The Impact of COVID-19 on Homeware in China
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The Impact of COVID-19 on Homeware in China skinny Key Observations HOME GOODS IN CHINA TODAY • New trends have emerged due to changing consumer behaviour – the crisis has impacted people's attitudes towards food, fitness, education, health and general wellbeing, among others. • Shifts in the homeware industry – it is likely that short-term measures taken in response to coronavirus lead to changes that last for decades. • The homebody economy has reached a wider population across China – since people were forced to stay indoors with the quarantine, a growing number of consumers shopped, studied, worked and amused themselves online at home, creating new consumption habits moving forward. • eCommerce penetration and usage has grown significantly during COVID-19 – the initial lockdown and social distancing provides limited alternatives as many consumers still see the risk in public shopping malls and other brick-and-mortar retailers. • Consumers are increasingly devoting more time to home improvement – there is noticable growth in home accessories, especially food production equipment, sporting goods and soft furnishings. • Current consumption of art suggests healthy growth moving forward – more galleries will utilize third-party online art sales platforms to reach a wider community of collectors. Trending Keywords FEBRUARY – APRIL 2020 KEYWORD(S) INTERPRETATION TAKEAWAY • While traditional homeware suffers a 2.2% YOY decrease in retail sales, the concept of ‘smart households’ is steadily growing in China. Convenience is ideal for busy urbanites when choosing homewares Smart Home • In April this year, a domestic electronics/appliance brand Xiaomi and a contributing factor to the rise of home automation and smart celebrated its 10-year anniversary with a shopping festival that generated homes. a record-breaking ¥530 million in total sales. • Jing Xi, JD's social eCommerce platform, helped Yunnan flower farmers As people spend more time at home complying with social distancing to open an express channel for selling the leftover flowers for Valentine’s measures, they’re paying more attention to their home environments. Soft Furnishings Day during the lockdown, generating a ¥400,000 in sales. Brands have also used this trend to initiate charity activations, or • Non-essential items, including home goods, are where eCommerce simply give back to the community. brands are seeing record-breaking sales numbers, reports Forbes. • Consumers saw compulsory quarantine as an opportunity to devote more Consumers will feel more encouraged to tackle home-improvement DIY Home time on home improvement. Since resources were scarce, do-it-yourself projects independently, order supplies online, and look to the internet Improvement tutorials circulating on social media became hugely popular. community for free expertise. • Games such as Nintendo’s Ring Fit Adventures sold out with second- Brands should look to make its process as transparent as possible to Stress Relief hand sales prices increasing from ¥600 to ¥2000. reassure a concerned market. Products that have perceived calming • According to Suning, sales of massage chairs rose 436% over a period. and stress release benefits are likely to sell well. • Yoga mats are the bestselling home fitness equipment on major People increasingly search for equipment-free work out routines, Active Life eCommerce platforms. however still a necessity for yoga mates to execute those. • Major sports brands started offering online classes for home workouts. Industry Overview IMPACTS OF COVID- 19 Pre- outbreak Current Situation • China is the second largest consumer market in the world with • COVID-19 continues to depress sentiment: while more people are optimistic retail sales of consumer goods exceeding 37 trillion RMB in the about higher levels of spending, a growing number of cautious consumers first 11 months of 2019, up 8% YOY. may cut back. In Q1 2020, Chinese people’s savings have increased by 8.07 trillion RMB. • Higher living standards of Chinese consumers have bolstered the domestic furniture market, meaning that people are willing to • One of the fastest-growing retail categories since the outbreak has been spend more on household decorations. kitchen appliances, indicating people are spending more time in their homes and invest accordingly. • According to Statista, China's furniture market value was forecasted to exceed 1.3 trillion RMB in 2020. • Home decoration businesses are having more challenges sourcing raw inputs such as supplies and materials, with migrant labour initially slow to • China had a flourishing homeware industry due to the availability return to factories. of natural resources and strong manufacturing base. • More and more domestic brands are molding themselves in Chinese • Previously, Chinese brands tried to look like they were a foreign traditions and style. From 2009 to 2019, the proportion of attention paid to product to attract local customers. domestic brands has increased from 38% to 70%. • Wooden furniture accounted for a big proportion of the furniture • Foreign furniture companies currently account for 3-4% of market share in manufacturing industry in China. Bamboo and rattan have also the country and lead the high-end segment. gained popularity in recent years. Case Study: Denby Building Awareness Post- Virus Dining-ware looks to have solid prospects based on positive trending growth rates. Denby, a British manufacturer of pottery, first entered the China market through local partnerships with distributors that got its product in key department stores. Emma Zhou, Denby’s BDM in Greater China, comments on how the brand is planning to move forward post-COVID-19: “In keeping with our category of luxury tableware, we prepared to launch Q1 2020 with a purely offline approach looking to complement with online after a couple of years in the market. Coronavirus has brought those online developments forward, as offline retail is still some way off returning to normal.” Denby realized the importance of digital in the changing environment and accelerated the ongoing move to TAKEAWAY online channels. • There is an opportunity for “When I scope out shopping malls right now, restaurants are packed at lunch- and Australian homeware dinnertime, but there’s still a hesitancy in making purchases.” businesses to succeed in the market, but they must “The interest in high-end homeware is definitely there, and increased under coronavirus, leverage all opportunities, but it will take time for consumers to convert that interest.” expand their target Although Chinese consumers remain relatively optimistic, people have become more aware of their demographic and integrate spending habits. new interactive marketing techniques into their strategies, both online and “Potential exporters need to understand cash-flow issues for offline retailers in China. offline. They’ve been hit hard, so while they may be really interested in your product, they often won’t be able to make any orders in the short-term.” As COVID-19 evolves globally, organizations are experiencing significant operational, financial and liquidity challenges. This data indicates a positive trajectory for art Homeware Industry: Decorative Art in China, which we believe will steepen as a result of Home Artwork Purchase In China 100 8000 the homebody economy. 90 6757 6146 7000 80 Over the past five years, the disposable income of Chinese consumers has 5262 6000 70 Participants of shown steadily grown. This has allowed them to pursue higher living 60 5000 Offline Exhibitions standards, which includes increasing fulfilment through self-actualisation. 50 4000 (In million) Emotional purchases such as a ticket to an exhibition or decorative additions 37.24 40 Offline Exhibitions in one’s home are seeing higher demand. 30.53 32.37 3000 30 2000 20 As a result of the COVID-19 pandemic in China, people are spending more 10 1000 time in their homes and have become more emotionally attached them. This 0 0 presents a great opportunity for home decorative art businesses immerse 2015 2016 2017 themselves in this trend. Information Channel for Chinese Art Purchasers Possibility On Purchasing Art Works Online (%) According to research The pandemic has accelerated the 1% Books/Magazines 69% conducted by CNBData 7% 12% number of art exhibitions and 67% and Tmall, 57% of Chinese museums showing their collections consumers are at least online, particularly through Offline Exhibition 57% ’quite likely’ to purchase livestreaming. This presents 68% artworks online. Note that this opportunities for Queensland art Art-related data was taken Many consider the 35% prior to COVID, groups to show off them collections Weibo/WeChat 52% 56% and there has advantage of purchasing from within Australia. Accounts been a notable increase in digital artworks online is the uptake for leisure availability of options, the 45% Art-related TV 34% -based activities Art sharing WeChat account Shows 27% since easy price comparison and ikanlixiang ( ) has accumulated 看理想 Overall access to the latest Very Likely Quite Likely 1.8 million followers since its launch Art-related Apps 24% artworks to stay on trend. Unsure Not likely in 2015 and continues to grow 26% Tier 1 Cities Never strongly. Data collected from 2019 CNBData Report. Case Study: Educating Art New Norm In China Art Market During the peak of the outbreak, similar to industries such as sport and entertainment, all exhibitions, art fairs and galleries were temporarily closed. With the industry depending on offline activations,