The Impact of COVID-19 on Homeware in

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 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, the impact on the market has been significant. As businesses are struggling, many have decided to change their tactic and shift to online platforms: promoting, educating, selling art through various digital channels.

“The Wonderful Read”, a An art KOL on Weibo Chinese artistic book named 画家西茜 has reading show has TAKEAWAY accumulated 4.89 million generated 500 million followers for her art views and is rated 9.2 on • Queensland art businesses Douban, a popular educational posts ought to recognize the growing Chinese file rating page. interest in purchasing decorative art for households in China, Traditional Chinese Painting College is a national art especially the unique, production and analysis institution founded in 1956. It interesting, well-marketed ones. was built to educate and preserve the thousands-year- old traditional Chinese art culture. • Given the high interest Chinese In 2017, livestreaming became one of its most effective consumers had shown in marketing channels, just as streaming was starting to traditional Chinese arts, cultural take off. The college encouraged thousands of its artworks such as Australian painters nationally to join the online space. aboriginal paintings may present The institution now has 10 of thousands of viewers for a promising chance in China each livestream, selling more than 500 paintings per day with its unique historical with each of them priced between a few hundred to background when combined tens of thousands of RMB, generating roughly one with sufficient education for million yuan per month. Not only they have accumulated consumers. a significant amount of income, they also managed to educate more people along the way. Industry Overview CHANNEL BREAKDOWN Market Share by Key Channels 2013-2023 Pre-COVID-19* • Like most other industries and markets, traditional 50.0% channels sales are being cannibalised by the COVID-19 is likely to steepen these eCommerce Grocery Retailers forecasts with consumers limiting offline increasing importance of eCommerce even before 45.0% encounters as a result of social distancing. COVID-19. 39.0% • The integration of online and offline channels is no 40.0% longer a zero-sum game: those brick-and-mortar retailers that have adapted new retail components 35.0% 34.0% are likely to succeed more than ever as a result of Non-Grocery Specialists the outbreak. 30.3% 30.0% 28.5% • For consumers, particularly in luxury, it is becoming experience product 28.0% more and more common to 25.0% offline and purchase online. Department Stores • Decline rates in non-grocery specialists such as. 20.0% homeware stores are not as pronounced as they 15.8% are in grocery retailers and department stores, 15.0% indicating that this channel is the more robust of the three key offline spaces. 13.8% 10.0% 8.7% eCommerce 5.0%

0.0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Euromonitor Case Study: IKEA Embracing eCommerce

IKEA x TMALL

• IKEA started selling on Chinese eCommerce platform Tmall, marking the first time the retailer has sold through a third party in its 77-year history.

• The move coincided with temporary store closures across China during the peak of the pandemic.

• IKEA is hoping to reach more shoppers in a market where TAKEAWAY consumers favour multi-brand online platforms. • Australian brands could • Tmall’s store offers around 3,800 of IKEA’s 9,500 products as potentially investigate well as services such as delivery and assembly. partnerships with major Chinese eCommerce platforms such as Alibaba • The partnership with Alibaba enables IKEA to become and JD to maximize their more accessible for the many people in China and reach. allows it to test and learn how to reach those • Offline environment remains previously fragmented customers. critical for converting sales and generating awareness • The move has been lauded as a “great response to the given the personal interaction needed in the coronavirus outbreak that is pushing shoppers to do all category. their shopping online”. Homebody Economy

ECOMMERCE PENETRATION Transactions in everyday products spiked on Tmall

• The homebody economy (宅经济) has gained momentum during the Hair clippers Pajamasy Egg whisks COVID-19 outbreak, potentially reshaping lifestyle and consumption 200,000 patterns within the homeware industry, 180,000 160,000 • Traditionally, not many Chinese families have tapped into immunity- 140,000 related products like fresh air systems, disinfection cabinets, dishwashers and antibacterial washing machines, but the outbreak contributed to 120,000 people’s new attitudes towards these appliances and led to a spike in 100,000 demand. 80,000 60,000 • According to JD, the sales of yoga mats surged 150% and rowing 40,000 machines showed a 134% increase. The trend clearly demonstrates the 20,000 future direction of the industry – staying active and healthy at home may 0 reshape purchase behaviour in the long run.

KEY TAKEAWAY FOR TIQ While some sectors of the 4/1/2018 7/1/2018 1/1/2019 4/1/2019 7/1/2019 1/1/2020 economy struggled for survival 10/1/2018 10/1/2019 • eCommerce has driven China’s amidst COVID-19, eCommerce Source: WPIC data homebody economy throughout the experienced strong demand. epidemic, which in turn has given rise to new categories such as work from The country’s online retail sales “I keep in touch with the management of our retail partners to home, cooking, fitness, education and went up by 3% to 1.1 trillion understand the challenges and opportunities. One large DIY home improvement. RMB in the first two months of 2020 – slower than last year’s retailer is busy developing eCommerce capabilities for the first time • Brands would be smart to explore these 19.5% rise, but still respectable in 30 years because of the impact.” trends in their consumer engagement given the circumstances. strategies moving forward. - Emma Zhou, BDM Greater China, Denby Social Commerce DIGITAL EXPERIENCES TAKEAWAYS FOR TIQ • Trending well before the COVID-19 outbreak, several brands have put increased emphasis towards social commerce as result of temporary • Social commerce is seen as the next key area for store closures. Popular homeware brands have been quick to adopt this channel. growth, meaning that business must prepare their grassroots networks • With several social platforms now integrating now ecommerce components campaigns range for a country setting the wheels back in motion. from WeChat Mini Programs, Taobao, Douyin, XHS to fitness specific platforms among many others. • Traditional retail models are challenged by KOLs, • Commonly brands collaborating with KOLs (Key KOCs, live-streaming, Opinion Leaders) with a large following has social activations, content been the norm but recent trends particularly in sharing and referral selling. the beauty category have seen greater use of Covering these channels will be key. grassroot KOLs and KOCs (Key Opinion Consumers) with smaller followings considered • as more trustworthy. Young consumers, particularly those born after • Social commerce is an eCommerce function the 1990, are the key Flower and lifestyle store The Beast often hosts live- that leverages the individual in the sales consumer group shopping process. According to China Internet Research, streaming sessions to their 2.56 million fans on Tmall. on social commerce Interested consumers can purchase the featured social commerce will be worth in excess of platforms. products by simply swiping the screen. ¥2.86 trillion in 2021, up from ¥6.27 billion in 2018. Since this figure was predicted before the quarantine economy (隔离经济), the actual outcome is likely to be even higher. Case Study: KOLs & Livestream ’s Douyin Livestream Debut Luo Yonghao, a Chinese entrepreneur, the founder of phone, commonly regarded as a “first generation Chinese KOL”, debuted on Douyin live-stream on April 1st 2020, selling 22 items covering categories such as F&B, electronics and homewares. The 3 hour livestream session saw 48 million followers purchase a record-breaking ¥110 million of sales and give ¥36 million Sound Wave income (virtual tips from fans on a Douyin livestream and then cashed out).

The runaway success of the livestream new comer is the result of the compatible collaboration between tech giant Netease, Luo Yonghao and Douyin:

Yeation, Netease’s homeware brand, has users has a customer base of predominantly mid-high income TAKEAWAY 20-35 year-old men and women with an appreciation for design, quality and cost-efficiency. • Queensland homeware businesses should recognize Luo Yonghao is the founder of Smartisan phone, the importance of utilizing which has a similar male customers between 26- the up-rising livestream 35. features and the potential cross-category KOLs like Douyin is increasing appealing to this age group, Luo Yonghao. seeing the collaboration of the three create a great • It is essential to understand foundation of audiences pool which contributed to your brand position and your the sales result. consumer demographic before deciding the right Yeation’s computer chair outshone the other 21 products, marketing channel and the creating a new record of selling 5000 chairs within first 10 suitable marketing seconds. This annual event saw Yeation sell 252% more approaches. than last year. TAKEAWAYS • With the increasing self-awareness and needs to self-improve, the Habitual Changes surrounding environment for working and studying will be revisited. Home CONSUMER SENTIMENT: SELF- IMPROVEMENT improvements may be on the rise as a by-product of the increasing consumer sentiment. • Brands should tag into this consumer trend and consider a related During the lockdown, people were forced to stay at their concept for product messaging. homes for an extended period of time. In order to maintain efficiency in this “new” working and studying environment, uprising consumer sentiments of “self-discipline” and “self- improvement” have emerged on different social media. Focus & sustainability in one app “Study with me” • Videos about daily routines • Most WeChat articles containing “self-discipline” in the with 30m downloads • Forest is a ‘focus app’ designed with the hashtag title have an average view of 100k. to help users increase #studywithme are trending • On RED, more then 650k posts about “self-improvement” productivity. now on Bilili. and 350k posts on “self-discipline”. • Users can earn points to • This kind of easily accessible • Video platform Bilibili has a #self-discipline challenge# purchase and plant real life trees online buddy system giving ideas or life-hacks for self-discipline skills which by growing a virtual forest which provides schoolers and have reached 300m views. requires the user not to use their workers a sense of phones during the set time. companionship during the • Total android downloads: 29.81m self-quarantine period. Index search terms 2015-04 to 2020-04 • These videos thus gain millions of views.

Self-discipline Psychology Anxiety Dating app Creativity Case Study: Mi’s Smart Home Increased Living Standards

With more time spent at home, people are more affectionately connected to their houses, their expectation for living conditions increased as a result which is expected to have a long lasting effect beyond the pandemic.

• In early April, Mi’s 10 year anniversary shopping festival ended with a recording-breaking 530 million yuan sales in smart appliances alone. • Within cleaning products, Mi’s ground-cleaning robots, wireless vacuums and wireless de-mite machines were the hero products. The wireless vacuum alone broke 10 million sales.

Besides the fact Mi’s home products are quality-guaranteed and cost- TAKEAWAY effective, all of hero products understand market trends and target at consumer pain points and needs which concreted its success. • Queensland businesses should consider a multi- platform (Weibo, WeChat, Douyin, etc.) marketing x approach to increase marketing effect and ROI. • Queensland brands could Along with Mi’s 10-year anniversary shopping festival, a Mi x Ikea potentially look into campaign was launched on Weibo under the hashtag partnering with other #SmartXiaomiInspirationalIkea to increase exposure. 10 lucky families will Australian or Chinese be awarded with ¥30,000 of Mi smart products and a ¥20,000 Ikea in- homeware brands to offer a home furnishing gift card. The hashtag had been viewed 8.9 million+ times holistic home upgrading and used almost 20 thousand times which is a big contributor to the solution and maximize record-breaking sales in Mi’s shopping festival. shopping experience. Notable Industry Trend Multi- functional Homeware

Homeware consumers are increasingly seeking a better living standard, seeing product functions become more segmented to meet needs. People are not longer just satisfied with the traditional pans and pots, they are now more willing to invest in small appliances to make their lives easier.

• Online sales of ovens increased 90% in 2020, air fryers increased 146%, electronic heating lunch boxes had a year-on-year increase of 217%. • During the 2020 Women’s day on 8 March, 15 x more Viomi, part-owned by Xiaomi, is a Chinese home toast pressers sold in the first hour versus last year. The network appliance brand founded in 2014. As stand mixer reached the full day sale in 2019 in just 40 Viomi’s hero product, the smart fridge has a TAKEAWAY minutes. built-in tablet offering common pad features from web-surfing for cooking recipes to • Convenience is and will However, with limited space in most households, streaming TV shows/music or answering phone always be one of the most multifunctional homeware is on the rise to maximize space. calls including an AI voice assisting system to free your hands while cooking. important pursue for homeware consumers. Queensland homeware Tmall released the Tmall Queen mirror in businesses need to 2019. The mirror, also doubles as a table lamp understand the fast-changing but also a beauty expert digital home consumer needs and trends assistant. With Tmall being the leader in and to adapt swiftly, and China’s smart speaker market, the company’s potentially partner with these Queen mirror is expected to lead a new trend tech leaders. in the homeware industry. Advice For Brands Moving Forward

1. Know Your Role 5. Be Available BE SENSITIVE Coming off as too salesy or opportunistic can result in Shown in the virus outbreak, it is huge consumer backlash online that could ruin a For the time being, brands should be even more important for brands to keep brand’s exposure. Understanding a brand’s role in conscious of their tone and behaviour with their supply consistency. what they can provide in these trying times is essential. communications. Businesses will not win over the situation if they appear opportunistic or crass. 2. Listen to Consumers 6. Educate Consumers Although the virus outbreak has cooled down in China, consumer needs and mindsets developed During these uncertain times consumers needs tend Be proactive in educating over this period are worth looking at as parts of to change frequently which presents an opportunity consumers rather than the long-term business plan. It’s vital for brands to for brands to showcase their flexibility to adjust to responsive. Anticipating build the bridge between the needs of the situations and provide to their core audience. situations and new needs can customer and their offering. provide a significant edge. 3. Transparency and Authenticity WHAT IS MOST IMPORTANT Transparency and authenticity will only become more 7. Invent New Traditions important as consumers try to avoid any potential risks to their health. The outbreak essentially has obsoleted some businesses that failed to keep up with changes. 4. Act Fast On the other hand, more opportunities thus are open. As the situation remains relatively unclear, it is important for brands to keep pace with the constant changes. Even when everything completely goes back to normal. LET’S CHAT

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