How the pandemic has accelerated changes to consumption patterns and employment in China

What will it take to get consumption back to pre-Coronavirus levels, and how will it have changed as a result of the pandemic? Rajesh Chandy, Academic Director of the Wheeler Institute for Business and Development was joined in conversation with Juliet Zhu, Professor of Marketing and director of the Social Innovation and Business for Good Centre in Cheung Kong Graduate School of Business (CKGSB), to discuss how the Chinese economy is being restarted and long-term shifts in consumer behaviour and employment patterns.

  • In China, local governments are providing coupons to subsidise spending, potentially amplifying consumption by a factor of 10; these scarce, time-limited credits are redeemed to boost spending; 
  • Online sales have been booming during the lockdown, with an increased use of ‘internet celebrities’ selling merchandise through live streams; 
  • These channels have been used for a wide range of products, from entrepreneurs selling mobile phones through to local government officials promoting potatoes to keep farmers in business; 
  • Initiatives such as employee sharing programmes have enabled people to find work where it is needed, as well as let businesses to reduce the cost of full-time employees when there is limited activity required; 
  • Zhu has also identified a link between people were being able to reduce their stress levels during the crisis by helping others and finding a better sense of fulfilment. 

Shifts in consumption patterns have been accelerated as a result of the pandemic

As the Chinese economy reopens, Juliet Zhu has observed the steps being taken to increase consumption and return to normality post-COVID-19. Instead of providing fiscal stimulus, the Chinese Government is supporting small businesses through waiving rents and insurance payments. Furthermore, local governments are also collaborating with small businesses to provide electronic coupons which can be redeemed once the consumer has spent up to a certain threshold, in order to boost consumption. These coupons are provided on a limited basis to consumers who have spent money on wallet platforms, simulating consumption up to 10 times over. These measures are intended to ensure any stimulus provided by the Government is spent, rather than saved so that the economy can regain momentum. Similarly, because the coupon has an expiry date, there is a greater incentive to redeem the credits within a short period of time, thereby boosting consumption.  

Zhu has noticed an increasing trend of online businesses using internet celebrities to boost online sales through live stream selling. The acceleration of online to offline in combination has led to influencers becoming important opinion leaders. While this is not a new phenomenon, with famous examples including Li Jiaqi, who competed with Alibaba founder Jack Ma to sell more lipstick in 2018, during the pandemic it accelerated significantly, with businesses venturing onto online platforms to communicate with customers, using CEOs and salespeople to live stream and demonstrate products with great success. For example, one entrepreneur sold 110 million yuan products (around £11 million) over a three hour period, attracting 48 million visitors. Moreover, local government officials are also promoting through these channels when there is an oversupply of produce in an attempt to keep farmers in business.  

Employee sharing programmes have allowed for a more efficient allocation of people, as well as help companies that have been shut reduce their costs

Employee sharing programmes that allow business owners to move workers where there is the greatest demand have also enabled employment levels to be maintained. Businesses which have had to shut down during the lockdown, such as restaurants, have been able to lend their employees to businesses which are having an upturn in activity, such as online grocery stores. Not only did this provide employees with meaningful work, but it also meant that businesses that were closed were able to reduce their costs. 

Similarly, there could well be an innovation benefit for these companies in the future, as the capabilities of their workforce have grown through working in different roles. Zhu thinks that moves towards more flexible working were already gaining momentum before the crisis, but believes the pandemic may accelerate these trends, impacting how people choose to work and how employers choose to hire employees in the future.  

Helping others can help reduce stress levels during the pandemic

Over the course of the 5-month lockdown period, Zhu collected data to see how various things can affect stress levels during this difficult time. Based on Zhu’s research during the crisis, she identified that people who spent more time helping others experienced a better sense of fulfilment, and as a result, exhibited a lower stress level. So Zhu’s message is to not only protect yourself but to help others because that will help you too.  

Juliet Zhu conversation with Rajesh Chandy is part of the Wheeler Institute’s COVID-19 series – bringing together the expertise and experience of our extended community to understand, illuminate and offer solutions to the challenges created by COVID-19. Our differentiating factor is the role of business in addressing these challenges, with a focus on the implications and actions for those in developing countries.   

If you’re interested in following the Wheeler Institute COVID-19 series, check out our previous episode ‘A one size fits all apporach to information sharing will not lead to the behavioural change required to prevent the spread of COVID-10’, with Imran Rasul.

Rajesh Chandy is the Academic Director of the Wheeler Institute for Business and Development. He is Professor of Marketing at London Business School, holding the Tony and Maureen Wheeler Chair in Entrepreneurship. 

 Juliet Zhu is Professor of Marketing and director of the Social Innovation and Business for Good Center in Cheung Kong Graduate School of Business (CKGSB). She currently is an Associate Editor at the Journal of Marketing Research and the Journal of Marketing. 

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