Economic Fluctuations Call for Innovation in China’s OOH Space

Unemployment has risen in China, the growth of total retail sales of consumer goods has slowed down, and liquidity has been limited. These adverse economic effects will continue, which has also led to ups and downs in media effectiveness, especially outdoor media.

Cinema media, elevator media and building media, etc are undoubtedly hit hard, but outdoor is actually a medium that has been brewing innovative forms for a long time.
In the recovery process of the overall economy, the marketing industry must first examine the changes in their surroundings before finding the next opportunity in outdoor advertising.
More than 70% of brands will deprioritise outdoor media in the second half of 2022 and even in the next year, unless it is absolutely required to boost retail sales or to enhance immersive experiences.
Drones, 3D billboards, and the like are emerging forms of outdoor media in the last two years, and we can expect more innovations in the future to drive growth.
As economic growth slows, the competition for consumers’ time, minds and wallets will inevitably intensify, so a key consideration for developing new out-of-home touchpoints is whatever makes the target audience invest their time and energy repeatedly.

Looking at the impact from a series of economic data

Most parts of the world have been hit by the pandemic to varying degrees in the past two years, but the Chinese market has still achieved a relatively rare growth rate compared to other regions.In China’s 2022 Government Work Report, the GDP growth target is set to be 5.5% which all provinces and cities will strive to achieve. However, the recent “return” of the COVID-19 pandemic has slowed the pace of growth, with local and international financial institutions downgrading their forecasts to 4%. According to the latest data released by the National Bureau of Statistics, the GDP growth rate in the first half of 2022 was 2.5%, and aggressive measures are expected despite the adverse circumstances.

People’s livelihoods are bearing the brunt. We have also seen a sharp increase in unemployment rates for the first time since Feb 2020. In April 2022, the urban unemployment rate climbed up to a high point of 6.1%. Although it was back to a better level at 5.5% in June as restrictions were lifted, the headwind is expected to persist.

The growth rate of total retail sales of consumer goods is also facing a severe slowdown. In March 2022, when the new Omicron wave broke out, retail consumption decreased by 3.5%, which further fell to negative-11% in April. Even though there were positive signs in June, a quarter of negative impact would take long for retail markets to recover the loss.

The immediate impact seen in lower sales, tighter wallets, more cautious consumers, and restricted mobility are alarming for marketers. In order to recover and return to growth in line with the broader economy, we need to take strong measures. The current situation has also hit outdoor media hard, but it is also giving birth to the evolution of the outdoor space. We must first examine what changes have taken place in this environment in order to achieve breakthroughs in this difficult situation.

Does outdoor media still have opportunities?

Even under the shock of the first COVID-19 outbreak in 2020 filled with fear of the unknown virus, China’s annual adspend that year grew by 4.4%, while globally -1.95% was recorded (and APAC at -1.56%). In 2021, as the world continued to adapt and adjust to COVID-10, China’s ad spend grew impressively by 16.2%. The local advertising industry has taken a hit, but was still showing resilience. In 2022, with the enactment of the “Zero-COVID” policy in place, MAGNA expects the growth of advertising spending in the Chinese market to slow to 8%, close to the global forecast at 9% and on par with the rest of APAC.

The most significant hit for offline media is obviously in the outdoor space. People are going out less, traveling less out of the city, facing more costs, restrictions and disruptions. From the perspective of outdoor media investment, overall OOH adspend fell 44% in Q2 2022 compared to Q1.As the outbreak returns, communities are wary of congregating or travelling to crowded areas, including entertainment venues, shopping malls, fitness facilities. Of all offline media, cinema media has been hit the hardest, with adspend falling by 97% in Q2 2022 year-on-year, according to the MAGNA Global Advertising Forecast (June 2022 Edition). Apart from the days that cinemas are closed due to COVID, the capacity has also been reduced by half. The recovery of cinema media investment will depend on the lifting of restrictions.

For the other OOH formats such as big building billboards, bus shelters, and metro ads, Beijing Winter Olympics gave them a good start. However, 2022 is estimated to record a -1% negative growth for OOH. More than 70% of our agency clients are extremely cautious about the second half of 2022 and the year ahead. Unless it is necessary for sales needs or immersive experiences, OOH is being deprioritized in the near future. This avoids advertisers having to change plans at the last minute due to an unpredictable drop in traffic.

In contrast, although people are staying at home, traditional TV are still losing homebound audiences. TV spending is expected to decline slightly by 2% in 2022, although the Beijing Winter Olympics in February and the Qatar World Cup in December are positive factors. We do not expect these events to reverse the downward trend or offset the COVID impact as adspend for the Winter Olympics is spread across all media, and the World Cup will be broadcast at night. Going forward, we expect spending on traditional TVs to decline, but top provincial TV and video networks will thrive on digital media.

While this is the overall picture, we expect these effects to abate once the outbreak is better controlled. With innovations, we might even find new ways to make a comeback. OOH allows not just one-way communication but two-way engagement and experience. If we look beyond the traditional forms of OOH, we would discover that the innovation engine has begun long ago, even before COVID happened. The recent restrictions have just propelled it to the next level driven by people’s desire for the outdoors, making it the next growth opportunity in OOH. Drones and 3D billboards are newer media forms that have appeared in the past two years, and we can expect more innovations in the future.

Going outdoors to connect with consumers

Regaining momentum is every brand’s priority in getting through the COVID turbulence. Brands need to focus on areas related to people, culture, and connections to get practical clues and new growth opportunities.

Looking back to 2021, the historical growth drivers at that time were closely related to changes in life needs and priorities, with categories like personal care, household goods, pharmaceuticals, and clothing & accessories experiencing a significant rebounce.

It can be seen that in challenging times, the desire of consumers to make the best out of life is the fuel of growth for marketers.

Mobility and convenience, deprived during COVID times, have prompted many to explore the other sides of life as many new behaviours emerged after those periods. The extensive lockdowns has made people rethink how life could be different, and reflect on what is the source of happiness.

Qualitative research by Initiative shows that what people long to do is to “go somewhere else” other than go around in the apartment to connect with people or experience life. Glamping, frisbeeing, skateboarding and snowboarding are amongst the top things to do or things to learn.

New sporting movements

Take snow sports for example, according to Mintel, by the end of 2022, it is forecasted to have 300 million people on the snow slopes. New indoor snow centres are going to populate the country, even in China’s warmer cities. Guangdong alone has ambitions to have 30 indoor snow sports centres by 2025, introducing 10 million of the Chinese population (8% of Guangdong’s population) to the sport. This not only create opportunities for sports brands to sell products, but also means new passions and locations for non-sports brands to connect with consumers.

It makes sense for marketers to research these new movements. These new types of sports require consumers to invest time and money in traveling to locations or buying equipment, as well as learning and perfecting their skills. This kind of investment is very addictive.

Quoting the textbook golden case of Betty White’s pancake mix, and IKEA’s self-assembled furniture, involvement matters, and even when the bar is heightened, people are still willing to be follow, engage, and be emotionally invested. Could some of your brand experiences invite the end users to join the process before it produces the finished product? Marketers need to pay attention.

Getting out of the house

Connecting with other people is the top desire in the post-pandemic era. This provides marketers the first clue to win.

It is not difficult to find that posts on WeChat Moments on weekends are full of greenery. Many people do not go to shopping malls or cinemas, but head to the nearest grassy patch to camp with relatives and friends. One might think that in the countryside, the chances of connecting with brands are lower, because there are no billboards around, and people are busy camping. However, a careful analysis of where, when, who and how this takes place will reveal many ways to connect with consumers outside of traditional frameworks. Think newly-created media channels and touchpoints.

As marketers, can we create new ways of connections with these new behaviours at the core? Sun umbrellas, camping seats, delivery services, location-based entertainment… There’s so much we as brands can do, and it does not just start or stop at the campsite. It’s not just about venues. Connections can be built along the entire consumer path; brands can be the ones to inspire weekend ideas. As the economy slows, competition for consumers’ time, minds and wallets is sure to become more intensified. Creating human-centric brand experiences will help you differentiate and win.

Offline stimulants to keep fit

Will Liu has inspired many to start their home fitness plans with no equipment at all, bringing a lot of beginners into the category. However, apart from a small group of very disciplined consumers, keeping up with fitness routines at home is difficult to continue. Not because they don’t know how, but because they lack motivations.

We have spoken to a small group of gym and yoga studio owners since they received permission to reopen from China’s General Administration of Sports. In the first 7 days in July, not only did former members come back to continue exercising, but new prospects and interested enquirers increased significantly.

Regardless of the extensive WFH periods, people still think that the home is not the best place for workouts. Many also think going to a fitness facility allows for better rituals and routines. Ambient stimulation, face-to-face instruction, and fitness immersions are experiences that keep consumers sweating and make them repeatedly invest money and time in fitness facilities. Brands can learn from this and uplift their brand experiences.

Staying in but also out: the connection between virtual and reality

At the start of the 2020 pandemic, a new version of Nintendo’s hit game “Animal Crossing: New Horizon” surpassed developers’ expectations in popularity. With widespread lockdowns, the desire to be part of a community drove people to look for alternatives. Gaming became a new world where consumers came together to fulfil the same need to make connections and experience new things. This has accelerated the application of web 3.0 and the metaverse, where offline experiences take on new forms.

Some marketers are starting pilot projects to build offline experiences into this highly realistic virtual world. Metaverse 0 alcohol beer parties, a Metaverse fashion show with costumes for real people and digital avatars, everything is possible in this new world.

Some brands also try to regularly launch outdoor media in the metaverse, occupying every corner of the metaverse through billboards, bus shelters, and even aircraft fuselage. As brands innovate in this new world with a sense of closeness to reality, it’s important to note that connecting with consumers remains experiential. What will be the next opportunity, metaverse camping, or metaverse premieres? Everything that happens in real life can happen in the metaverse.

The future outlook of OOH

The COVID lockdown might have put growth to a pause but never a stop. It is a good time for marketers to renew and strengthen our connection with our current and future consumers. Media evolves and there will always be novel ways to connect. Life is connected by different events, experience, and culture. Digital media and offline media should not be a either-or case, but an integration and evolution inspired by human needs for life. With this at heart, we wish all markets could get out of the challenging COVID times stronger and better.

Author

Abby Wong

Chief Strategy Officer

Initiative Greater China

Source：WARC