will be different for individuals, business and sectors, we can already see different speeds, scale and implications.

While the majority of restrictions have been lifted, retail spending has not yet returned to normal with March’s total retail sales at -15.8% YoY. This is an improvement on Jan-Feb’s -20.5% however, there are encouraging signs across several categories. In the latest data from the National Bureau of Statistics, we can see food and drinks have remained stable and in growth. Automotive sales had a 20% improvement in March regaining lost ground. However categories like clothing and dining out are still in decline and even cosmetics have only seen a marginal lift.

In our survey of 155 marketers, 77% of our respondents were already making proactive plans for recovery. Marketers are now looking at the smart use of technology to regain online traffic and connect with consumers in new and innovative ways. In the second wave of our survey in March, only 1% of brands had stopped all spending and 17% either increased or maintained. Why? Rather than ‘going dark’, many brands changed to reflect consumers changing priorities. Instead of talking broadly about healthy lifestyle, Zespri changed to highlight immunity boost of Vitamin C – which they had identified as a subject being discussed by customers.

Despite the immediate pressures it’s still critical to have a long-term outlook. Our econometric modeling consultancy D2D have shown that there is compelling econometric evidence to support the argument that advertising has a long-term impact on sales. Especially during challenging times, advertising supports corporate stability and as the cost of media drops it’s important not to lose share of mind.

The past month has seen a surge in use for digital and cloud based services. Understandably remote learning, health and self development have seen significant gains. But we’re also at an inflection point for purchase behavior. The latest sales data from March and April shows that ecommerce is dominating the point of purchase across household essentials, discretionary and entertainment spending. We need to think commerce first planning regardless of category.

As China has navigated the path out from the peak of the COVID-19 outbreak, both consumers and businesses were forced to adapt to new digital channels.

The behaviour changes we’ve seen over the past two months are here to stay. We are at an inflection point for marketing in China. In the face of both disruption and opportunity, this is a chance to streamline and transform how we work and how we engage with consumers. Use the learnings from the recovery phase to inform your next steps. 

This is a moment to identify where we as marketers can strengthen, diversify, digitise and localise to find a new purpose and position in consumers lives. Brands that have invested in these emerging areas stand to thrive. Those that don’t won’t be so lucky, and won’t be prepared when the opportunity arises.