, China

China leads in consumer market recovery worldwide

The country will be the only major economy reporting positive growth in 2020.

China is leading the pace in terms of the consumer market recovery, with online consumption surging during the outbreak and offline channels beginning to rebound in full momentum, according to a report from Nielsen.

The pandemic situation in China has been largely under control, as enterprises resumed full business operation whilst people's life generally returned to normal. According to the National Bureau of Statistics, total retail sales of social consumer goods grew 0.9% YoY in Q3, the first positive quarterly growth recorded this year.

Additionally, China will be the only major economy in the world reporting a positive growth this year, according to a forecast from the IMF.

Nielsen's study found that the importance of online channels reached a high of 34% in Q2, boosted by the epidemic, as well as the e-commerce shopping festival. However, in July and August, the growth of online sales became more rational, and the importance of online channels was 25% and 27%, respectively.

Meanwhile, offline channels started to recover in full momentum. The importance of offline channels in July and August was 75% and 73%, respectively, compared to 66% in the second quarter. By August, most offline existing stores had already returned to normal operation.

Even traditional channels had resumed operation. The in-business rate of stores in modern trade (MT) expanded from 76% in March to 86% in August, whilst those of traditional trade (TT) rose from 64% to 80%. In particular, the in-business rate of stores in baby channels climbed from 67% to 80%, whilst that of cosmetics channels jumped from 53% to 75%.

Nielsen also found that golden stores are becoming more fragmented, especially in lower-tier cities. The number of stores in MT grew 6.3% from February to September, whilst golden stores expanded 10%.

“As more and more high-quality stores enter the market, the sales concentration of stores across various channels will generally reduce. Thus, assortment will become more challenging, and retailers will need to cover more stores in order to obtain the same share of sales,” the report stated.

Moreover, nearly 56% of golden stores have changed, with newly-opened stores and ranking up of stores accounting for 33%. Store closures and ranking down of stores accounted for the remaining 23%.

Furthermore, online-to-offline (O2O), social commerce and lower-tier cities will be the major factors driving channel growth. In a survey, nearly four in five (79%) businesses are looking to focus on O2O in the next 12-18 months. Social commerce is also eyed by 64%, whilst 57% are looking to deepen their penetration into lower-tier cities.

O2O growth has been mainly driven by lower-tier cities, where orders surged 43% YoY in June, accounting for 41% of O2O orders nationwide. In comparison, lower-tier cities accounted for 33% in June 2019.

Meanwhile, the performance of O2O in different provinces varied. For example, Anhui and Sichuan are both provinces with a large population, but O2O orders in Anhui soared 69% YoY during the month whilst Sichuan recorded zero growth.

“This was because in Sichuan, the growth in lower-tier cities were offset by the decline in upper-tier cities. Therefore, brand owners need to consider carefully about where is the best place to start O2O,” the report added.

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