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Decoding the new reality of Chinese consumption in the post epidemic Era From Consumer confidence report 2021

The following is the Decoding the new reality of Chinese consumption in the post epidemic Era From Consumer confidence report 2021 recommended by And this article belongs to the classification: Boston Consulting, Consumer research.

In 2020, the epidemic will bring a huge impact on the global consumer market. China’s rapid and decisive anti epidemic action has enabled economic activity to recover in the second half of the year and consumer confidence to gradually recover. During this period, we observed a series of consumer trends: they are more mature and rational, and the behavior of category preference and consumption upgrading and degradation also shows structural changes, especially the rapid growth of life necessities and health products, and the improvement of preference for the new channel of online and offline integration. These trends will continue in the long run, so we call them the “new reality” of Chinese consumption in the post epidemic era.

“In the past 2020, times were inevitably marked and changed by COVID-19. In the future post epidemic era, in the policy environment of expanding domestic demand and boosting consumption, innovation and reconstruction in the field of consumption are also taking place simultaneously. Enterprises must pay attention to the consumption trend and study the structural changes of consumers’ demand and choice, so as to seize the opportunity and have a definite aim when seeking development and allocating resources. ”  

Opportunities are often hidden in the crisis, and social distance further accelerates the penetration of all kinds of online shopping and the integration of online and offline shopping. The explosive growth of live delivery and private domain traffic helps some agile enterprises to effectively resist the offline impact brought by the epidemic. These are major trends that enterprises must pay attention to. Of course, the biggest “x factor” in 2021 is still the uncertainty brought about by the epidemic. How will this uncertainty affect consumer confidence? How to make the future direction and deploy resources? In order to help managers answer these questions, BCG consumer insight think tank (CCI) summarizes four major trends of Chinese consumers in 2021 based on recent survey data of Chinese consumers

Consumer confidence is optimistic on the whole and slightly polarized

Structural changes in consumer preferences

“Best value for money”

The trend of a new round of Omni channel O + O

Looking back at 2020, we can see that the confidence and behavior fluctuation of Chinese consumers has gone through three stages.

Stage 1

January to February 2020

Since the outbreak of novel coronavirus pneumonia began in Wuhan, measures to close the city have been introduced in all parts of the country. Consumers are scrambling to hoard food, vegetables and daily necessities for home quarantine.

Stage 2

March may 2020

As the early anti epidemic measures such as city closure and social isolation worked, the number of new cases declined steadily, enterprises returned to work and production from the end of March, consumers’ restrictions on going out relaxed, consumer activities and confidence gradually recovered, and Chinese consumers entered the new reality of post epidemic situation.

Stage 3

June 2020 to present

In addition to the occasional local small-scale epidemic, most consumer and business activities have recovered steadily and have begun to return to growth. In the first quarter of 2021, Chinese consumers remain optimistic and have strong expectations for the new vaccine. Health care continues to be the focus of consumer attention.

Four consumption trends in the new reality

Recently, BCG consumer insight think tank conducted a survey on Chinese consumers to comprehensively understand and reveal the changes in attitude, confidence, cost and channel preference of Chinese consumers towards four categories, more than 30 different categories before and after the epidemic.

The categories covered include: first, high-end products, such as luxury goods, jewelry, wine, foreign wine, etc.; second, health and lifestyle products, such as nutrition and health care products, medical and health care, life services, etc.; third, affordable products, such as snacks, desserts, etc.; fourth, daily necessities, such as basic food and beverage, household daily chemicals, etc.

01. Consumer confidence is optimistic on the whole and slightly polarized

In 2020, COVID-19 brought a certain impact on the income of many respondents, but as the epidemic stabilized, the economic growth was positive, and consumers were generally optimistic about the growth of 2021. 32% of consumers expect income growth in 2021, while only 5% believe it will decline (see Figure 1).

The confidence in the increase of income will naturally lead to the increase of consumption intention. Overall, the proportion of consumers who plan to increase spending is slightly higher than that of consumers who plan to decrease spending, but their willingness to save is still strong. From the perspective of segmentation, high-income consumers are more willing to consume than low-income consumers (see Figure 2). The high-income group has strong financial risk resistance ability, and most of them can work remotely, so they are more confident in the future, or will increase the consumption expenditure of all categories. On the other hand, the low-income group’s income has decreased significantly, and the recovery of consumer confidence in the future is not as strong as that of the high-income group. Such people will try their best to tighten consumption in 2021, and only increase consumption of essential categories may become their choice.

02. Structural changes in consumer preferences

In 2021, under the influence of strict control and vaccination, the possibility of widespread outbreak of COVID-19 was very low, but the occasional uncertainty still existed. This new reality has deepened the attention of Chinese consumers to healthy life, and also changed the consumption structure and the priority of shopping categories.

We compare the consumption curve of different income groups to the four categories before and after the epidemic (see Figure 3)

There is a strong demand for health and lifestyle products, which is just needed by the whole people. The spending index of the rich people on healthy life category surpassed that of high-end products (including luxury goods, high-end alcohol, jewelry, etc.) and rose to the first place, becoming the top priority of the consumption of this group.

At the same time, we will find that the rich are upgrading their consumption in all categories. The most striking contrast with that before the epidemic is their consumption of daily necessities. From the original purchase of “just right” products to now, they are more inclined to buy higher quality products.

In addition, the consumption of daily necessities has a rapid growth in all groups, and its consumption index ranks first in the middle class and below compared with other categories.

From the perspective of categories, consumers’ overall willingness to consume personal care, fresh food and other necessities has increased, while consumers’ overall willingness to consume non essential categories such as digital electronic equipment, large and small household appliances, outdoor entertainment services and tourism and vacation is relatively less strong (see Figure 4). In short, in the post epidemic era, consumers’ preferences for different categories also show different structural changes from those before the epidemic.

03. Pursuit of “extreme cost performance”

In the first half of 2020, when the epidemic is stuck (see Figure 5), the uncertainty about the future makes consumers generally experience a stage of strong willingness to downgrade their consumption. According to the survey data in the first half of 2020, the proportion of demoted consumers is as high as 55%, nearly double that of upgraded consumers. However, by the second half of 2020, the epidemic situation will be better, and 37% of consumers will return to the track of consumption upgrading, which is higher than the proportion of demoted consumers (15%).

Under the dual catalysis of positive economic growth and weakened impact of epidemic situation, consumption upgrading will usher in a significant V-shaped rebound in the second half of 2020. The past data show that the most strongly willing consumers to upgrade are non essential categories. In this survey, the proportion of people with consumption upgrading shows a similar trend in the two dimensions of non necessities and necessities. It can also be seen from the five sub categories that various changes have taken place in the proportion of consumption upgrading from the first half of 2020 to the second half of 2020 – whether it is non essential categories such as cosmetics, shoes and liquor, or essential categories such as fresh fruits and vegetables, household chemicals, etc., the willingness to start consumption upgrading in the second half of 2020 is very obvious (see Figure 5).

At the same time, we also find that Chinese consumers who have passed the epidemic test have become more mature and rational. In many categories of consumption, high-quality and affordable brands are favored. Take the mobile phone market as an example, “selling kidney and chopping hands” has become an old catchphrase, “if you don’t have enough cards, you can fight for three years” has become a new catchphrase. Among the beauty brands, many domestic brands with low price but high fashion are on the fire, and the “ingredient party” focusing on raw materials is also rising. In this round of consumption upgrading, consumers are not so much in pursuit of better quality as they are in pursuit of “ultimate cost performance”.

04. The trend of a new round of Omni channel O + O

Since the outbreak of the epidemic, all kinds of online channels have developed rapidly, and new forms of e-commerce or similar e-commerce have emerged one after another – everyone obviously feels that these new forms have brought changes and convenience to our lives. However, the impact of the epidemic on all channels is not permanent. Some online channels have achieved explosive growth during the isolation period, but may return to normal in the long run. Some consumption habits developed during the epidemic are more likely to last for a long time. Some offline channels will pick up in the long run, and some will continue to be weak. In order to understand whether these new trends can continue in the new reality of post epidemic situation, we conducted the research according to three stages: before the epidemic situation in 2019, during the epidemic situation in 2020, and in the future post epidemic era, aiming to reflect consumers’ willingness to choose different channels at different stages.

Figure 6 shows that during the epidemic period, online formats / e-commerce represented by social e-commerce and community group buying became the preferred channel for consumers, and this preference may continue after the epidemic. Consumers tend to choose these new e-commerce models better than traditional channels such as hypermarkets and supermarkets. Wechat’s one-to-one e-commerce also brings more convenient shopping experience and solves the problems in the scenario of epidemic uncertainty. This trend will continue in the future.

Although the overall development of e-commerce is strong, we have observed two different types of e-commerce channel growth from the perspective of segmentation. The first category is fast-moving necessities such as fresh food and packaged food and beverage. During the epidemic, they were greatly strengthened through new channels such as wechat, community group buying and o2o. However, the decline rate after the epidemic is also large, and the proportion of consumers returning to traditional channels is high. The other category is clothing, cosmetics, personal care, home appliances, etc. after the end of the epidemic, the consumption of these categories in new e-commerce is still strong, and there is still a lot of space for exploration and development in the future.

To sum up, in the future, through social networking, live broadcast, wechat one-to-one and other multiple ways, it will form linkage resonance with offline channels, and the development of O + O Omni channel integration is undoubtedly the general direction.

The recent boom in the real estate market is also a signal of the recovery of consumer confidence. Real estate is a kind of special consumption. In the national accounts, house purchase belongs to the category of investment. Compared with other investments, the liquidity of real estate is poor, which can be said to be a barometer of consumers’ long-term confidence in the economy. Our data further verify the overall optimism of Chinese consumers about the future economy. In the next five years, the proportion of consumers who show willingness to buy houses is as high as 56%, and 58% of them plan to buy houses in their current cities (see Figure 8). Among 42% of the people who buy houses in other places, most of the people in second tier cities choose to buy houses in the same tier cities, while more than 90% of the residents in third tier cities and below plan to buy houses in higher tier cities.

Looking to the future

Based on the above tracking of consumer mentality and behavior, we believe that when enterprises seek to develop and co-ordinate resources in the post epidemic era, they can focus on the following four aspects according to their own situation, starting from the existing business and emerging opportunities: reviewing the existing business and establishing segmentation strategies; practicing product internal skills; integrating channel layout; exploring emerging opportunities and capturing healthy trends.

Establish segmentation strategy: in the process of consumer confidence recovery after the epidemic, the recovery rate of consumers with different ability to pay is different. According to their own business characteristics, enterprises should examine the market strategy for each segment of consumers, adjust the strategic positioning and income focus timely, seize the opportunities of middle-class and rich people, and pay attention to the preference changes and consumption barriers of low-income people.

Practice the product’s internal skills: “the ultimate cost performance” is the rational regression between the actual value of the product and the price paid by consumers. It is not difficult to imagine that behind the national trend of beauty, clothing, electronic products and many other categories, the factors driving consumers will shift from fashion to practicality in many categories, and then bring vitality to more local brands, and put forward new requirements for enterprises to strengthen product strength and supply chain economy.

Integration of channel layout: in the future of consumption recovery and popularization of digital means after the epidemic, the channel layout needs to be diversified to meet the diverse shopping needs of consumers and enhance the resilience of risk response of distribution channels. On this basis, enterprises can focus on improving the coordination ability between various channels, and make use of digital means to truly integrate online and offline, so as to create the optimal consumer experience.

Capture the health trend: health priority has received unprecedented and sustained attention among the whole people, which brings new product and service innovation opportunities for food, daily chemical, medical and health, life services and other industries, and may promote the further penetration and promotion of brand concepts related to healthy lifestyle. At this time, enterprises can re-examine their business layout, strengthen the business direction that can bring health benefits to consumers, and seize the opportunity.

Winter is over, spring is not far away. With concerted efforts, both the market, enterprises and ordinary consumers have gone through the most difficult times, and the future full of opportunities and vitality has been waving ahead.

It is hoped that this article can help enterprises sweep away the haze of the epidemic situation in 2021 by insight into consumer confidence and behavior, and “turn the bull into the world of performance”.

Read more: Nielsen: China’s consumer confidence is the fourth most optimistic in the world Far more than Nielsen: global consumer confidence index report of Q4 in 2011 BCG & China Foreign Trade Trust: Trust Industry Report of China in 2017 (with download) Boston Consulting: application of brand advocacy index in China’s technology, media and telecommunications industry Boston Consulting: it is predicted that China’s wealthy consumers will reach 280 million in 2020. You may not know about the choices of global consumers Tencent & BCG: consumer digital behavior insight report on China’s luxury market culture: the most important thing for new fashion and luxury consumers BCG: global luxury consumer insight in 2017 (attached report) Boston Consulting: consumer insight report on global luxury industry in 2017 (attached download) China Chain Store Association: China’s convenience store development report 2017 Boston Consulting: new generation women and young mothers lead China’s “her economy”

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