It has been 2 months since the initial outbreak of COVID-19 pandemic in Wuhan, China. With China now over the hump in its battle against the virus, life is starting to return to normal. Unexpectedly, however, coronavirus has since spread to 152 countries, disrupting work and life everywhere with no end in sight. All tentpole cultural events have been canceled or postponed — even the upcoming Summer Olympics has to be delayed till next year. All things considered, COVID-19 is going far beyond what we’ve expected. It seems the battle won’t be quickly settled, as many recognize the possibility that this pandemic could last at least for a year.
In the past 60 days, we’ve seen numerous reports covering COVID-19’s effects on marketing. As strategists, we want to look at things from a different angle. As the situation is changing every day, we can’t simply chase after the latest data points and react to the market, which would be ineffective. What we intend to do in this series is to discuss the cause and effect behind these changes, gauge their future directions, and use the foresight to guide and prioritize our strategic choices.
In the midst of a fast-changing crisis, no one has all the information, and no one should try to play oracles of the market. We hope that through our observations and insights, we can inspire our marketing partners and make them think differently. As the saying goes, in the midst of every crisis, lies great opportunity. The important part is having the foresight to identify the opportunity and take appropriate actions.
COVID-19: Decidedly Not SARS 2.0
Many articles have referred to the 2003 SARS outbreak as a benchmark to predict the implications and aftermath of this epidemic, but given the severity of this global pandemic, that no longer seems an appropriate baseline for comparison. It is time that we recognize the fact that this pandemic is leading the global economy into uncharted territories and its impact on our way of life will be unprecedented.
First of all, COVID-19 is far more dangerous than SARS. Although the two viruses genetically belonging to the same family, COVID-19 is much “sneakier” than SARS with a longer incubation period is longer and ability to spread via asymptomatic carriers. Also, COVID-19 is mutating much quicker than SARS: so far scientists have tracked 149 mutation points in its DNA, spouting two subspecies that are even more contagious.
In addition, China’s connection with the world economy in 2003 is incomparable with where things are today. In 2003, China has just joined the World Trade Organization (WTO); in 2020, China, as one of the pivotal parts in the world production chain, has developed a mutually dependent relationship with the rest of the world.
In the early stage of the COVID-19 outbreak, the world worried about China’s ability to fulfill orders as many factories are shut down. Now, as Europe is also implementing lockdowns, it’s China’s turn to worry. As disruption ripples across the world, it affects not just the manufacturing sector but also consumption demands all over the world. Chinese consumers are anticipating a shortage of imported goods in the coming months, while Chinese workers in factories are anxious about keeping their workload full. As a Chinese netizen joked, “We are all grasshoppers on the same string.”
Back in 2003, our technological toolkit was not as advanced either. During the SARS outbreak, ecommerce was still absent, which contributed to a sense of deprivation during the outbreak and later spurred a wave of compensational shopping. Today, however, online shopping and telecommuting have become a part of everyday life for consumers in China and worldwide. So that wave of compensational spending will likely move towards non-retail categories.
COVID-19’s Wide-Ranging Impact
Historically, every epidemic has provided us with a strong imperative to reconsider our priorities and upgrade our way of life: the Black Death led to the emergence of the Renaissance; the 2003 SARS epidemic greatly accelerated the development of China’s ecommerce and digital infrastructure. For COVID-19, although it is still too early to predict all of its lasting implications, we also observed some early signs of how this epidemic is changing consumer expectations, facilitating new habits and consumer behavior, and accelerating industry transformations to address the needs of increasingly connected consumers.
Therefore, we intend to publish a series of observations on the long-term impact of COVID-19 from the following perspectives:
1. Government Policies and Economic Stimulus
2. Accelerating Changes in Consumer Behavior
The conventional wisdom says it takes 21 days to form a new habit. During the past two months, we see a lot of emerging changes in consumer behavior because of the lockdowns and the resulting shortage of last-mile delivery services, especially during the Chinese New Year holiday. Specifically, the following three areas should be closely observed:
- The “shut-in economy”: When people were quarantined at home, their desire for shopping and cultural consumption was not totally suppressed; On the contrary, they shifted the focus of their consumption and looked for upgrades, supercharged by mobile commerce and shoppable social content. We need to carefully consider whether the “shut-in economy” has lasting power and discern which elements and shopping scenarios will still be around after the epidemic? Of course, the “shut-in economy” is enabled by a broader ecosystem of supporting services and new platforms. How to adapt existing business model and plug it into this ecosystem is a question that many brands will need to answer.
- The consumerization of healthcare: Over the past 2 months, the non-stop top-down communication of disease prevention and preventative health have led a lot of Chinese families to form a daily routine of sterilization and checking vital signs. These routines will no doubt lapse after the epidemic, but the mindset of healthcare as well as the demand for preventative care products will likely remain as a staple, thus opening a new growth area for brands in healthcare, food, fitness, and other adjacent industries to tackle.
- The possibility of “compensational consumption”: Will there be a wave of post-crisis “compensational consumption” like what happened following the 2003 SARS outbreak? The evolution of shopping behavior and post-pandemic consumer spend are being closely monitored in China as cities lift lockdowns and return to normalcy, but what we saw so far suggests that the impact of “compensational consumption” will be far more limited this time around compared to what happened post SARS, and limited primarily to certain industries.
3. Adoption of New Technologies and Infrastructure Upgrade
4. Media Trends and Innovation Opportunities
5. The Evolution of Cultural Values
With these questions in mind, we will continue to think about the pandemic’s possible impact and future opportunities for brands and marketers. The pandemic is far from over, and the future is still uncertain, but we will try to approach the reality of the market as closely as we can in our search for real-time actionable opportunities. In this series, we will rely on data, observations, and real market response shared by our partners to inform our views, with the hopes that sharing our insights will kickstart discussions that will inspire us all.
