04/05/2020
BEIJING (Reuters) – Tang Yue, a 27-year-old teacher from the city of Guilin in southwest China, steam-presses a blue dress and takes dozens of photographs before picking one to clinch her 200th online sale.
For a growing number of Chinese like Tang, hit by job losses, furloughs and salary cuts, the consumer economy has begun to spin in reverse. They are no longer buying – they are selling.
Instead of emerging from the coronavirus epidemic and returning to the shopping habits that helped drive the world’s second-largest economy, many young people are offloading possessions and embracing a new-found ethic for hard times: less is more.
With Tang’s monthly salary of about 7,000 yuan ($988), the self-described shopaholic said she has bought everything from Chanel lipsticks to Apple’s (AAPL.O) latest iPad in the past three years.
But the adrenaline rush that comes with binge-shopping is gone, said Tang, whose wages have been slashed with the suspension of all the classes on tourism management she usually teaches.
“The coronavirus outbreak was a wake-up call,” she said. “When I saw the collapse of so many industries, I realised I had no financial buffer should something unfortunate happen to me.”
There is no guarantee that the nascent minimalist trend will continue once the coronavirus crisis is fully over, but if it does, it could seriously damage China’s consumer sector and hurt thousands of businesses from big retailers to street-corner restaurants, gyms and beauty salons.
To be sure, there are signs that pent-up demand will drive a rush of spending as authorities reopen malls, leisure venues and tourist spots. In South Korea, the first major economy outside of China to be hit by the virus, people thronged malls this weekend to go “revenge shopping” to make up for time lost in lockdown.,
There are some signs that a similar trend will take hold in China, where some upscale malls are starting to get busy, although luxury firm Kering SA (PRTP.PA) – which owns Gucci, Balenciaga and other fashion brands – has said it is hard to predict how or when sales in China might come back.
A recent McKinsey & Co survey showed that between 20% and 30% of respondents in China said they would continue to be cautious, either consuming slightly less or, in a few cases, a lot less.
“The lockdown provided consumers with a lot of time and reasons to reflect and consider what is important to them,” said Mark Tanner, managing director at Shanghai-based research and marketing consultancy China Skinny.
“With much more of their days spent in their homes, consumers also have more time and reasons to sort through things they don’t feel they need – so they’re not living around clutter that is common in many apartments.”
#DITCHYOURSTUFF
Tang made a spreadsheet to keep track of her nearly 200 cosmetic products and hundreds of pieces of clothing. She then marked a few essentials in red that she wanted to keep. In the past two months, she has sold items worth nearly 5,000 yuan on second-hand marketplaces online.
Bargain-hunting online has become a new habit for some Chinese as the stigma that once hung over second-hand goods has begun to fade.
Idle Fish, China’s biggest online site for used goods, hit a record daily transaction volume in March, its parent company Alibaba (BABA.N) told Reuters.
Government researchers predict that transactions for used goods in China may top 1 trillion yuan ($141 billion) this year.
Posts with the hashtag #ditchyourstuff have trended on Chinese social media in recent weeks, garnering more than 140 million views.
Jiang Zhuoyue, 31, who works as an accountant at a traditional Chinese medicine company in Beijing – one of the few industries that may benefit from the health crisis – has also decided to turn to a simpler life.
“I used to shop too much and could be easily lured by discounts,” said Jiang. “One time Sephora offered 20% off for all goods, I then bought a lot of cosmetics because I feel I’m losing money if I don’t.”
Jiang, the mother of a 9-month-old baby, said she recently sold nearly 50 pieces of used clothing as the lockdown gave her the opportunity to clear things out. “It also offered me a chance to rethink what’s essential to me, and the importance of doing financial planning,” she said.
Eleven Li, a 23-year-old flight attendant, said she used to spend her money on all manner of celebrity-endorsed facial masks, snacks, concert tickets and social media activity, but now has no way to fund her spending.
“I just found a new job late last year, then COVID-19 came along, and I haven’t been able to fly once since I joined, and I’ve gotten no salary at all,” said Li, who said she was trying to sell her Kindle.
Some are even selling their pets, as they consider leaving big cities like Beijing and Shanghai where the high cost of living is finally catching up with them.
NO RETURN TO OLD WAYS?
As the coronavirus comes under control in China, the government is gradually releasing cities from lockdown, easing transport restrictions and encouraging consumers to venture back into malls and restaurants by giving out billions-worth of cash vouchers, worth between 10 yuan and 100 yuan.
But many people say they are still worried about job security and potential wage cuts because of the struggling economy. Nationwide retail sales have plunged every month so far this year.
Xu Chi, a Shanghai-based senior strategic analyst with Zhongtai Securities, said some Chinese consumers may prove the ‘21 Day Habit Theory,’ a popular scientific proposition that it only takes that long to establish new habits.
“We believe people’s spending patterns follow the well-known theory, which means most people in China, having been cooped-up at home for more than a month and not having binge-shopped, may break the habit and not return to their old ways,” Xu said.
Jiang said she was determined not to return to her free-spending ways and planned to cook more at home.
“I’ll turn to cheaper goods for some luxury brands,” she said. “I’ll choose Huawei’s smartphone, because (Apple’s) iPhone has too much brand premium.”
Tang, who has recently used 100 yuan of shopping coupons to stock up on food, is going to hold the purse strings even tighter.
“I’ve set my monthly budget at 1,000 yuan,” she said. “Including one – and just one – bottle of bubble tea.”
Source: Reuters
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05/04/2020
- The coronavirus pandemic has completely changed patterns of consumer psychology across the world, experts say
- Complexity of the crisis, the number of variables and its magnitude make a consumer recovery unprecedented and difficult to predict
The coronavirus has caused panic buying around the world as consumers frantically stockpile of goods such as toilet paper, hand sanitisers and masks. Illustration: Brian Wang
Before the coronavirus crisis began rippling through the global economy, Susan Wang had big plans for 2020.
Not only was she going to buy a new Apple MacBook and iPad, plus a projector so she could host friends for movies at home, but she was set on making a career move.
“I was planning to change my job, but my headhunter told me that all recruitment has been postponed to the second quarter,” said the 27-year-old who works for a British company in Hong Kong.
“Our headquarters in London has a plan for redundancy, too. It is better to save some money in case I get laid off.”
As Covid-19 spreads across the world, sending stock markets reeling and prompting big companies to slash jobs, Wang has become increasingly frugal like scores of other consumers from China to the United States.
She has stopped eating at restaurants and now tries to keep her weekly food bill under HK$500 (US$64), whereas in the past she wouldn’t think twice about spending HK$100 per meal.
Amid mounting uncertainty, the
coronavirus pandemic – which has claimed the lives of more than 41,000 people and infected at least 842,000 worldwide – is fundamentally changing consumer behaviour in Asia, Europe and North America.
Consumer experts said the 2009 global financial crisis, the Great Depression that started in 1929 and the September 11 terrorist attacks give some clues about how and when global consumption might recover. But the complexity of this crisis, the number of variables and its magnitude make this consumer recovery unprecedented and difficult to predict, they added.
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“The coronavirus pandemic has completely changed patterns of consumer behaviour all over the world. People are afraid, and when people are afraid, they go into survival mode,” said Jesse Garcia, a Los Angeles-based consumer psychologist, who is also the CEO of market consulting firm My Marketing Auditors.
plummeted a record 44 per cent in February and those figures are only expected to get worse, with sales forecast to slump between 30 and 40 per cent in the first half of the year, according to the Hong Kong Retail Management Association.
In the US, retail sales dropped by 0.5 per cent in February, even before many states had issued stay-at-home orders to protect the world’s largest economy. The decline was the biggest fall since December 2018.
Experts say non-essential products and services are set to be worst affected by the coronavirus pandemic, while goods and services that can be consumed at home will see a spike in sales.
The coronavirus pandemic has completely changed patterns of consumer behaviour all over the world. People are afraid, and when people are afraid, they go into survival mode – Jesse Garcia
“Online consumer behaviour is frenetic,” said Ross Steinman, a professor of psychology at Widener University in the US state of Pennsylvania. “Consumers are refreshing and refreshing and refreshing websites to secure grocery delivery times, purchase paper towels from their usual big box retailer and scavenge for rice and canned soup from third party sellers on Amazon.
“A pronounced spike in coronavirus cases will only amplify the freneticism.”
So far, one of the
biggest shortages for consumers is toilet paper. Television stations across the globe have beamed images of empty supermarket shelves and huge queues as people hoard toilet paper rolls, masks and hand sanitiser.
The frantic stockpiling can be explained by a psychological concept called informational conformity, said Vicki Yeung, associate professor at the Department of Applied Psychology at Lingnan University in Hong Kong.
A pronounced spike in coronavirus cases will only amplify the freneticism – Ross Steinman
“When people lack knowledge and are in an uncertain situation, they tend to follow the group’s behaviour and blindly conform, but once they obtain more information, and digest and process the situation, the panic gradually fades away,” she said.
“During this Covid-19 pandemic, people generally feel jittery and anxious because they feel their sense of control has disappeared.”
Unlike other recent global crises such as the September 11 attacks, the coronavirus is less a one-time sharp shock to the system and more of a rolling source of anxiety that could retreat and resurface repeatedly, consumer behaviour experts said.
This was the pattern with the Black Death plague that hit Europe in 1347 and returned episodically over many years, ultimately killing millions of people.
During this Covid-19 pandemic, people generally feel jittery and anxious because they feel their sense of control has disappeared – Vicki Yeung
“It may be we’ll have to shut down things again in October or August. And this could go on for years,” said Charley Ballard, an economist with Michigan State University in the US. “The more that happens, the more damage it does to buoyant consumer psychology.”
Furthermore, relative to the 2009 financial crisis and even the Great Depression, when much of the damage was concentrated at least initially in the financial sector, this crisis has seen virtually the entire economy grind to a halt all at the same time, devastating employment and consumption.
Last week, a record 3.3 million Americans applied for unemployment benefits within one week, as restaurants, hotels, barber shops, gyms and retail outlets shut down in a nationwide bid to stem the pandemic. The previous record of 695,000 was set in 1982.
On Tuesday, Goldman Sachs predicted the US jobless rate will hit 15 per cent in the second quarter of this year from the coronavirus economic freeze, and could rise further beyond that to near the historic peak of 24.9 per cent seen in 1933 during the Great Depression. Economists at the St. Louis district of the US Federal Reserve projected unemployment could cost as many as 47 million jobs in the US this year, sending the unemployment rate past 32 per cent before making a sharp recovery.
US now has world’s most coronavirus cases, surpassing China
China’s unemployment rate jumped to 6.2 per cent for January and February from 5.2 per cent in December and 5.3 per cent a year earlier. It was the highest level since records began in 2016, but did not include China’s estimated 291 million migrant workers.
Consumer spending accounts for more than 60 per cent of the Chinese economy and drives 70 per cent of the US economy. But with the pandemic causing many people to go into hibernation and likely to lead to cycles of job cuts, economists have predicted a consumer-led global recession by the second quarter of this year.
Just how long it will take for consumer behaviour to return to normal depends on each person’s psychological resilience, including how quickly they can adapt to change, how optimistic they are and whether they can adopt strategies to regain a sense of control, Yeung said.
Anirban Mukhopadhyay, chair professor of marketing at Hong Kong University of Science and Technology said as long as the coronavirus threat was still present, people would remain fearful to some extent. But he added that people were resilient.
Satellite images show world sites deserted amid coronavirus pandemic
“Human beings adapt to events and stimuli over time,” Mukhopadhyay said. “Research has shown that even people who win lotteries tend to return to their earlier levels of life satisfaction after some months, as do people who have to have amputations.
“So even if the source of the fear does not go away, we learn to live with it.”
Ballard, from Michigan State University, estimated it could take upwards of two years for American consumers to feel secure enough in their jobs and gain enough confidence to fully open their wallets. A longer and more episodic duration for the disease could push that higher, he added.
Further complicating the consumer picture, he said, is that many supply chains are at risk of breaking. And consumers will be wary of spending for a while in many traditional areas, including crowded sporting events and concerts, restaurants and flights.
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Some experts have even suggested that consumer behaviour may be permanently changed as a result of the pandemic.
“It seems very unlikely that people will get back to life as it was before, once the coronavirus is over,” said Andreas Kappes, a lecturer in psychology at City University of London.
“People’s behaviour is extremely orthodox, often referred to as the status quo bias and captured in expressions like ‘past behaviour best predicts future behaviour.’ Now, the crisis forces us to change our behaviour, radically, and we might discover that new way suits us better.”
Source: SCMP
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