Chinese consumer trends in the Covid era

Richard Dunsheath is New Zealand's trade commissioner in Shanghai and leads NZTE's efforts in the area to help New Zealand companies grow overseas. He talks to the Asia Media Centre about the consumer trends in China in the face of Covid, and what that could mean for exporters here.

What trends have you been seeing, especially due to Covid and in the wake of Covid?

The first one is health. Certainly, consumers are more aware of their health and leading healthy lifestyles. Covid has been a shock to everyone, and people are realising they want to live the best lives they can. So that means there’s an increased interest in, and demand for things like healthy foods and supplements, as well as products like sportswear and outdoor wear.

New Zealand trade commissioner in Shanghai, Richard Dunsheath. Image: Supplied/NZTE

Another big trend is the growth in e-commerce, social commerce and digital platforms. These were already growing, but there’s no doubt the pandemic has accelerated the rate at which these technologies have been adopted by consumers and businesses alike.  You're seeing brands that are digital-only brands and you're seeing various growth of the platforms here in China. E-commerce and digital continue to be more important and relevant than ever.

The third trend I’d highlight is the rise in domestic consumption. Domestic products are becoming popular and that's especially true of the post-1990s and post-2000s age bracket.

Why do you think that consumer confidence is growing, domestically?

I see three key reasons: firstly, looking at those people born post-1990, they've only experienced GDP growth of 6 to 15 percent. Every year they've been alive, China has grown at 6+ percent (the exception being the slower growth that occurred due to COVID). If you look at the GDP per capita, in the last 10 years, it's grown from about $USD5,000 per capita to $USD12,000 per capita.

There's growing confidence that people are doing better: there's more prosperity, there's more wealth.

The second reason for the growth in consumer confidence comes down to travel. A lot of Chinese consumers travel the world; they're educated overseas, they go to study, they go for travel. They can see what's happening around the world, and they think China's got a positive and confident future.

China is seeing a growth in consumer confidence domestically. Image: Photo by Javier Quiroga on Unsplash  

The third factor is linked to China’s rise as a producer of unique products and services, particularly over the last decade. If we look at some of Alibaba’s products, some of Tencent’s products, or DJI, a drone company, they are world-leading.

Chinese consumers are proud of those products, and that helps show them that they can create some of the best products and services in the world.

Where is this push for ‘buy local’  coming from? Have there been marketing campaigns to push this, or is it consumer-driven? 

I think it's mostly consumer-driven, and it comes back to consumers wanting value. So, me or you or anyone anywhere in the world, if you're buying something, you want a product that solves your needs and provides value to you.

Chinese companies are getting better at solving the needs of Chinese consumers. That could be in terms of price, but it could also be in terms of product quality, service, delivery, or it could be in terms of how you engage the consumer after sales.

There's an element here that, previously, Western or imported products were regarded as better quality than domestic products. But now a number of those products can be produced locally, with a similar or perhaps better, quality.

So in a nutshell, the rise in 'buy local' can be largely credited to domestic companies creating a better product or service that aligns with Chinese consumer needs.

The rise in a 'buy local' push in China  can be largely credited to domestic companies creating a better product or service, Dunsheath says.

There’s also been a big push in NZ throughout Covid, encouraging people to ‘buy local’ and support local businesses during a tough economic time. Have you seen much of this NZ-based push and if so, how does it compare to China?

There are some similarities but there are also some differences. There's a similarity in that there's a domestic drive to buy local and there has been some storytelling and incentives out there to buy local.

But outside of that, it's quite hard to compare and it’s been quite different here. I think in China, it comes down to value, whether it’s made in China or imported. They want the best value for money, and that comes down to ‘where do you find the best product to solve what you're trying to do?’.

This increasing confidence that you're seeing within China, will it impact exporters in New Zealand at all?

Yes, I think it will have an impact, but it's not linked to New Zealand specifically. It will impact all foreign products in China and it will impact domestic products too. Some sectors may find it more difficult but there will be other areas where there are opportunities.

I don't think you can definitively say it will impact New Zealand in a good or bad way. It depends on what product you offer. For example, if you're trying to provide healthy products to a Chinese consumer, that's a market segment that might be growing and one that New Zealand F&B exporters are very well placed to deliver on, whereas other segments might be more difficult to have a point of differentiation.

If you're a New Zealand company, you have to ask ‘what value am I providing to the consumer?’ and ‘how do I compete against others who are trying to provide the same value to that consumer?’.

That’s why story-telling is so critical in all of this. It helps to differentiate your products from competitors. This will become an even more important skill for companies to develop and invest in, if they want to stand out, particularly if the New Zealand version of a product ends up costing more than a domestically produced one. You have to be able to articulate to consumers why your product has an edge, and why it’s worth the extra investment of their hard-earned money. It’s about developing stories that connect with consumers to help build brand awareness and sales for your product or service.

Increasing confidence in domestic Chinese products could have implications for New Zealand exporters. 

In the past, there's been a stigma against the ‘Made in China’ label – is this idea changing?

I think it is changing and will continue to change. Twenty years ago, what was being made in China was lower value products such as clothing, homeware and textiles.   

What is China good at making now? Electronics, home appliances, mobile phones. If you take products like Huawei phones for example, they're good phones. The hardware is very good and it competes against Apple and Samsung. If you look to the future, you can see China as a big competitor in the electric car space.

As perceptions of the 'Made in China' label change, it comes down to 'how can that product solve what the consumer needs?'.

That's going to be a challenge for more Chinese companies. How do they solve the needs of a consumer sitting in India or France? They’re looking at different platforms, they've got different wants and desires, different family structures. That's going to be the challenge for Chinese companies going international.

- Asia Media Centre