Notorious for its e-Commerce success proven by Singles Day festivals and more, China has only gone ahead to migrate the largest national holiday online as it holds its first-ever New Year’s Festival virtually to reduce the risk of spread from gatherings and mass shopping sprees.
The Chinese New Year, equivalent to the importance of Christmas in Western markets, is one of the largest festivals in China that officially takes place for 16 days. Consumers are typically generous and are lavish with their spending over this period in food and gifting categories as a sign of blessings and to maintain social status, on top of the cash handouts that are gifted in hongbao’s (red packet). E-tailers such as Alibaba
However, recent sprouts of Coronavirus cases have been discovered in multiple cities within China, quickly triggering the nation to carry out mass testing, lockdowns, and travel restrictions as precautions for the holidays. Citizens have been ordered to stay indoors where possible and domestic travels are advised against to halt the spread. “Distributors and manufacturers already thought about potential lockdowns and pushed inventory to the market earlier.” shares Rodrigo Cambiaghi, Asia-Pacific & Greater China Supply Chain and Operations Leader of EY.
Stay Home, Shop Online
For this reason, the Ministry of Commerce in partnership with the Central Cyberspace Affairs Office, the Ministry of Industry and Information Technology, the State Administration of Market Supervision, the State Post Bureau, and the China Consumers Association came together to devise the ‘2021 National Online New Year’s Festival’.
The online campaign encourages citizens to shop at home and spend the holidays virtually to prevent further epidemic waves but also mainly to promote consumption, all the while reinforcing new priorities over protecting consumer’s rights. Over 20 e-commerce platforms such as Pinduoduo, JD.com, Suning, and more are participating, but many technology platforms have recently been placed under scrutiny for anti-monopoly practices by previously forcing retailers and merchants to exclusively trade on one platform only, illicitly utilizing big data and the sale of counterfeit goods.
The month-long festival, held from January 20th to February 18th, encourages all partners to create attractive promotional activities with a local flair of their own municipality to invigorate the consumer appetite and generate a strong festive atmosphere through heavy discounts such as buy-one-get-one and flash sale deals.
Previously, China had taken the success of the many online shopping festivals and spun it into a two-month-long shopping event known as the Double-Five shopping festival back in May last year, where online and offline sales had exceeded over ¥15.6 billion ($2.2 billion) in the first 24 hours. “Beijing Consumption Season” was also another campaign held to encourage citizens to utilise their digital vouchers to spur online spending as a recovery tactic for the economy.
Consumer Confidence Down
China has been recognized as the largest online retail market for the eighth consecutive year as its online retail sales account for a quarter of the country’s total retail sales volume in 2020. Despite so, there has been a dip in discretionary product sales in conjunction with the stagnant household spending due to cautious sentiment over unprecedented times and the return of coronavirus cases.
The already strong e-Commerce scene in China has been largely accelerated by brands amping up their digital efforts during pandemic times, though an online presence still does not beat the significance of physical outlets, proven by the many flagships continuing to open this year as retailers look towards the New Retail method to synchronize their omnichannel efforts.
Online shopping is also further prompted by the recent development of the nation’s first-ever digital yuan, where ¥20 million digital yuan ($3.09 million) has been distributed in Shenzhen to encourage spending with online merchants and platforms through the payments of its digital currency.
Denis Cheng, EY Partner in Assurance clarifies “From the 2020 GDP press conference (on January 18), the National Bureau of Statistics has acknowledged that retail sales in December have been dampened by the resurgence of COVID-19 cases in the mainland, although the general situation ‘remains under control’.”
Statistics further show rural households mainly in lower-tier cities are more resilient and spending had normalized towards the end of 2020. Yet, it is expected that many blue-collar workers especially in the manufacturing fields who would normally receive bonus pay will be lessened, as factories in China have downsized their production thus affecting their disposable income. EY’s own Future Consumer Index (FCI) hosted in October 2020 discovered a quarter of its respondents have had their paid hours reduced, nearly a half suffered financial loss, and one in two are trying to save more money than in the past.
Export outputs are typically churned out in an accelerated manner and in advance of the holidays as manufacturers would release their workers to return home earlier in time for the festivities. However, many State-owned enterprises have advised staff to not travel home during Chinese New Year to minimize the possibility of another outbreak. Cheung reiterates, however, “China recovered earlier than other countries in 2020, the manufacturing plants were mostly running at normal capacity over the previous few months. There should be sufficient inventory to meet consumer demand during this January event. The question should be whether the gross merchandise value (GMV) of this campaign will reach those observed during past e-commerce events, such as 11/11 and 12/12.”.