Western eyes are focusing tightly on China as it edges out of its coronavirus nightmare. Might the market offer pointers for the rest of the world?
Clive Yeung, Managing Director of Shanghai-/Hong Kong-based NuanceTree, reports that while the country is able to now see the light at the end of the tunnel, it’s still difficult to know with any certainty just what kind of societal changes the virus will have engendered.
The current situation is, of course, compounded by a US-China trade war that has inflicted its own economic damage. So it could well be that consumers want to cut loose a little after such hard times.
“People are saying there will be ‘revenge consumption’, which means they will, once the virus has gone, be purchasing and enjoying more and better goods and services to cheer themselves up, to celebrate a little,” Yeung says. “In the next month or two, we will know if this is happening, and if it has momentum.”
Then again, it could be that, after two successive shocks, it’s caution that rules in China.
“You could understand it if people wanted to save money instead,” he adds.
In Spain, there will certainly be a shift in consumption habits though it’s not yet evident in which direction, notes Silvia Artiñano, Founding Partner at Arpo in Madrid.
“However, forecasts are currently based on the possibility of an economic crisis equivalent to that of 2008 – but the characteristics aren’t the same, and Spaniards are not nearly as indebted as they were back then,” she says.
The UK, which is also in double-whammy territory due to a long period of Brexit uncertainty, could well veer towards conservatism, thinks Sabine Stork, Founding Partner of Thinktank International Research in London.
“UK consumers have been addicted to credit for a long time … while some may not have a choice but to continue in this vein, I’m convinced that this experience will make for more careful spending habits. I predict more interest in creating nest eggs and in savings products in general,” she says.
Frederica Santucci, Founder and Qualitative Director at Lighthouse in Rome agrees. “Money is a big issue for many people who are not working, or getting only part of their salaries,” she says. “This may mean a lower propensity to spend once we get back to normal. There will be a period of avoiding unnecessary purchases.”
And finance is, indeed, a very touchy subject right now.
“French consumers are shocked that some banks are talking freely about significantly extending their credit lines – while failing to properly highlight that these carry high interest rates,” notes Alexandre Didier, Research Director at Paris-based Smartfrogs. “We’re also hearing complaints about the reluctance of the banking sector to heed the government’s request to cancel dividend payments during a time of national crisis.”
And that takes us onto Big Business in general, with consumers across markets playing close attention to those corporates some believe did all too well out of the 2008 financial crash.
“While it seems that the vast majority supports the German government's measures, some see a danger in companies taking advantage of government aid, whether they are in need of it or not,” says Barbara Denneborg, Research Director at Insight Culture in Frankfurt. “There are also fears that financial assistance won’t reach those who need it most, such as the typical German Mittelstand, or even-smaller companies, that do not have substantial financial resources.”
In all markets there seems to be indignation about corporate profiteering and brands not pulling their weight. And our roundtable participants believe this will be remembered after the crisis has subsided.
Smartfrogs’ Alexandre Didier argues that brands which “tried to make profits from the situation and/or refused to participate in the national effort will later have to pay the bill.”
But will this bill merely consist of reputational damage, or will it also hit the bottom line? Our researchers believe it is likely to be both.
“In uncertain, scary times consumers are looking to brands they can trust,” says Sabine Stork. “Once lost through perceived or actual callous behaviour at a time of heightened anxiety, this trust will be hard to regain.”
And people may have a longer memory of corporate infractions then they would in normal times, with Clive Yeung expecting, for example, that consumers will be far more wary of unsubstantiated product claims. “There is more scepticism in the market after consumers have discovered the painful consequences of fake information,” he says. “There will be more onus on brands offering product proof.”
What about those brands that are showing themselves as good corporate citizens during the crisis?
In France, Alexandre Didier says “it is more likely than not” that L’Oréal and LVMH will be thanked by consumers for the thousands of litres of hand sanitiser they will have produced, or that car makers will get plaudits for making life-support systems.
Sabine Stork believes that genuine helpfulness and thoughtfulness may well be remembered and rewarded.
“I’d advise any client to look at their business and seriously consider where they could redeploy resources, use R&D and marketing brains to help the collective effort and the vulnerable, or show kindness to their customers. But whatever they do needs to still come from the heart of the brand and not smack of opportunism. Let’s hope this time will usher in a new era of brand integrity.”
Round Table Participants were:
London: Sabine Stork, Thinktank (moderator), Keisha Herbert
Paris: Alexandre Didier & Jean Paul Petitimbert, Smartfrogs
Frankfurt: Barbara Denneborg & Eva Caspary, Insight Culture
Rome: Frederica Santucci, Lighthouse
Madrid: Silvia Artiñano, Arpo
Shanghai: Clive Yeung, NuanceTree