Lessons from China: Finding Clarity in a Crisis
Part 3: Accelerating Media Trends and Brand Opportunities
Co-written by Laura Wang, Strategy Executive, Initiative China | William Wun, Head of Strategy, Initiative China | Abby Wong, Chief Strategy Officer, Initiative Greater 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 third entry in the “Lessons from China” series, which focuses on how the pandemic accelerated new media trends in China and the brand opportunities that are unlocked in the process. You can find the previous installments in this series here.
As China celebrated the end of the city-wide lockdown of Wuhan after 76 days last week, China entered a period of recovery and stabilization that will now be our “new normal”.
The latest GDP growth has been adjusted to a mere 2.6% by the China International Capital Corporation (CICC), one of China’s most high-profile brokerages. A recent report by eMarketer has also reduced their forecast on China’s total media ad spending by 6.6% for 2020. At such a low, upwards is the only way to go so expect further adjustments to this in the future.
Under the current market dynamics, marketers will face big challenges and have to ask themselves some tough questions: How do they connect with and sell to consumers who are now increasingly wary of how they spend their money? How should marketing activities and budgets be adjusted and invested?
If you are asking yourself these questions, we hope you will find some of the answers in this article.
Media by the Numbers
Firstly, let’s look at how the media numbers have moved.
Digital media seems like the obvious benefiter as consumers turned to various kinds of online services, including grocery deliveries, meeting platforms, online classes and games to keep themselves connected during self-isolation — all whilst working from home.
Therefore, it’s no surprise that traditional media spend has seen the biggest decline during this crisis. Monitored spend by China’s CTR between December 2019 to February 2020 saw a 22% drop in TV spend, whilst Print has been the biggest victim with a huge decline of 46%. However, readily declaring traditional media the loser would be quite misleading, as overall monitored digital spend also saw a decline of 19%.
TV Dramas Amassing Huge Audiences
After increasing nearly 19.4% to 446 minutes per day according to a report from Nielsen, time spent watching TV is slowly returning to pre-crisis levels as consumers return to their “normal” daily lives. Further evidence is the drop-in time spent watching OTT, which has dropped to 383 mins per day (from 452 mins).
However, during this time, TV dramas were the talk of the town amongst consumers. One of the hottest drama’s that aired during the pandemic, (安家) “I Will Find You A Better Home” starring Sun Li, broke the show’s all-time ratings record for a single episode with over 410 million viewers.
Understandably, numerous program productions have been put on hold during this period, so expect a reshuffle in future program line-ups and air dates. A press release from the National Radio and Television Administration made last week stated that programs with content that express “empathy” towards the current situation would get the full support from the administration. Therefore, expect to see more dramas with a positive vibe coming out around the October holiday period.
Gaming and Short Videos Dominate Digital Media
Unsurprisingly, consumers turned to video games and short-form mobile videos to keep themselves entertained during this period. Daily time spent on mobile increased by 19.7% — an extra 80 minutes per day to 438 minutes according to a report by Questmobile. Gaming apps saw an incredible 159 minutes of daily time spent whilst short video platforms commanded 105 minutes of daily time spent.
But it’s not just mobile gaming that has caught consumer attention. There was a huge 96.1% search increase for gaming consoles such as Nintendo’s Switch across all of Alibaba’s e-com platforms. Their long-standing IP Animal Crossing launched a new game called New Horizons on Mar 20th and became an instant hit. While social distancing is being reinforced, this game became an alternative outlet for people to meet and socialize with their friends whilst staying at home. Last week, GQ Magazine opened a branded Animal Crossing island for select players to visit, and we foresee more marketing opportunities to emerge soon with Animal Crossing and similar games. In addition, videos of people playing video games have also taken over the top lists on popular live streaming site Bilibili.
Livestream Gets a Big Boost
With retailers forced to shut their doors during the crisis, brands have been forced to innovate. This has pushed them to use digital channels to close the gap between their stores and consumers, whilst attempting to offset the decline in offline sales. They have used livestream to as the quickest and most direct way back into consumers’ lives. From real estate agents giving apartment tours to chefs giving cooking lessons in restaurant kitchens, livestream has gone mainstream across all categories.
One of the most interesting campaigns was by Burberry who invited influencer Yvonne Ching to visit their Jing’an flagship store in Shanghai and livestream her experience via Tmall. In just 1 hour, her visit was viewed over 1.4 million times and most of the products she featured were completely sold out.
We have witnessed a surge of live-streamers, brands and organizations who were not active in this space before, now exploring this channel as a new way to build brand image, connect or sell. Although people’s responses have been varied, it has become one of the fastest growing direct-to-consumer channels.
The Deceleration of OOH
Once the focal point of advertisers, technological advancements and format innovations in the past decade have slowly reduced advertisers’ investments in OOH. However, this trend of de-prioritization has been accelerated with everyone staying indoors and actively avoiding large public places during the crisis. The postponement of major events such as the Canton Fair, F1, Euro 2020 and the Olympics will probably only further add to OOH advertiser’s woes. As such, eMarketer revised their 2020 OOH forecast in China of 2.5% growth to just 0.7% at RMB 70 billion.
However, in recent weeks, the slowly climbing number of consumers returning to use public transport, visit shopping malls, and relax around in urban outdoor areas may be a sign for marketers to revisit their long-term OOH investment strategy.
Winners & Losers: Brand Categories
In the last issue, we mentioned the potential impacts across different categories. Now, with more data available, let’s take a closer look the pandemic’s impact on various industries and gauge how that will affect media spending across categories.
Early Movers
The initial drop in TV Ad spend appears to be a knee-jerk reaction by advertisers as the market was shocked by the initial outbreak of COVID-19, and not a true reflection of actual consumer behavior. Although it was expected that certain brands and categories would reduce investment, China’s CTR monitored that brands in the Cleaning / Hygiene and Dairy categories dramatically increased their TV spend by around 1000% as they looked to quickly capitalize on consumers’ renewed relationship with TV.
Winners: Tech Gadgets and Kitchen Appliances
It’s not surprising that whilst people were locked up at home, sales of products that could keep people busy would surge. Tech gadgets and advanced kitchen appliances were two categories that witnessed the biggest increases. Computer Tablets (+170%) and Bread Making Machines (+847%) both increased vs. Feb 2019 on Tmall. With these products now an established part of the common household, we have noticed a growing trend of related services, such online bakery classes, opening a new “at home” touchpoint for marketers to explore.
Losers: Fashion & Dining
Fashion retailers no doubt have been some of the biggest casualties hit by COVID-19. According to China’s National Bureau of Statistics, there has been a 30% decline in sales in apparel and a whopping 41% decline in jewelry during this period. It seems the homebound period has saved stifled consumer spending on fashion.
Restaurants have also seen their sales decimated with a decline of 43.1% as most venues close all in-dining options and consumers opting to stay in and cook. Even as restaurants begin to re-open, consumers are still exploring new ways to cook at home, although the emergence of semi-cooked delivery has attempted to reverse this downward trend.
En Route to Recovery: Auto & Travel
The automotive category has proven to be the biggest casualty by far with a catastrophic drop in the demand and production of cars. According to China’s PCA (Passenger Car Association), sales plunged by a record 80% in February 2020. However, there are some early signs of a possible post-pandemic rebound. According to a recent survey from iResearch, 45.2% of consumers they asked were strongly interested in purchasing their own car after the crisis of COVID-19 — possibly due to the safety concerns of using public transportation.
The auto industry has offered digital alternatives such as VR showroom to keep engaged with prospective buyers until they are able to visit a physical dealership. That being said, for an industry that is heavily reliant on OOH and offline media channels, they may need to re-evaluate what their most effective media channels would be, if consumers continue to shy away from these touch points in the long-term.
The travel and hospitality brands, whilst was initially heavily hit, have already seen a positive recovery during the recent Qingming Festival holiday. According to a recent report from Kantar, leisure travel is the 2nd most popular activity that Chinese consumers are looking to do after the outbreak. More than half (56%) will be domestic travel, with Yunnan Province being the top destination of choice and 32% looking to travel in June and July. As travel interests warm up again, Tongcheng-Elong reported a 40% growth in daily bookings for hotels, a 230% growth in daily bookings for domestic flights, and a huge 250% growth in domestic flights for the month of June.
Brand Takeaways
Game On
The recent surge in gaming during the isolation period is not just a temporary fad, but a long-term trend that most experts believe will only continue to grow. A recent survey by iResearch on China’s online gamers stated that a staggering 83.3% will continue to play after the crisis ends. With 85% of gamers regularly paying to play, and an industry that was projected to reach over RMB 2.7 billion in 2020 before the outbreak. For marketers, now is the time to start exploring video games and gaming-related digital media channels to reach young audiences.
Stay Tuned
With a 25% increase in TV ratings for dramas at the beginning of March versus the beginning of February, combined with a big push by the National Radio and Television Administration for upcoming dramas that show “empathy”, marketers should monitor the program reshuffle closely and explore the opportunities that will undoubtedly arise in the latter half of the year.
Go Live
As brands reliant on physical retail stores look to transform their current route to market, some brands are actively training staffs, partnering with influencers and celebrities to promote their brands and products via live video streaming. In addition, the pandemic is pushing people in professions that provide in-person services, such as barbers, chefs, pastors, fitness instructors, to turn to live video to showcase their expertise and make money through donations or plugging products. They form a new wave of KOLs that brands in respective fields should tap into.
Conclusion
The pandemic has certainly been a wakeup call for us all to catch up onto an increasingly digital lifestyle and media consumption. While some things may never be back to normal in the near future, the future is far from bleak. This brings us to our final thought: Target consumers, key audiences, bullseye consumers, whatever you called it — they have changed. We need to be agile in our media planning and adept to this “new normal”, finding our way to be meaningful in their new lives yet staying true to our brand.
