What Does the Coronavirus Mean for Brands in China?
Photo by Alessio Lin in Shanghai
Shanghai was one of 24 provinces and cities to officially extend the lunar holiday through February 9 in efforts to slow the spread of the novel Coronavirus. Although remote work policies and self quarantines are still in play for individuals and teams across the middle kingdom, China is waking up to an unpredicted new reality for the Year of the Rat.
While the Chinese government continues to implement measures to control the public health risk and slow the spread of the virus, businesses, individuals, and governments around the world are speculating what the full impact of the outbreak will be on China’s economy and the global implications of that impact. How are businesses being affected in real-time, what can we expect in the short to medium term, and how should decisions in or about China be made during this time of uncertainty?
For brands operating in or stepping into this market, navigating this moment in China’s story will be both a decisive and complicated one. To help in this unique and nuanced pursuit, we spoke to six experts in their fields, representing a diverse and extensive range of experiences working with global and local companies on the ground in China. Here, we recap their outlooks on the situation, and their insights into how organizations, brands, and businesses should be operating to minimize damage and show their support to their Chinese consumers.
THE EXPERTS
Will Zhao AUS
CEO
eCargo Holdings Limited
Olivia Plotnick USA
China Social Media Marketing
Jessica Miao CN
CEO & Founder
United Media Solutions
Gregory Prudhommeaux FR
Founder
NextStep Studio
Diane E. Long USA
Xanadu Enterprise Ltd.
Tingting Yang CN
Corporate Relations Expert
China Consumer Industry
THE QUESTIONS
Where have you been during the Coronavirus outbreak and how have the last few weeks played out?
Diane
As a long term resident of Shanghai, with a Chinese family, we tend to stay in Shanghai for the Chinese New Year every year. Especially the first 3-4 days which are when we go around for meals at each others’ homes. We often will take a trip domestically somewhere via road later in the holiday when the crowds have returned to Shanghai. This year is obviously different. The hotel in Zhejiang where we had reservations called us to advise that all of the entertainment and tourist activities around the city were now closed so it did not make sense to travel there. “Would we mind changing our plans and come at another time of year?” the manager asked. And we were wondering if we could get our money refunded if we cancelled at such a late stage. Problem solved.
Jessica
China is rather safe at the moment and that’s all thanks to China’s government and how they have managed the outbreak. Due to the potentially fast-spreading nature of the Coronavirus infection, it was important for China to do as much as possible to contain its spread and the government has taken extreme caution and action to mitigate this. Through releasing frequent official announcements, prolonging the CNY holiday, suggesting citizens not travel and creating provincial policies to help SME companies prevent business loss, China has demonstrated that it can effectively handle the responsibilities a nation of its size has, I think countries should respect this.
Tingting
Why [are my husband and I still] in China? Because [our] dog is here. My parents are here. Better to stick with family, more for sanity really. I also have a duty to work with colleagues remotely to make sure business operations are not completely disrupted. I am trying to stay at home as much as possible - apart from walking my dog early morning and late-night, when there’s hardly anyone on the street - geared up and all!
Will
I’m in Shanghai with my family and we are staying put in our apartment. The government is doing a pretty good job communicating and Shanghai especially is leading the way in combating the virus. The fact that the government is able to mobilise all the people and departments gives me confidence that we can overcome this. Leaving in a hurry with no plan B is not the solution we need right now. I'd rather see this through with the Chinese people who have endured way more than us.
Greg
I was actually away since early January, [but] we decided to extend our trip a bit and try to see how things will be settling. The main reason is that I believe there was nothing that could have been done while being locked-up at home watching Netflix and struggling to get food and masks.
Olivia
It has been heartbreaking to see the global reaction to the situation, both policy and sentiment wise. It’s vital to remember that the media tends to portray the most dramatic and rare scenes of current life in China. I can speak firsthand to the city I live in, Shanghai, as being peaceful and quiet thus far. People are cautious, wearing face masks and taking significant precautions to ensure cleanliness and transparency. As during any national crisis, the people of China are showing their solidarity with one another, posting messages of encouragement and strength all across social media.
2. From your professional vantage point and based on your work experience in China, what do you make of the current situation?
GREG
It’s a reality check, and yes it’s tough and stressful but sometimes it’s necessary. Our businesses are suffering already. We have several companies in our portfolio and several are around F&B and restaurants. Clients will need time to get their confidence back and in the meantime, we all have to deal with our high fixed costs.
OLIVIA
As my work revolves around social media, it has been fascinating to see the past few weeks unfold across platforms such as WeChat, Douyin (TikTok) and Weibo. We’ve seen positive outcomes such as an increase in content focused on self-development, at-home exercise, mindfulness & meditation, and general health best-practices. As some of these industries like health & fitness have been experiencing a recent uptick in China over the past few years, it would be especially worth paying close attention to now.
WILL
The virus is more contagious than first thought and the number of [infections is still increasing]. However, the drastic measures taken by the government to close off Wuhan and surrounding cities helped the situation. The entire nation [is] behind this and following the new hygiene standard. Let's also put it in perspective, influenza kills more people than the Coronavirus each year and the death rate for this virus is far lower than many other contagious diseases.
TINGTING
Being in the eye of the storm, the situation is much calmer than what outsiders perceive. I returned to China from Europe towards the end of January and was impressed by how organized the airport was and how calm and cooperative the passengers were. [Our apartment] compound is doing a stellar job in sterilization, the streets are kept very clean, [and] a few days ago, each household was allocated 5 masks. There’s no shortage of food (although pork is more scarce, price is normal). Work wise, the leadership team is keeping everyone updated with the newest policy of return to work. I see most other MNCs are taking very good care of people in advising people to work remotely, and trying best to provide a safe work environment in preparation for return. In the past weeks, I see companies and organizations proactive in donating money and sourcing medical equipment to places and people in need. It’s overall a very uplifting environment where everyone is contributing to one shared goal, which is to combat the virus.
JESSICA
Based on our research and observations, there were signs that this Coronavirus outbreak has significantly impacted industries such as the travel and tourism industry and logistics and offline retailers, but we believe this impact will be short-lived. It’s good timing for business owners and decision-makers in these industries to take a breath, review their current strategy and build a portfolio of loyal customers. Business in online education, e-commerce, online entertainment, mobile games are the winners, with these industries benefiting strongly from the outbreak. The future is bright, although we are in a period of unknown, China and its related industries will quickly recover from the effects of this outbreak.
DIANE
The Wuhan virus is my third epidemic experience in 35 years of being on the ground in China. On one hand we are learning about the disease very early compared to prior epidemics, and with social media we are in real time with the investigation as well as the attempt to respond to the crisis. I learned from the previous experiences that this is not the time for incriminating words and whodunnits suppositions. The entire system, resources and thought process must be focused on containing the virus. Especially this time it seems to move so much faster. Or we humans are moving faster. The populations of every major city are exponentially larger than say in 2003 which builds good feeding grounds for viruses.
Photo by Zhang Kai Yv in Shanghai
3. How resilient is the Chinese consumer market?
Will
The Chinese market has come back from every set back I know (SARS, H1N1, etc). The Chinese consumers are evolving and with the defeat of the Coronavirus the consumption habits will change, they will learn from their mistakes and perhaps a new era for healthier living will be upon us. I'm always bullish about the Chinese market, sure there will be short term challenges in certain sectors, but longer term this is a market that will prevail. The key is patience and resilience with the right level of support.
OLIVIA
It is my sincere hope that the drastic measures that have been taken so far can curb the spread of the virus within the next month. As of now most businesses will have to brace for a hit in the first quarter and potentially the first half of the year, but I remain optimistic that this will not have a detrimental effect on the Chinese consumer market long-term. It is imperative that foreign businesses and governments realize their role in advocating for, not alienating Chinese consumers. The next few months are going to be critical for brands to show Chinese consumers that they support them and understand them.
Greg
I have been in China for close to 15 years now. I think the consumers will go on and will come back to a certain normality. However, it will go through a more or less long period of massive paranoia as usual.
Tingting
With the current situation, the consumer market is, like any other sector, taking a hit. Realistically there will be ups and downs. But with the collective determination of going through the hard times, businesses still keep our faith in the Chinese market and believe that it will go through the temporary hard times. Most businesses remain committed to the Chinese market.
Jessica
There won’t be a long-term impact given the size of the China market. China’s ability to recover was proven after the 2003 SARS outbreak. China’s economy is now even stronger than it was before the 2003 outbreak. I’m very confident the market will swiftly recover.
4. What advice would you offer a brand looking to enter or make a decision on China right now?
Jessica
Digital strategy is key. By strategically creating more digital assets, building brand awareness, and discussing the opportunity in expanding online trade logistics, companies can minimize loss during the outbreak and be best prepared for when it subsides and the market awakens. Each industry should have a different strategic response to the outbreak. But one thing I can be sure of is the shift of consumers from offline to online activity among all age groups. The business who have previously built well-established digital footprints and infrastructures are now gaining the benefits of this shift and are performing well.
Olivia
It has never been more important to understand the Chinese consumer. And it is my belief and experience that this can only be done by working with an EMPOWERED team IN China who understands what is happening and has ears to the ground. Now is not the time to turn away from or alienate Chinese consumers, but a time for you as a brand to think of how you build a genuine relationship with your audience for the future.
Will
If a brand is looking to enter China, don't change your plans. When you are the first mover and everyone else is afraid to come into the market, I see that as an opportunity to establish yourself and prove to the Chinese consumers that you are with them in good and bad times. Brands should understand it's not the good times that makes the brand, but the tough times that makes the brand and their reputation in the market. After all, the virus is not scary even though the media makes it out to be.
Greg
If you still don’t know what “LEAN” means, it’s really time to learn. You will have to keep your costs low and remain flexible. This situation is also teaching us to work on several markets and several channels and brands should do this too, because once thing is sure, this is not the last crisis they will face.
Tingting
Keep close observation to see how the combat of the virus goes. Be more levelheaded and have a more long-term focused view. Also pay attention to a more global view as China now is much more integrated in the international market than 2003. One good example that I read in the news is that New Zealand’s fishing industry, especially lobster, had to release 100 ton of lobster back into the water due to a decline of Spring Festival gathering banquets from China! That’s just a very straightforward reminder to all of us to analyze the situation bearing in mind the importance of China market in a global business network.
Diane
If I were looking to enter the China market at some point I would not hold back conducting market research, watching the anecdotal stories, and collecting data points to learn how the man on the street is coping with this situation. Situations like this can create disruption in the market to which humans respond cleverly [as in the phenomenon of online shopping during SARS]. And for sure, this epidemic may exhaust itself at some point, but we can be sure it is not the last one to come around to our door. So “KEEP CALM AND KEEP LEARNING.”
Whether you’re operating on the ground, or on the other side of the world, it can be difficult to cut through the sensational headlines, paranoia, and disheartening reports of discriminatory reactions and policies across the globe. But it’s crucial for brands and businesses to take stock of the realities, and develop a thoughtful and calculated approach to next steps.
Businesses face both singular and common challenges navigating this crisis, but there is one thing we know for sure - now is the opportunity to demonstrate understanding and support, both of your situation and of your customers. Whatever the timeline and consequences, core truths about the Chinese market do not change - its resilience, innovation, efficiency, and ability to come together in the face of a common challenge have been tested and proven before. The market will rebound, and the brands who will succeed will be those who have invested in China for the long haul, and acted thoughtfully, nimbly, and swiftly during times of uncertainty.
END
We’re keeping our ears and our feet to the ground, speaking to as many of our friends, contacts, and partners in China as possible, and we feel optimistic about China’s ability to bounce back bigger and better. We are here to answer any of your questions, and are well-positioned to develop marketing solutions to amplify your brand story in China.
Reach out to us today and let’s start the conversation.
Taste Collective is a creative agency that builds experience-driven marketing solutions using the most powerful multi-sensory medium: food and beverage. Headquartered in Shanghai, we produce bespoke campaigns, content, and activations for global brands, as well as provide a suite of on-the-ground services for brands we love.