Name:Suzan Rita Paul
MatricNo: 18/sms03/030
Department:Business/Admin
Course code: BUS 208


Behavior in a time of crisis
In countries heavily impacted by COVID-19, consumers are stockpiling food and other essential items, while isolating themselves from crowds. To find out how and when consumers started showing these behavioral changes, Nielsen1 conducted shopper behavior research that started during the beginning of the pandemic in China and extended to other countries that have also been affected. They monitored consumer trends, as COVID-19 news reached the general public and found out that consumers go through six behavioral stages based on their awareness of the COVID-19 spread in their communities:
1. Proactive health-minded buying: Increased interest in the acquisition of products that maintain well-being or health
2. Reactive health management: Prioritization of products for infection containment (e.g. face masks)
3. Pantry preparation: Higher purchases of shelf-safe products and increased store visits
4. Quarantined living preparation: Increased online shopping, decreased store visits and first signs of strain on the supply chain
5. Restricted living: Possible price gouging due to limited supplies and deterred online fulfillment
6. Living a new normal: Increased health awareness even as people return to their typical daily activities
The study also found out that consumers typically moved from one stage to another in a period of two weeks in areas close to the initial outbreak. However, this happened much faster in other countries where the outbreak started later, such as Italy and the US.
Currently, the only country where consumers are starting to transition to the sixth stage is China, while the US has begun to move towards restricted living. So, what kind of possible long-lasting consumer behavior shifts can we expect as a result? It’s still too early to tell, but clear trends can be seen, which, if sustained, could lead to significant shifts in how consumers shop in the future.


Consumers are changing their spending habits to reflect new standards of living during the COVID-19 outbreak.
First came the masks, hand sanitizers and disinfecting wipes. Now, it appears Americans are stocking up on non-perishable food items, among other things, as COVID-19 concerns continue to rise. According to statistics from Neilson published last week, consumers are starting to think beyond emergency items by preparing their pantries for the worst.
Titled, “Key Consumer Behavior Thresholds Identified as the Coronavirus Outbreak Evolves,” the Neilson report identifies six threshold levels that correlate with different levels of consumption over the last eight weeks. With nearly 175,000 confirmed cases of the virus worldwide, and around 3,800 in the US, consumers are changing their patterns to reflect certain fears.
The report emphasized that not all countries affected by the virus fall within the same threshold. Some countries, such as China and Italy, are further.
The first threshold Neilson identified was “proactive health-minded buying.” During this phase, when minimal cases of COVID-19 linked to an arrival from an infected country were identified, interest rose in products that support overall health and wellness. The report noted that the world is largely past this phase, which drove only minor changes to sales patterns.
At threshold level 2, “reactive health management,” consumers began to prioritize products essential to virus contamination, such as face masks and hand sanitizers. This phase peaked when the first local transmission with no link to another location occurred, and COVID-19-related deaths began.
As news reports detailed the continued spread of the virus worldwide, consumers in many countries jumped to threshold level 3: “pantry preparations.” This phase is marked by stockpiling of shelf-stable foods and health-safety products, a spike in store visits and growing basket sizes. After multiple cases of local transmission and deaths linked to the virus occurred in the US, sales of powdered milk products, canned beans and canned meat, peaked at 85, 37 and 32 percent respectively compared to this time last year.
A spike in online shopping, a decline in store visits, rising out-of-stocks and strains on supply chains are all patterns exhibited in threshold level 4, “quarantined living preparation.” Neilson predicts that online shopping infrastructure will be put to the test during this phase.
At threshold level 5, “restricted living,” consumers are beginning to restrict shopping trips, online fulfillment will be limited and price concerns will rise as limited stock availability impacts pricing in some cases. During this phase, when mass cases of COVID-19 continue to arise and some communities are ordered into lockdown, Neilson predicts consumers will be less price-sensitive on high demand packaged goods.
During the final threshold, “living a new normal,” people will return to their daily lives but operate with a renewed cautiousness about health. This phase is marked by permanent shifts in supply chain, the use of e-commerce and hygiene practices. The report noted that China is the only country with large levels of its population impacted to reach this threshold and return to normal ways of life.
As this global health crisis continues to evolve, Neilson said it will continue to provide ongoing updates on the impact that COVID-19 is having on consumer purchasing.

Marketers are managing their expenses in this new coronavirus-impacted economy, and that has translated to a decline in advertising spend. The Interactive Advertising Bureau recently reported that 24 percent of brands paused their advertising spend for the first and second quarters of this year, and 46 percent are at least adjusting it.
Overall, digital ad spend is down 33 percent and traditional media is down 39 percent. However, two thirds of buyers hadn’t decided about their ad spend for the second half of the year—an indication that some brand marketers are waiting to see precisely how the pandemic plays out and affects the global economy and businesses before altering future plans.
In terms of product category, there are some industries that are thriving during the pandemic, such as streaming services (Conviva reports it’s up 40 percent in recent weeks), pharmaceuticals, food delivery and technology companies enabling remote work, according to a piece in AdExchanger. There is an opportunity for some brands to edge out competitors and connect with consumers—while treading lightly and focusing on the human-to-human angle rather than driving conversions.
Consumers are continuing to make purchases, though habits are likely shifting from week to week. According to Nielsen data for the week ending March 21, health, safety and cleaning products are still experiencing significant year-over-year growth, but slightly less of an increase compared to the week prior. Water filtration products are up 200 percent as consumers try to stay safe and healthy, and products that reflect home-dwelling habits are going strong, such as baking yeast (up 648 percent year-over-year), shelf-stable products and indulgent snacks. In terms of more permanent shifts in consumer behavior? The jury is still out. For more information on marketers and ad buyers navigating these uncertain times, The world has been an unusual place since we published our first VoxEU/CEPR eBook on COVID-19, Economics in the Time of COVID-19, on 9 March 2020. The number of COVID-19 cases and deaths have soared globally. Europe is now the centre of the pandemic but the US, given its huge population (330 million) and lack of national leadership, is on course to become the next centre. Stock markets gyrate 5 to 10% a day, sometimes up but mostly down. Other financial markets are equally volatile. Governments in Europe have imposed public health containment measures that would seem extreme in any other circumstances. Containment policies in the US are spreading without coordination or coherence as cities and states fill the leadership void. But not everything is becoming more uncertain.
The COVID-19 crisis has become more predictable in a sense. What was widely viewed as a ‘Chinese problem,’ and then an ‘Italian problem’ has become an ‘everybody problem’. With few exceptions, governments initially downplay the disease until sustained community transmission takes hold. Then they impose severe social distancing policies, work and school closures and the like. This inevitably leads to almost immediate economic hardship, which then leads governments to propose increasingly bold anti-recession measures. This was the pattern in Europe and looks set to be the pattern in the US and many other nations. All this is due to the highly contagious nature of the virus, and the inexorable implications of its explosive spread during the ‘acceleration phase’ of the epidemic.
This eBook is an attempt to collect the thinking of leading economists on what is to be done. In addition to contributing to analysis of the rapidly evolving policy reactions, we hope this eBook will help nations get ahead of the curve – to think ahead on the medical and economic policies that will be needed. The collected wisdom of our authors also points to another critical aspect of this crisis. Without care, solutions to one set of economic problems could – for some nations – turn this economic crisis into a financial crisis, or a debt crisis, or a foreign exchange crisis, etc. Care must be taken to ensure that temporary solutions don’t create long-lasting problems.
 

Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes
 The size of the economic damage is still very uncertain, but it is certain that it will large. Governments now need to focus on mitigating that damage. This is the time to bring out the big artillery; this is not a time to be timid, but to do whatever it takes, fast. Background to coronavirus and the COVID-19
Coronaviruses (Coronaviridae) are non-segmented positive-sense RNA viruses belonging to the Coronaviridae family under the order Nidovirales (Drosten et al., 2003; Ksiazek et al., 2003). Earlier versions of the Coronaviridae virus include but not limited to severe acute respiratory syndrome coronavirus (SARS-CoV) (Drosten et al., 2003) and what was known as the Middle East respiratory syndrome coronavirus (MERS-CoV) (Zaki et al., 2012). Even though these viruses are known to have existed among animals, most human coronavirus infections are relatively mild. The previous versions claimed more than 1000 lives out of the 10000 cases recorded, and the highest fatality was recorded in China. China, thus, seems to be a preferred holiday destination for the nCoV family (WHO, 2004). Even though the SARS-CoV and the MERS-CoV were finally contained, recent developments are an indication that what was seen and previously known as just the smokes has enormous fire underneath.
A recent outbreak of the case of chronic pneumonia cases in the Chinese Wuhan city of the Hubei province has been a center of attention globally. The unknown virus was first detected in December 2019 and subsequently identified as the 2019 novel coronavirus (COVID-19), based on the symptoms and the laboratory test results (Huang et al., 2020).
As of March 22, 2020, the global COVID-19 statistics stood at 32542 new diagnosed cases, 253253 cumulative cases, 89408 cured, and 10431 deaths. Out of this, there are 5566 active cases in China with 136 new suspected, 3276 deaths, 2622 existing severe cases, 81694 cumulative cases, and 72852 cured cases. Europe recorded 16412 new diag- noses, 193237 cumulative cases, 13427 cured, and 10295 death cases, with Italy been the hardest hit. Other Asian countries besides China recorded 1222, 44970, 12651, and 2154; North America had 653, 44895, 196, 541, South America with 0, 4186, 24, 53, of new diag- nosis, cumulative, cured and death cases respectively. Others include Africa with 276, 1772, 163, 56; Oceania with 0, 1898, 88, 7, and cruise ships with 0, 712, 551, and 10 cases of a new diagnosis, cumulative, healed and death cases respectively (Baidu, 2020).
Currently, besides the very few known studies in areas of epidemiological, clinical characteristics, treatment, and clinical outcomes of confirmed cases infected with COVID-19 (Cortegiani et al., 2020; Huang et al., 2020; Li et al., 2020), there are no known studies on the implication for marketing, and the socio-economic impact of the human infection of the 2019 novel coronavirus (COVID-19). In this study, we present how ‘fear appeal’; a negative hedonic feeling has impacted sales and purchase of selected items. Based on published symptoms and the prevention measures, thus, we expected a drastic swing in online consumer behavior from the known high purchasing of apparels,
(clothes) and baby products (Kim & Forsythe, 2010) often seen in online sales to COVID-19 personal protective equipment (PPE).
We sampled PPEs, such as masks, hand sanitizers, thermometers, disposable gloves, and alcohol-based cleaning wipes based on the preventive measures announced by the National Health Commission of the People’s Republic of China (PRC) (NHC, 2020). Two primary sources of data were used. We sampled purchase data from live-streaming con- sumer experience platforms and the daily statistics of suspected, confirmed, and fatal cases to investigate how social presence characteristics of live-streaming mediates user needs and purchase behavior.
Fear appeal and purchase behavior
Beyond the reality of the deadly COVID-19, is the ‘fear’ factor powered by hedonic and uti- litarian motives. The theory of fear appeal has dominated marketing research in the past but appears to be neglected in recent times (Witte & Allen, 2000). Fear appeals are persua- sive messages designed to communicate facts or to scare individuals by resenting or exag- gerating terrible outcomes of neglecting a specific caution (Witte, 1992). Marketers often use this technique intelligently to persuade customers to buy their products (Mcdaniel & Zeithaml, 1984). A fear appeal may be segmented into danger control and fear control. Danger control guides adaptive behavior to deal with or avoid danger whiles fear control guides emotional responses resulting from risk. In the current study and for the fact that there are no apparent signs of controlling or curing the deadly COVID-19, individ- uals will have to avoid, deal with, and or respond to it.
An increase in fear is known to be associated with increases in coaxing and compliant behavior if the causal factor forewarned the receiver to danger. Subsequently, the parallel response paradigm base on the theory of fear appeal predicts that the higher the per- ceived level of risk, the greater the intent to take action to relieve it (Laros & Steenkamp, 2005). Fear appeals have been employed in advertising of products and services. It domi- nated areas such as life insurance, road accident campaigns, promoting political causes, drug-prevention commercials, and in the development of social awareness of serious con- cerns (Latour & Zahra, 1988), such as the COVID-19 and other public health-related issues. Some studies also associated impulse buying with fear (Lin & Chen, 2012).
Recent works point out that purchase decisions and choices are a result of the scrutiny of the pros and cons and affective and sensitive aspects of products (Consoli, 2009). Pro- ducts that are perceived to overcome a specific risk or dangers, fomenting fear, and more successful in reducing perceptions of danger, attract higher purchases (Mcdaniel & Zeithaml, 1984). We based on this to predict that, in the wake of the continuous spread of the deadly COVID-19;
H1: Fear appeal will have a positive relationship with the purchase behavior of selected per- sonal protective equipment.
Social presence
Social presence is an essential element in both offline and online social contexts and has fea- tured widely in studies in the area of technology or computer-mediated interactions to ascer- tain the existence of personal and socio-emotional attachments (Short et al., 1976). Over the years, several definitions of social presence have emerged and rapidly changing with the birth of virtual reality and augmented reality. However, social presence has commonly been referred to as the degree to which two people interacting through a technologically mediated environment feel as if they are physically together. Face-to-face communication has a higher social presence than that of SMS, email, or voice calls (Biocca et al., 2003).
In many computer-mediated interactions, viewers have the feeling of being together while they are interacting with other people on a second screen or, in many cases, the host. As a result, users turn to get very involved in such a mediated environment as though the other person is physically present. Social presence is two dimensional – as a sense and as a means, also known as the absent availability and present availability, respectively. Absent availability requires physical colocation in space and time, while the latter refers to a person’s perceptions and feelings of being with others (Nowak & Biocca, 2013; Zhao, 2002). This study adopted the former (the sense of being together in a mediated perception of an environment).
Fear appeal and social presence
My people perish for lack of knowledge (Hosea 4:6). Fear is a negatively-valance sentiment, along with a high level of provocations, and provoked by a threat that is seemingly signifi- cant and personally relevant (Witte, 1992). Consumer needs information to control, avoid, deal with, or respond to fear and its perceived risks. The fear that accompanies the COVID- 19 will lead consumers to seek answers, and this will lead to a high level of interactivity and social presence in e-commerce platforms (Arnold & Reynolds, 2012). Consumers character- ized by (negative) hedonic motives (fear) are known to engage more in social-interactive aspects of shopping as a way to seek affection, acceptance, and social information (Arnold & Reynolds, 2003; Joo Park et al., 2006). We predict that with the uncontrollable infectious state of the COVID-19;
H2: Fear appeal will have a positive relationship with the level of social presence in consumer experience live-streaming platforms
The fear appeal comes with audience reactions. The typical outcome in fear appeal besides intention or behavior change is message acceptance and a strong connection to a source of relief (Khasawneh et al., 2010). It is known that the decision to accept a fear appeal recommendation is a function of seeming utility of the threat, the possibility that the risk will occur, and the probability that the threat will not happen or can be avoided if the recommended changes are made (Stauss et al., 2005). A strong connection with the source of PPEs against the COVID-19 (Online retail shops) is highly possible.
Confidence, trust, and loyalty are three social emotions necessary, respectively, for the social processes of agency, cooperation, and organization. Having confidence in a system, brand, or a vendor leads to trust. Trust, when built over time, leads to (electronic) loyalty (e- loyalty). Confidence is associated with the willingness to act (Demoulin & Zidda, 2009). Whiles confidence is the emotional basis of action and agency, trust is the emotional basis of cooperation. Trust, therefore, includes the feeling that one can somehow rely upon others. When this reliability is established, loyalty becomes obvious. While trust is generally acknowledged as a sufficient condition for cooperation to occur, it is widely not held to be a necessary condition until it develops into loyalty. Individuals may feels loyal to a person, a relationship, or an institution that provides satisfactory solutions even in the absence of self-confidence (Demoulin & Zidda, 2009; Latour & Rotfeld, 1997).
Confidence, trust, and loyalty bring the future into the present by providing a sense of security and certainty to what is inherently mysterious, feared, and unknowable so that specific action concerning it may be engaged (Laros & Steenkamp, 2005; Passyn & Sujan, 2006). Similarly, the fear of and for the unknown (the COVID-19) is a sufficient premise to build customer-seller, customer-product confidence. This confidence leads to the building of trust in PPEs and, causing consumers who find solace in the product and brand to become loyal and eventually propagating positive word-of-mouth (eWOM). It is important to note that live-streaming provides a social platform for consu- mers and streamers to interact, share ideas, learn, and comfort or provide counseling in times of distress.
The high social presence characteristics embedded in a live-streaming strategy can enhance customers’ online purchase behavior with a reduction in psychological distance and perceived uncertainty (Zhang et al., 2019)
I don’t think it’s too soon to say that the COVID-19 global pandemic will likely be one of the defining events of 2020, and that it will have implications that last well into the decade.
The situation is rapidly changing. The amount of people deemed safe to gather in a single place has dwindled from thousands, to hundreds, to ten. Restaurants, bars, movie theaters, and gyms in many major cities are shutting down. Meanwhile many office workers are facing new challenges of working remotely full time.
Essentially, people are coming to terms with the realities of our interconnected world and how difficult it is to temporarily separate those connections to others. To say that we are living in unprecedented times feels like an understatement.
One of the responses we’ve seen to how people are approaching this period of isolation and uncertainty is in huge overnight changes to their shopping behaviors. From bulk-buying to online shopping, people are changing what they’re buying, when, and how.
As more cities are going under lockdowns, nonessential businesses are being ordered to close, and customers are generally avoiding public places. Limiting shopping for all but necessary essentials is becoming a new normal. Brands are having to adapt and be flexible to meet changing needs.
This resource is intended to provide information so that you can make the best decisions for your brand during uncertain times. We’ve gathered some facts and numbers around how behaviors are changing, what products people are buying, and what industries are feeling the strain to help you determine what choices you can make for your business.
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Understanding Panic Buying and Coronavirus
As news of COVID-19 spread and as it was officially declared a pandemic by the World Health Organization, people responded by stocking up. They bought out medical supplies like hand sanitizer and masks and household 
essentials like toilet paper and bread. Soon, both brick-and-mortar and online stores were struggling to keep up with demand, and price gouging for supplies became rampant.
Humans respond to crises in different ways. When faced with an uncertain, risky situation over which we have no control, we tend to try whatever we can to feel like we have some control.
Paul Marsden, a consumer psychologist at the University of the Arts London was quoted by CNBC as saying: “Panic buying can be understood as playing to our three fundamental psychology needs.” These needs are autonomy (or the need to feel in control of your actions), relatedness (the need to feel that we are doing something to benefit our families), and competence (the need to feel like smart shoppers making the correct choice).
These psychological factors are the same reasons “retail therapy” is a response to many different types of personal crises; however, during a pandemic there are added layers.
One is that the global spread of COVID-19 has been accompanied by a lot of uncertainty and at times contradictory information. When people are hearing differing advice from multiple sources, they have a greater instinct to over-, rather than under-, prepare.
Secondly, there is the crowd mentality. Seeing other people buying up the shelves and then seeing a scarcity of necessary products validates the decision to stock up. No one wants to be left behind without any resources.
Health management and household care
With health professionals suggesting that consumers avoid hospital emergency rooms as the first point of contact for medical attention (freeing up resources for those who are/suspect they are infected), telehealth is poised to shine. With proper messaging and education, more Americans may be willing to try telehealth services during a COVID-19 epidemic to err on the side of caution. Disinfectants and hand sanitizers have become high-demand items in retail outlets and online, driven, in part, by consumers paying closer attention to personal and household hygiene. Mintel research shows that two in five US consumers are trying to use hand sanitizers more frequently, and a third have increased their use of disinfectants or other household cleaning products. With the emphasis on personal hygiene, manufacturers of cleaning products, both personal and environmental, have great opportunities, as do collateral items such as paper towels and tissues. The strongest line of defense lies in strong hygiene practices and wearing properly-rated facial masks in high-risk areas, which is where the opportunity for aircare brands lies. Wearing ‘courtesy masks’ to prevent the spread of germs is common practice in many parts of the world, but filtration masks are still niche in the US. However, this market could move from niche to a mainstream accessory given that just over one in 10 US consumers say they are using face masks in public. To presage the growth potential opportunity, one-third of urban Chinese consumers say they currently wear a face mask when they go out.
Travel and transportation
All aspects of the travel industry are being upended by the virus as cancellations dislocate both personal and business travel with each passing day. Even with the here and now disruptions to airlines, trains, and boats, other aspects of the travel industry may present opportunities. Ridesharing could become the preferred method of local or regional travel as consumers perceive it to be a safer option. According to new Mintel research, nearly one in five consumers are avoiding public transportation. This increase in demand for rideshare services will likely drive an uptick in average ride cost. However, according to Mintel research, consumers are willing to walk away from ridesharing services in the event of a drastic price increase. If consumers perceive public transit to be too dangerous for everyday use, they’ll likely pay more per ride to ensure their safety and potentially cut back spending in other areas of their life. Rideshare operators can capitalize on this opportunity by clearly broadcasting the cleanliness and hygiene of their vehicles.
Retail and apparel
China is a major source of the clothing and accessories production, as well as manufacturing the packaging supplies used to ship them. The fallout from the virus will negatively impact sales and present growth challenges for the apparel and accessories category. Companies that can efficiently manage inventory have an opportunity to win new shoppers and increase sales among existing customers. This is also an opportunity for retailers to introduce themselves to a new group of shoppers who may be willing to pay more or shop an unfamiliar or new retailer (either online or in-person) in order to find an item out of stock at their usual shopping venue. Sales representatives in China have set up WeChat groups with VIP customers for exclusive online fashion shows. Such strategies can translate to the US marketplace as well. This can be especially beneficial during the pivotal sales periods of the year, such as the back-to-school and holiday seasons. Consumers will have to rethink their expectations around price and convenience heading into peak seasons, and retailers will have a challenge and an opportunity to serve existing and win new customers. With the summer clothing season just around the corner, retailers will have to begin to deal with this situation in the next few weeks.
eCommerce
The work-from-home trend continues to grow as more companies of all sizes have their employees staying out of the office. Consumers are trying to avoid crowded places, a behavior noted by three in 10 US consumers, and we expect to see a boom in the eCommerce market across a range of directions. For example, online grocery is a market segment that continues to struggle with online sales, but currently provides a host of opportunities. Nearly 10% of US consumers report an increase in their use of online shopping services as the COVID-19 virus takes root in various regions of the United States. This figure is likely to increase as self-quarantine regulations spread around affected regions. However, as encouraging as it is to see some of these categories growing, the experience may not live up to consumers’ expectations. Supply is dwindling in some areas and there are not enough workers to fulfill orders, meaning shipping is delayed and may even be more expensive due to high demand. However, we are going to see an increase in all eCommerce areas, from shopping to teleconferencing to streaming entertainment and gaming.
Beauty and personal care
As the CDC has made it understood that careful handwashing is one of the first lines of defense against the virus, the demand for hand soap and sanitizers is already clear. However, there is an opportunity for other hand care products, especially those that offer repairing or healing benefits. The drying effects of many hand soaps and sanitizers and the potential for disruptions to the skin barrier suggest the need for products with ingredients such as ceramides and lipids to help with healing and repair. We also see opportunities for cleanse-moisture combination products as consumers are likely to be focusing on “effective cleansing” while keeping the skin’s barrier healthy. Some products will also promote their ability to remove toxins; positioning that can provide a boost for charcoal and clay masks as consumers may look for a complete "skin detox" as studies show clays can adsorb viruses in general.
19th-century diplomat Klemens von Metternich is credited with quipping: “When France sneezes, Europe catches a cold”. In the 20th century, this mutated into: “When America sneezes, the world catches a cold”. Scant surprise then that, in the wake of China’s meteoric economic rise in the 21st century, some economic journalists began paraphrasing this into: “When China sneezes, the world catches a cold”. So we watch with concern the spread of COVID-19. Epidemiology aside, the effects of COVID-19 spreading will have wider implications, not just on how economies function, but also on how consumers behave, across China, Asia-Pacific, and around the world. Another effect of China’s economic rise is its influence in the adoption of and adaptation to new technologies and behaviour patterns that percolate out into the wider consumer sphere. Mintel analysts have amassed many years of building expertise in understanding Chinese consumers, which allows us to monitor and measure the spread of the influence of Chinese consumer behaviour into the wider Asia-Pacific region. Consider the adoption of online-offline shopping; think of the huge influence on regional travel; recall China’s adoption and propulsion of Asian fashion and media; or its' trendsetting in social commerce and crowd-sourced content consumption. China has had, and will continue to have, a huge influence on the region’s consumer behaviour. COVID-19-induced changes in behaviour could well prove a new tide-change in the direction of China's influence. The need for millions to retreat into self-quarantine, caused by the outbreak, has forced changes in the way many people have behaved for over a month now. Being cooped up at home for such an extended period will leave an indelible (if subtle) shift in how consumers in China - and through its influence, Asia-Pacific - behave in the future.
What will result from consumers being home-bound for a month (or more)?
The pace of life slows. The need for new routines emerge. Working from home becomes a necessity. Planning rationed shopping expeditions alters shopping lists. Couples, forced to stay in the same space day after day, learn to accommodate each other’s need for space (or perhaps not). Elders, previously reticent to shop online, find that new, easier-to-use apps and social media make shopping a breeze. But what to do with all that extra time at home? Will China’s middle classes discover the joys of do-it-yourself (DIY) projects, to the elation of furnishings and decoration manufacturers across the region? Certainly, there is enough time for a thorough Spring clean, getting into otherwise neglected corners, or shifting the furniture to try new layouts. Hygiene is high on the agenda, so opportunities are opening up for more cleaning products, new ways to clean, and new home hacks from online videos. Will consumers spend more time on their wellness or beauty routines? Maybe. Bored with reading the same old news or watching short-attention-span videos over-and-over, will people seek the long-read, discover long-unread books on their bookshelves, find work for idle hands in drawing, painting, puzzles, games or crafts? Even while online shopping has been boosted, and food delivery carries on (despite delivery restrictions), will the slow-it-all-down zeitgeist lead to a furthering of the shift towards consumers seeking more meaningful experiences, rather than just accumulating things? Based on Mintel’s 2030 Global Consumer Trends, we think so. With limited shopping, China’s home-bound families are renewing their joy in-home cooking, finding creative ways to concoct meals with “what’s in the larder”. Online cooking videos are helping with the discovery of new recipes, new ways to create dishes, and new influences. What else is there to do when stuck at home, once the meals are cooked, the dishes washed, the floor scrubbed, and the kids safely tucked up in bed? More babies? Perhaps boredom, forced proximity, and patriotic stirrings to rejuvenate aging populations will bring extra stress to the bedsprings… How about less waste as an interesting angle? More home cooking and consideration of shopping strategies might lead to consumers to better appreciate using what they have, leading to less waste. Fewer home-delivery meals perhaps, and less throw-away packaging. Fewer trips to the mall might end with fewer impulse purchases of fast-fashion, and a reverse of the throw-away culture that has predominated.
Why will these behaviours persist?
In war, a victorious army keeps its strategic aims the same but adapts its tactics in the field to suit the changing needs of the situation. So brands also need to keep marketing their products and services but must innovate their way through changes in the consumer market, such as changes created by an epidemic. There are benefits to both consumers and brands in having consumers’ time, technology, and attention. In China, we’re seeing:
* 		Chefs give live-stream cooking tutorials in restaurant kitchens;
* 		Gym instructors live stream work out classes;
* 		Club DJs live stream mixes for “cloud clubbing” sessions;
* 		Real estate agents give live stream tours of apartments for sale;
* 		Movies premiere via live stream while cinemas remain closed;
* 		Performers give live-stream performances from their homes;
* 		Farmers live stream produce in-the-field in order to sell to buyers;
* 		Auto dealers live stream the interiors of luxury cars;
One of the criticisms of online shopping is the lack of service and human interaction. One of the key appeals of massive multiplayer online games (MMOGs) is the ability to compete and communicate with other people within the game environment. What the above examples of innovation-through-crisis show us is that businesses can still connect with their consumers via massive multi-participant online showrooming. But, if necessity is the mother of invention, plagiarism is the mother of adoption. The key lesson here is that you don’t need the crisis to adopt and adapt a good idea to your own ends – that being better engagement with your existing and potential customers. JD.com was already developing AI-enabled vending machines, but the COVID-19 crisis gave it a reason to trial these to sell fresh produce to home-bound shoppers in China. More importantly, if the innovation works to fulfill a basic human need, then it has the potential for longevity – for as long as the need persists. People still need to eat, sleep, work, and do all the things they normally do, which is why the economies of Asia-Pacific will rebound from the COVID-19 crisis. And if innovation has longevity in solving human need, you can potentially apply it wherever there are humans – especially if they are likely to be stuck at home for long periods of time in the coming months. As China now begins its economic reboot and supply chains regain traction, we will witness a reconfiguration of industries into new consumer behaviours. A change of key, perhaps, but the song remains the same.

How can the retail industry quickly restore business and build long-term capabilities?
First, in the short term, companies must keep a tight control on costs. A flexible management approach will be essential to control labour costs, rental costs and the non revenue-generating areas of the business. In addition, business hours can be shortened, which together with a commensurate reduction in salary costs, can keep cash flow at a reasonable level. Meanwhile through this crisis, it is necessary for big brands and retailers to build long-term relationships by helping upstream and downstream enterprises.
Secondly, businesses should urgently prepare their supply chain operations for the economic recovery. From the demand side, as the outbreak hits the retail industry and consumer confidence in the first quarter and even the beginning of the second quarter, we predict that there could be "compensatory" growth. This is especially likely during holidays and the golden week period in the second half of the year, when the outbreak should ease. From the supply side, given the lack of operations in February, small and medium-sized production- oriented enterprises may shut down their business owing to insufficient cash flow. This would in turn create significant challenges in the supply of goods when the economy begins to recover in the second and third quarters. Therefore, in dealing with the crisis in the short term, we recommend that retail enterprises should proactively align with suppliers on the schedule of production and supply for the second half of the year. This may include planning with logistics partners to prepare for the rebound in consumption.
Thirdly, in the long term, it is necessary for retail companies to establish risk prevention mechanisms. Companies need to collaborate with the government, communities, banks and hospitals to establish an emergency mechanism that can help protect people’s livelihoods and reduce the inventory backlog caused by outbreak. After the Kumamoto earthquake hit Japan in 2016, four 7-Eleven plants in Kumamoto were shut down and 16 other plants in Kyushu were required to increase production to ensure the normal delivery of goods to Kumamoto stores. Goods trucks were unable to get into the affected areas at the time due to traffic congestion. However, after it was listed as a "designated public authority", 7-Eleven had priority to reach the affected areas. In March 2017, 7-Eleven and the Tokushima government collaborated in a pilot to manage the supply plan by using convenience stores. 7-Eleven has a system called “Seven VIEW” that aggregates information about natural disasters such as typhoons and earthquakes and adjusts logistics networks accordingly. When a disaster happens, 7-Eleven can arrange supplies according to information provided by the government on traffic control and refuge locations.2
Last but not least, in line with the trend of long-term business development, enterprises can strengthen their "internal capabilities" in the following areas:
Build "omni-channel" marketing and digital retail capabilities, and continuously innovate business models. We have observed that many enterprises do not maximise the value of their online membership schemes, which are simply used for receiving orders via an app. When facing inventory backlog issues, businesses often encounter difficulties in adjusting supplies due to the lack of data. As a result, companies can leverage this outbreak as an opportunity to identify shortcomings regarding digital technology and talent. It is a chance to enable retailers to embrace technology and upskill employees to ensure they have the right talent to capitalise on opportunities presented by the artificial intelligence and the digital revolution. On one hand, retailers will be able to reach out to consumers more actively and secure their future. On the other hand, innovative business models can help reduce margin costs via investment in automation or artificial intelligence.
While enhancing their digital and online presence, companies should also plan for the future of their brick-and-mortar stores. Big data on footfall, customer profiles and shopping preferences can help retailers judge which store locations have the best long term value, and which could be replaced by online sales to improve overall sales and cost efficiency. During the offline to online transition, companies should prioritise maintaining good relationships with landlords, and focus attention on retraining employees to enable redeployment of talent to digital positions.
Advisory (China) Limited, a wholly foreign owned enterprise in China and KPMG, a Hong Kong partnership, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Hong Kong, China. For example, following the trend of “one-stop” consumption, cosmeceuticals can be added in offline supermarkets and convenience stores while general merchandise can be also introduced into pharmacies. Large hypermarkets can move towards “fragmented retail”, allowing greater customisation and helping consumers.
Improve the supply chain network and ensure all products have more than two suppliers. Supplies should be guaranteed by setting a reasonable inventory level. Given its geographical advantage, Wuhan plays such a significant role in supply chains that many companies have been affected after the city was locked down. To withstand the impact of such crises in the future, we suggest companies work with suppliers and logistics vendors to make their supply chain more flexible. In Japan, for example, after the Fukushima disaster, auto companies conducted a thorough investigation of the security of all global suppliers from tier 1 to tier 3. This action not only ensures that plants have contingency plans but also further drives the restructuring of the industry and eliminates over reliance on top tier suppliers.3
Invest in digitalisation and functionalisation, reduce personnel costs and increase efficiency. We recommend that retail companies invest more in automation and artificial intelligence, such as robotic process automation (RPA), and automated replenishment systems, AI deep learning, to reduce labour costs in the long term. At the same time, the function of retails apps should be fully utilised to ensure communication among employees, suppliers and logistic vendors. Especially when crises occur, apps can be an important tool in bringing front-end store staff and consumers closer and protecting livelihood.
Finally, we urge local governments to further introduce policies on tax relief and loan preference to help enterprises survive the crisis, and be well prepared for the recovery in the second half of the year. Recently, the Suzhou, Shanghai, and Beijing governments have introduced relevant policies. For example, reducing taxes for small and medium-sized enterprises, extension of the payment period for social insurance.