Lessons from China: COVID-19’s Impact on Consumer Technology
Part 4: New Inspirations for Building a Techno-Utopia
Written by Lin Liu, Chief Strategy Officer, UM China
Editor’s note: China is about two months ahead than the rest of the world in the fight against COVID-19, and our team from China is leveraging this foresight to offer their thoughts on the long-term impact of COVID-19 and the post-pandemic implications for brands. This is the fourth entry in the “Lessons from China” series, which focuses on how the pandemic accelerated adoption of new technologies, and how the market responded to new use cases. You can find the previous installments in this series here.
Like any other crisis, the Covid-19 pandemic has been an accelerator that spurred the new behaviors to emerge, and that is true for consumer technology adoption as well. Before the pandemic, big tech deployment plans for 5G, AI, IoT, and cloud-based computing were already in place for 2020. Yet, for average consumers, few could imagine them or articulate their benefits. The pandemic has changed all of that — the early applications of emerging technologies ushered in the next iteration of a society already sold on their power. While most of these innovations have been in the arena of public health management, with China’s fast speed of implementation at scale, we expect to see them finding their ways into marketing and tech platforms soon.
The Integration of AI + Big Data: health code systems evolving into smart social services
On February 11, to prepare itself for the influx of people returning from the Chinese New Year holiday, the city of Hangzhou, home to Alibaba’s headquarter with a world-class data infrastructure, launched the first “health code system” in China. After authorizing the use of their mobile phone number to retrieve their location data for the past few months, users are presented with a colored health code — green, yellow, or red — which local authorities and shop owners check to determine whether they are allowed entry or must go into quarantine. Before long, the health code system was rolled out to the rest of the country, helping people self-monitor their health status and prove it to others.
Unlike in the West, where the contact-tracing apps take the form of apps that require users to download voluntarily, China’s health code system for managing Covid-19 was embedded in our omnipresent “super apps” (i.e. WeChat and Alipay), which ensured near-universal adoption overnight. These codes quickly proved themselves quite effective in improving the management of the population migration and of the pandemic, and became a source of assurance and security, along with omnipresent face masks and temperature checks.
The technology behind the health code system was relatively mature — using AI-powered data analytic tools to parse through the massive amount of location data released by telecom companies to determine if someone has been to a high-risk area. Instead, the greater challenge in deploying it was in the public policy arena. A key issue was around how to establish a framework to consolidate data across different government agencies and private platforms, without losing accountability and violating laws. In early February, the Central Security and Information Committee issued clear guidelines encouraging government agencies and businesses to utilize big data to assist fighting this pandemic, and the Chinese Telecommunications Department also facilitated the data sharing between the telecoms and the local government. In the new model that followed, local governments were given the ability to act proactively and in real time, compared to the previous “one case, one request” model, which would have overwhelmed the system.
The contribution by platforms like Alibaba, Tencent, Baidu, and UnionPay in deploying the health code systems has been well documented. The tech giants like BAT or JD.com were obvious choices for the government for many good reasons, including their tech competency, the depth of their data, and their legal compliance on privacy protection. But this also means that businesses will have access to another level of consumer data: big tech platforms now can reach much deeper into consumers’ private and public lives, and this is bound to have an impact on the scope of the big platforms and re-shape the competitive dynamics between them. For example, local services have already become a hot battleground for the tech companies.
Then, there’s the issue of consumer privacy. Generally, privacy comes as an afterthought for most consumers in China. So naturally, during a public health crisis, there was little resistance to the thought of trading personal data for pandemic management. Yet, we are seeing clues that awareness of privacy has been emerging and no one can take the consumers’ trust for granted. For example, the health code systems are perfectly legal under China’s current framework for privacy protection; yet in its implementation, barely ever, one gets the chance to give consent. According to a report by Shanghai Mana Data Tech Development Center, out of dozens of health code systems, most didn’t have a privacy agreement with the consumers.
Given that the pandemic happened at breakneck speed and no one had the luxury to pause and reflect, “getting on with the experiment and see where it takes us” seemed to be the zeitgeist. In the future, the health code system might phase out as it completes its job, but the learnings from its deployment could be applied in the development of smart cities. In some technologically advanced cities like Hangzhou and Suzhou, the health code system is already evolving into a type of digital ID, granting users to access public transportation, medical, and social services as the cities reopen.
Tech platforms, stepping from the private arena into their now very public roles, have lots on their shoulders. Just like in the past, all is well until a breach prompts the consumers to question how everything works, and whether they are being sufficiently protected. Whether their venture into the public sphere will inspire more trust, or prompt more vigilance on consumers’ behalf is something we will observe closely.
5G: from lukewarm reception to a beacon of hope
Chinese mobile consumers had been quite suspicious of the usefulness of 5G networks, but this pandemic has done wonders to 5G’s consumer perception in China.
When it first became publicly available near the end of 2019, 5G mobile plans were met with lukewarm reception at the best. Hindered by both high prices and limited choices in data plans and compatible devices, the 5G user base was growing at a sluggish rate. Amongst the reported 48 million 5G data plan subscribers, less than half of them — around 20 million — have been accessing the 5G network with a 5G-compatible device by the end of March. Some blamed the lack of consumer interest on the lack of popular 5G use cases, and the misperception that “5G is useless” prevailed in certain consumer segments.
However, the outbreak of Covid-19 highlighted the dire need for a technology that could deliver “low latency, high reliability, high mobility” for long-distance communication and digital services — a bill that 5G fills perfectly. Before long, 5G became instrumental in enabling different public health management scenarios that required high-fidelity long-distance communications in real time, and its strengths were made real and concrete to average consumers.
While the world was impressed by the speed at which China set up new hospitals to treat Covid-19 patients, the Chinese audience was impressed by the nearly simultaneous set up of live broadcasting of the construction. Thanks to wireless 5G connectivity, there was no need for installing light optic fiber cable, and as many as 100 million Chinese viewers were able to witness, or as they fondly called it, “supervise” the constructions from their living rooms. They were able to get detailed information about the construction projects, interact with the livestreaming and other viewers at the same time. This collective experience enabled by 5G was widely regarded as a cultural event that provided hope and a sense of control in a time that people needed them the most.
It was also widely publicized that during the pandemic, 5G connectivity enabled hospitals to connect with the medical workers in different cities to conduct much-needed remote consultation sessions, as well as remote control of robots to deliver patient care in high-risk situations. In addition, in combination with heat-imaging technology, 5G-powered unmanned monitoring stations were able to efficiently scan passengers for high body temperature around train stations and other high traffic areas.
Granted, these applications are still in the early stages of development, and one could argue that some could have been accommodated under the 4G framework, however awkwardly. Yet, the significant change is in the consensus around the perceived value of 5G. While this doesn’t mean that the adoption of 5G will accelerate immediately — the disruption in the tech production chain means delays in the launch of 5G hardware — the cost of customer acquisition for 5G will be much lower than what it could have been. 5G has become a household name in China. Even McDonald’s has named a fried chicken offering “5G” (“G” and “chicken” are homophonous in Mandarin), which quickly went viral on social media. In short, Chinese consumers are now ready to embrace 5G after it had proven to be a beacon of hope during the fight against Covid-19, which stands in stark contrast with incidents of “destroying 5G stations in fear of spreading coronavirus” in the West.
Livestreaming & Connected Commerce: exploring new use cases
During the lockdown, people did many things online that we used to insist must be done in person — going to work, seeing a doctor, or even buying luxury products — all it took was a forced change of habit out of necessity. These new behaviors spurred adoption of new technologies, and much has been written about them, including our previous article on the shift in consumer behaviors. Here, we turn our attention to the new combinations of technology and use cases that could bring disruptions in connected commerce.
Livestreaming + Virtual Influencers
Virtual influencers such as Luo Tianyi have been part of the pop culture in China for a while now, both for what they are — perfect concoctions of idealized human qualities, and for what they aren’t — magnets of scandals and gaffes that would disappoint fans. Some merchants tapped virtual influencers for their shoppable livestreams to demonstrate and pitch products to prospective customers during the pandemic, and now many are starting to use them for customer services. Virtual customer reps are available 24/7, which is ideal for a generation of customers that demand instant gratification. During her first solo live merchandising session on May 3rd, Luo Tianyi attracted 2.7 million viewers, and her “commission fees” approached one million RMB per product(Xiuchuag.com, May 27, 2020). Although her sales performance from that day has yet to be disclosed, this experiment itself has already been replicated and is likely to extend into the future.
Livestreaming + D2C Model
Since the outbreak, livestreaming from the countryside has pushed their way into the mainstream ecommerce stage. As the pandemic disrupted the traditional distribution channels, some farmers and factory owners, many of whom are of an older age, were forced to turn to livestreaming to hawk their products directly to consumers rather than selling through grocers and retailers. This new wave of live-streamers shifted online shopper’s expectations, as the famers and factory owners were able to bring consumers to the source of production and showcase how produces were grown or how products were made, thus injecting a much-needed sense of authenticity and trust into a market that has been long plagued by low-quality counterfeits and food safety issues. This shift underlines the urgency behind the extension of high-speed internet in rural areas (likely via 5G), as well as the adoption of mobile and livestreaming platforms by the older populations in rural areas.
Virtual Experiences + Local Services
Since the Chinese consumers colloquially refer to online activities as “cloud(-based) activities”, everything in China now seems “cloud-able.” From the prevalence of “cloud meeting” and “cloud conferencing” comes the revelation that all forms of leisure and entertainment can take place online, including things like travel, clubbing, happy hours, and jogging, and they all became popular online experiences during the pandemic. Out of these “cloud experiences,” one of the most inspiring was how young people used Idle Fish, a secondhand goods marketplace app, to help each other out. During the initial phase of the pandemic, the number of transactions on Idle Fish skyrocketed in Wuhan. Most of them occurred within the radius of 2 kilometers, and many transactions for services, such as offering to feed cats for people unexpectedly stranded in other cities or therapy sessions, were priced at below 1 yuan, making them, in reality, neighborly acts of altruism. Turns out, the cure to the naturally occurring “social distancing” common in big cities was using virtual experiences to connect with neighbors and help each other out.
On-Demand Delivery + Emergency Relief
The logistics services were put through the wringer during the pandemic, and they came out of it better optimized as an area of intense competition for the big tech companies. During lockdowns, Meituan made it possible for delivery workers to act as new emergency service workers, delivering life-saving medicines and other crucial resources. Logistic giants like Alibaba and SF Express acted as the blood vessels across the country transmitting medical supplies to where they were needed the most. This is quietly transforming how delivery services are perceived — it’s no longer about delivering just physical products, but also local services. This shift in perception opens up a new window for brands to reconsider how products and experiences will be delivered to Chinese consumers.
Conclusion
With the worst part of this pandemic hopefully in the rearview mirror, we are seeing signs of real transformations in consumer tech adoption. Consequently, our online life won’t just be a copy-and-paste version of our offline world, and they won’t be siloed as “virtual” moving forward. The online world has proven to be capable of new creations, configurations, and shared experiences. In the past, we regarded “online” as a growth channel while offline as the “home base” — a notion that has been rendered completely antiqued by the pandemic.
Technology has been a key driving force behind China’s rapid socio-economic development over the past decades. The fallout of this pandemic dovetails nicely with the Chinese government’s push to build out “new infrastructure” led by 5G and blockchain, which will no doubt elevate consumer interest in tech innovation to new heights and spur new inspirations for building a techno-utopia in China. For brand marketers, that means it is time to get tech-savvy and start testing new use cases and emerging digital channels.
