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Business After Lockdown: Lessons From China

Cai Yuqian

June 15, 2020

Photo by Macau Photo Agency on Unsplash

When places around the world are slowly transitioning out of the lockdown period as the COVID-19 pandemic cools down, the business world finds itself in a new reality — things are not the way they were used to be, while new habits and mentality are here to stay for long. Although the uncertainty under the New Normal poses challenges to companies regardless of their scale and industry, lessons can be learned from regions that have already gone into the recovery phase, and China is a great example.

China lifted its lockdown on Wuhan on April 7th and has already resumed work for more than 2 months. What can other businesses after lockdown learn from China? Here, we discuss three important lessons leaders need to pay close attention to with interesting examples and data.

Streets near Hankou Railway Station, Wuhan, China
Streets near Hankou Railway Station, Wuhan, China. Photo by Benjamin Chris on Unsplash

The new way of buying

Polarised consumer spending patterns

Being stuck at home for months has influenced how people manage their expenses. With shifting consumer buying trends, an interesting phenomenon in China is the polarised consumer spending patterns — consumption among low-income groups dropped after the lockdown while that from high-income households remained unaffected, or even increased to the extent of revenge buying.

For low-income groups, “less is more” has become the new philosophy towards living. A recent McKinsey & Co survey showed that between 20–30% of respondents in China said they would continue to be cautious, either consuming slightly less or, in a few cases, a lot less. Beyond buying less, many young people are offloading their unnecessary possessions to generate extra income. Idle Fish, China’s biggest online site for used goods, hit a record daily transaction volume in March.

Why is this happening? The outbreak led some young people to rethink what’s essential and whether they should continue their buying habits. For many young Chinese who don’t have strong cash reserves on hand, they are more likely to enhance their financial management due to the financial challenges brought by the epidemic.

“The coronavirus outbreak was a wake-up call. When I saw the collapse of so many industries, I realised I had no financial buffer should something unfortunate happen to me.” — Tang Yue, a 27-year-old teacher from the city of Guilin in southwest China

In contrast, revenge buying has been seen among high-income groups in China. The French brand Hermes’ Guangzhou flagship store reportedly did $2.7 million in sales the day it reopened in April — reportedly the highest figure for a single boutique in China.

“There will be a flight to value — shifting to cheaper alternatives (among mass-market consumers) and simultaneously an uptick in premium segments given the sustained ability of high-income households to spend.” — Nikhil Prasad Ojha, partner at Bain & Company
A glass jar filled with coins
Photo by Sandy Millar on Unsplash

Growing support for domestic/local businesses

Another phenomenon is consumers’ growing support for local brands. Domestic brands, such as Country Garden and Huawei, have been supporting initiatives by the government and other organisations with donations of money and resources and such deeds have earned Chinese consumers’ goodwill for these home-grown companies. During the outbreak, brands’ social responsibility have been closely examined by Chinese consumers, and this will influence their buying consideration in the future.

At the same time, more people are feeling the need to support local businesses once they realise the importance of the health of their local economy. This can be seen in other markets as well. For instance, in the US, a Groupon study of 2,000 people found that the majority of Americans are looking to support small businesses. 75% plan to support small businesses as much as possible once restrictions on non-essential businesses are lifted in their areas. The survey also finds that an average American plans to spend nearly $100 a week at local businesses post-COVID-19, up 16% vs. before the pandemic — in the hopes of boosting their local economy. In Singapore, blog posts, Telegram channel messages and emails are being circulated to encourage people to support local businesses, especially those struggling in the F&B sector.

Takeaways

  1. Take time to understand your target customer segment because different segments may have contrasting behaviour that is unexpected.
  2. Anticipate their shifting needs & priorities, and deliver great value with strong branding.
  3. To incentivise customers, consider marketing and promotional efforts to attract renewed demand.
A sale sign on a window of a shop near the street
Photo by Markus Spiske on Unsplash

The new way of working

Back to pre-COVID office setting: a very long haul

In terms of the new way of working, businesses in China have shown us that going back to the pre-COVID office setting will be challenging. Stringent health checks and measures implemented throughout employees’ journey from home to the office may discourage them to work at the office at least for a considerable period because of the inconvenience and mental stress attached.

“After a period of quarantine and working remotely at home, going back to work requires mental effort. There’s still a risk I could catch the virus and spread it to my family…It was a hard day. I’ll be working from home tomorrow.” — An architect returning to the office in Beijing after months under lockdown

A painful transition: blended working styles

As some businesses try to figure out the balance between remote working and in-office working, they may find themselves in an awkward situation — how can employees at the office and those at home effectively collaborate together?

Looking into the matter reveals the complexity behind it, as productivity and team synergy can all be affected by this blended working mode. For example, when meetings happen simultaneously online and in-person, the technology used to connect the two sides, the lack of physical affinity from being in the same place, and the communication format catering to both sides will all impact the effectiveness of the discussion.

Our remote colleagues often remind us to point on-screen by using the mouse, since they can’t see us gesturing with our hands during a presentation.

As people become more familiar with the new way of working, future work habits are cultivated. The rapid transition between online and offline work and the increasingly blurred boundaries between work and life have made the integration of online remote work and in-person collaboration a necessity for businesses.

Takeaways

  1. Over-communicate, listen to your people and provide extra support (you can read about how to create strong team synergy during this period here).
  2. Testing out different ways of doing things and building new processes & rituals will require patience and trust.
  3. Pay extra attention to ensuring hybrid (online and offline) interactions work by adopting best practices and doing trial-and-error to find what works for your business because it can be easier to be all online or all in-person vs. hybrid.
A laptop with a Zoom meeting on
Photo by Chris Montgomery on Unsplash

It will be a slow recovery

Be prepared to play the long game and be creative

Looking at the overall situation in China from a macro level, what it has shown us is that this will be a slow recovery. Therefore, businesses need to be prepared to play the long game and now is the time to be creative instead of conservative.

The situations are similar across the globe. Although cities are out of the full lockdown, everything is still far from ‘back to normal’ because of the controlled transition periods. Although business confidence has been continuously climbing in China since a low in February, consumer optimism has not brought spending back to pre-pandemic levels, as most company revenues were down 40–70% in the first quarter.

“Although demand conditions are improving on the margin, they will still take a long time to recover to where they were before the virus crisis.” — Bloomberg economist Chang Su

The new set of COVID-related habits and mentality will continue to stay with us, at least for a while. In Beijing’s reopened workplaces and public spaces, wearing masks and screening for body temperature have become routine. Public libraries, cinemas and museums also carefully monitor visitor inflows while implementing strict hygiene measures. Meanwhile, massive virus testing and contact tracing are conducted to support disease control efforts. When Shanghai Disneyland welcomed thousands of visitors for the first time in three months, instead of parades and fireworks, mandatory masks and social distancing became the new look of the park.

To take advantage of the situation, companies need to get creative about how they conduct their business and they can learn from how businesses are doing so in China. For example, Calvin Klein launched a virtual pop-up store with an immersive 3D interaction experience on TMall. Another example is Perfect Diary, the domestic digital-savvy beauty brand. It moved its offline makeup experts online and leveraged more than 10,000 WeChat groups for customer engagement. As a result, the brand’s sales grew 250% in both January and February compared to sales a year ago.

Streets in Beijing
Streets in Beijing. Photo by zhang kaiyv on Unsplash

Spot the opportunities

Because of the COVID-19 pandemic, people have become more aware of the importance of their safety and health, hence will pay greater attention to health management. This means that businesses can always discover new unmet needs, or consider what value they can provide in terms of areas that are getting more attention such as safety, health, and teleworking.

“This change won’t happen overnight, especially right now. But it’s an indication of how much health and safety concerns are entering investment decisions.” — Jon Newton, co-founder of Life Solutions, a supplier of water filtration systems in China

For example, HWS and ClearAir Spaces in China created a “Home office kit” including ergonomic chairs, height-adjustable desks and anti-virus purifiers to support remote working. The kit has become a standard offering and brought the business back on the budget in April, which is a huge success.

How businesses in China are coping with the new normal can serve as a great lesson for business leaders to look at how they can respond to the new way of buying, the new way of working as well as the gradual slow recovery. Companies need to untether themselves from the pre-COVID thinking and venture into the new normal with a new strategy in order to thrive.

How to thrive in the post-covid new normal?

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