Tuesday, May 5, 2009

Ten Consumer Behaviors and Trends to Watch During Economic Slowdown

The consumer mood today

Marketing pundits believe that condoms, DVDs, lipstick and junk food are likely to gain prominence during economic slowdown. Will Chinese consumers’ behavior be similar in these times of strain? TNS China conducted a study in urban China to validate or explode these hypotheses and myths and we present here the key changes that we can expect in consumer behavior in these difficult times in urban China.

On the whole, the urban Chinese consumer is facing the crisis with stoic optimism. Half the consumers feel that despite the downturn their incomes in 2009 will actually increase in comparison to 2008. 31% expect to retain the 2008 income level and only 19% expect a decline. The optimism is based on the fact that most consumers feel that their lives will only be slightly singed by the fury of the global economic meltdown. However on the whole the year 2009 for the Chinese consumer will be a time for reflection and an opportunity to seek a balance in life – balance between work and play, friends and family, saving and spending, excitement and peace – in their quest to seek a better quality of life.

1. Health is wealth

When the wise man propounded that “health is wealth” he possibly did not expect that we may one day have a time when health is the only wealth that people possess. In a situation you can do little about the economic health, it becomes even more important to preserve the physical health. While gyms should still have their treadmills rolling strong as enthusiasts try to match their body weight graph with the stock market trend, most consumers will adopt the natural and free exercise of walking and jogging in their quest for healthier and slimmer bodies.

2. Goodbye luxury

“It has been said that man is a rational animal. All my life I have been searching for evidence which could support this,” said Bertrand Russell. He would possibly be pleased with the consumer desire to rationalize their spending and cut down on luxury goods in 2009. Consumers say that they plan to spend less on jewelry, bags and watches in 2009 as compared to 2008. The luxury goods manufacturers who were expecting China’s appetite for luxury to make it the largest market in the world, would need to wait till the economy turns around.

3. More skin-care and colors

Beauty may just be skin deep, and the recession is deeper. But the Chinese consumers still feel that a glowing skin and luminous lips could act as a shield against the pain of the economic crisis. Need to look good is never more pronounced than when the times are tough. A heady feeling from a positive reflection in the mirror and admiring glances from friends and colleagues could almost match and even compensate for the lightness of the wallet.

4. Skill enhancement and training

American consumers may have over mortgaged their houses, but the Chinese consumers will never mortgage their future. Learning has always been seen in China as a ladder of success. Dealing with difficult times calls for enhanced skills and capabilities. What could be a better time to invest in self enhancement than when employment is scarce, the salaries are low and the work load light. English language courses, already a booming business will get a further fillip. Consumers will try to teach themselves software, web page designing, and even belly dancing to enhance their chances for fruitful employment and a healthy pay check.

5. Digital world

With nearly 300 million internet users (the largest in the world) China was already hurtling towards a digital age. The rapid adoption of the digital media, of course, precedes the recession. Internet is where the Chinese go to look for a better job, download free movies and songs and just engage in incessant chatter with friends. In times like these, they expect to rely on the net even more to search for a better job, complain about their poorly paid jobs in their blogs and upload videos for their temporary leisurely existence. We believe the recession will further enhance the role of internet in the consumer lives in China. The availability of relatively inexpensive 3G mobile services will definitely also facilitate greater adoption and usage.

6. Home sweet home

The joy of family life will be further enhanced and family relationships will be even more delicious with the flavors of home cooking wafting from the kitchen. Chinese consumers plan to cook more at home in 2009 than they managed in 2008. The competition to home cooking comes from cheap fast food restaurants and road side stalls – both of whom are likely to lose business from this segment in 2009. However, the overall business of McDonald’s, KFC and Nan Xiang Xiao Long dumpling chain store may still see an increase in 2009, as consumers also down trade from more expensive restaurants.

If you need to spend more time at home, it also makes sense to vacuum the floor and tidy up the place, Chinese homes are going to look much more neater in 2009 and the lower toil demanded by the workplace may be substituted by efforts at home.

7. Shop wisely

While shopping at hypermarkets has its attractions, it does call for time at hand, With more time and greater incentive to economize, more consumers are likely to shop at hyper markets than the more ubiquitous but pricier supermarkets and convenience stores. The search for value and bargains will also turn the shoppers to internet shopping – the only channel that will grow even faster than hypermarkets.

8. In-home entertainment in, out-of-home entertainment out

When the slow speed of the internet connection makes downloading a movie difficult, we in China have the option of spending a dollar to buy the pirated DVD. If we did want to make an evening out of it, with popcorn and all, we would spend thirty dollars for two tickets in one of the many multiplex cinemas. While conventional wisdom suggests many alternative uses for the thirty dollars (including putting under the mat for a rainy day) the consumers are unwilling to give up this pleasure. Cinema ticket sales are likely to remain high, as long as the movie industry can come up with compelling attractions to help the consumers a few hours of blissful escape from the harsh reality.

Bars and karaoke flourish in economic booms, when clients are entertained and deals are made on favorable terms with suitably mellowed potential business associates. Not unexpectedly the recession will mean that entrepreneurs and managers do not have to listen to potential business partners sing out of tune, in the hope of securing a juicy contract. Less cognac will be poured (sale of beer and other cheap alcohol consumed at home or low priced eateries is unlikely to be affected).

9. Social harmony of a kind

Absorbed in the relentless wheels of economic activity, the Chinese consumer has been accumulating a feeling of guilt for neglecting the immediate as well as the broader family. Recession is the ideal time to catch up with friends, take the children to the park and visit your parents, and in the process enjoy emotional warmth to compensate for the coldness of the economic climate. The children are likely to pay a heavy price for this, with parents having more time and inclination as well as a renewed determination to help their children with their studies.

10. Sex and Love

Chinese consumers do not really plan to change their sexual habits during the recession. However with a strong intention to spend more time with spouse or partner, the consequences can not be predicted!

Some consumers, however, may be forced to give up expensive mistresses, particularly if they continue to demand luxury jewelry and handbags. The demand of condoms, may go up slightly as couples decide to postpone having a child till after the recession. Though as a counter trend, some women are said to be rushing to have a “financial crisis baby” as the law prevents the employers from laying off pregnant women and nursing mothers!

The Shanghai Adult Toys and Reproductive Health Exhibition attracted 20% less exhibitors (pun intended) this year. Is it that the industry which specializes in providing stimulation, is itself in need of a stimulus package! These are hard times indeed!

Written by Ashok Sethi, TNS China