ASSESSING THE IMPACT: A CROSS INDUSTRY VIEW ON THE IMPACT OF - - PowerPoint PPT Presentation

ASSESSING THE IMPACT: A CROSS INDUSTRY VIEW ON THE IMPACT OF COVID IN CHINA Oceanne ZHANG Partner

MACRO IMPACT

In 2019, the annual GDP growth rate of the Chinese economy was 6.1%; the year-on-year growth rates in the four quarters were 6.4%, 6.2%, 6.0%, and 6.0% respectively, showing a slow decline. 2020 has been identified as an important year for China to achieve the goal

• f doubling its total GDP of 2010. Considering the impacts of NCP epidemic
• n the economy in Q1, the year-round macroeconomic target for 2020 is now

under a significant challenge.

ECONOMIC IMPACT

6.4% 6.2% 6.0% 6.0% 2019.Q1 2019.Q2 2019.Q3 2019.Q4

Source: National Bureau of Statistics of China

Year-on-year GDP Growth Rate in Four Quarters 2019

3

ECONOMIC IMPACT

According to The Economist, there are four possible economic scenarios that businesses need to consider under the epidemic :

Source: The Economist

" Baseline " 50% likely

The epidemic turns to be under control at the end of Q1, and economic growth slows down in Q1; but as the epidemic influence decreases, the economy looks to rebound. The year-round GDP growth rate in 2020 is expected to reach ~5.4%.

"Optimistic" 25% likely

The epidemic is effectively controlled by the end of February, and the year-round GDP growth rate is ~5.7%.

"Pessimistic" 20% likely

The epidemic continues until the end of Q2, and the year-round GDP growth rate falls to 4.5%.

"Nightmare" 5% likely

The 2020 epidemic fails to be effectively controlled, and the year-round GDP growth turns to be less than 4.5%; a real worst case scenario for the market.

4

The tertiary industry leads the Chinese economy, its GDP contribution accounting for as much as 54% in 2019. The highly contagious NCP epidemic has significantly reduced people's outside activities with transportation, tourism, catering, retail and entertainment industries expected to bear the brunt. The growth rate of the tertiary industry is expected to slow dramatically in Q1.

7% 39% 54% Primary Secondary Tertiary

GDP Growth Rates

• f 3 industries in 2019

ECONOMIC IMPACT

Data Source: National Bureau of Statistics of China

3.1% 5.7% 6.9% Primary Secondary Tertiary

GDP Contribution

• f 3 industries in 2019

5

Data Source: National Bureau of Statistics, Evergrande Research Institute, official data of catering companies, Kantar analysis

• In 2019, the sales revenue during the Spring Festival accounted for 15.5% of

the total revenue of the catering industry.

• This year, however, 500 billion yuan is estimated to have been lost due to the

epidemic.

• Many well-known catering companies, including Hai Di Lao and Xibei, have

suspended their business operations. Stockpiling of raw materials resulted in cash flow distress. Xibei, for example, has exclaimed that it "can't hold for more than three months”.

CATERING

Disadvantage: ★★★★★ Advantage: ☆☆☆☆☆

6

Data Source: National Bureau of Statistics, Evergrande Research Institute, official data of catering companies, Kantar analysis

• Starbucks and Luckin suspended in-store
• perations of more than half of total stores

throughout the country. Besides, the

• verseas financial agency short the shares
• f Luckin and the stock price decreased

more than 10% on 31st Jan.

• Milk tea brands, such as HEYTEA and

NaiXueCha, chose to only receive online

• rders to avoid direct contact between

consumers and shop assistants.

CATERING

Disadvantage: ★★★★★ Advantage: ☆☆☆☆☆

7

Data Source: National Bureau of Statistics, Evergrande Research Institute, official data of catering companies, Kantar analysis

• Although physical restaurants have suffered,

delivery orders are soaring. For many catering companies, delivery orders account for up to 90% of their business.

• Xiao Long Kan, a hot pot brand, sold more than

1,500 orders in 10 days, a 350% increase compared to those of previous month.

• KFC, McDonald's and Pizza Hut have

launched innovative delivery models such as “contactless food ordering”, “contactless delivery” and “safe takeaway card” to protect consumers’ health and safety, while most stores continue to operate. This will probably become a new approach to sell fast food in the near future.

CATERING

Disadvantage: ★★★★★ Advantage: ☆☆☆☆☆

8

Data Source: National Bureau of Statistics, Evergrande Research Institute, official data of some catering companies, Kantar analysis

Hema, an omnichannel supermarket, has seen significant upswing in online orders. To account for the additional capacity, Hema recruited more than 1,500 employees from 30+ suspended restaurants, including Yun Hai Yao, Youth Restaurant and Xibei, relieving the high labor-cost pressure of the closed restaurants to some degree.

CATERING

Disadvantage: ★★★★★ Advantage: ☆☆☆☆☆

9

Forecast of Catering Industry after the epidemic

• Traffic in offline restaurants may pick up slightly after the epidemic, but it is

unlikely to return to the normal level in the short term.

• The O2O food delivery business may see an explosive growth in the later

stage of the epidemic once restaurants are reopened

• Investment and marketing plan in physical restaurants might need to be

rearranged.

• The international chain restaurant brands are less likely to make major

adjustments with their long-term development strategy in China. The senior executives at Starbucks and McDonald's believe the difficult situation is just temporary, and maintain strong confidence in the long-term development of the Chinese market.

CATERING

Disadvantage: ★★★★★ Advantage: ☆☆☆☆☆

10

Data source: Ministry of Culture and Tourism, and Consular Department of the Ministry of Foreign Affairs

• The timing of the epidemic outbreak coincided with the biggest

human migration It is predicted that the direct economic loss during the 2020 Spring Festival is about 500 billion yuan, and the total loss attributed to a downturn in tourism in 2020 ~ 1.6-1.8 trillion yuan.

• The Ministry of Culture and Tourism issued an emergency notice

requiring suspension of the operation of tourist company and group tour. On the account of control of epidemic transmission, over 80 countries have implemented entry control for Chinese residents.

• Travel retailing has also seen a significant downturn, with multiple

duty-free stores shortening their opening hours or suspending

• perations.

TOURISM

Disadvantage: ★★★★★ Advantage: ☆☆☆☆☆

• The epidemic has had a strong impact on the hotel and Bed &

Breakfast (BB) sector. Booking, a hotel booking platform, began to cancel the orders from Chinese tourists since January 30. For example, more than 30,000 BB hotels in Yunnan have temporarily closed.

11

Forecast of Tourism Industry after the epidemic

• The tourism enterprises are undergoing a severe test, and this tough time

may still last one to three months.

• We believe that the travel demands of consumers will not disappear. It is

predicted that a round of spending spree may appear after the end of the

• epidemic. This period might appear in July to August, and a peak will

appear during the National Day holidays.

• Wide spread of this epidemic also has posed higher requirements for hotel

accommodations, airlines, railways and even public traffic hygiene and medical services ,etc. Future development of the tourism relies on the synergy of various industries, as well as its internal upgrade.

TOURISM

Disadvantage: ★★★★★ Advantage: ☆☆☆☆☆

12

Data source: piaofang.maoyan.com

CULTURAL ENTERTAINMENT

Disadvantage: ★★★★☆ Advantage: ★★★☆☆

• Under the epidemic, the films are forced to be cancelled. According to

Maoyan.com, on the first day of the current lunar New Year, the box

• ffice took in only 1.81 million yuan, compared with 1.458 billion yuan

in 2019. Cinemas lost at least 7.4 billion yuan in revenue during the seven-day lunar New Year holiday.

• In these difficult times, Lost in Russia, produced by Huanxi Media

Group Limited, became the first breaker by cooperating with ByteDance for free exclusive play on Toutiao, Tik Tok, ixigua and other platforms, with a view counts of more than 600 million by 180 million viewers in 3 days only, minimizing the loss of the producers in the event of withdrawal.

• There will probably be more movies premiering on streaming

platforms in the future.

13

Data source: public information, AppAnnie, JD Research Institute, public WeChat accounts of sports brand

SPORTS

Disadvantage: ★★★☆☆ Advantage: ★★★☆☆

With the spread and development of the epidemic, sports activities around the country have been suspended, important events such as CSL and CBA have been postponed, and gyms & sports education institutions have been forced to close, which has cast a shadow over the previously soaring sports industry in China.

• The chain gyms represented by

SUPERMONKEY and Shape have suspended all classes.

• Nike announced the closure of half of

its stores.

• Lululemon temporarily closed 29

stores in China.

14

Data source: public information, AppAnnie, JD Research Institute, public WeChat accounts of sports brand

The epidemic has quietly changed the traditional fitness habits of the public, who are unable to go out and must do exercise at home:

Increase in small-sized indoor fitness equipment

• For example, the Switch fitness ring,

a KINECT game perfectly integrating fitness and beating challenge, has sold out in most places, with the price doubling due to demand.

SPORTS

Disadvantage: ★★★☆☆ Advantage: ★★★☆☆

• According to the big data of JD, during the Spring

Festival, the sales of skipping ropes increased by 56%, dumbbells by 60%, chest developers by 109%, rowing machines by 134% and yoga mats by 150%.

• The increase in demand was even more

pronounced among small-town residents, indicating the increase of fitness awareness in lower-tier cities. Electronic fitness products emerged

15

Data source: public information, AppAnnie, JD Research Institute, public WeChat accounts of sports brand

Sports brands are also taking positive action and many emerging fitness products have also taken the lead during this period.

SPORTS

Disadvantage: ★★★☆☆ Advantage: ★★★☆☆

• Offered 40 live

yoga courses.

• Invited professional

coaches to offer live streaming for

• ne hour each day.
• Launched 36 micro

malls online across the country and introduced the latest products and surprise benefits from time to time.

• Launched a campaign

"Take advantage of this moment to build up", encouraging people to use Nike Training Club to arrange personalized training.

16

Forecast of Sports Industry after the epidemic

• In the long run, people will pay increasing attention to their health and show greater

willingness to participate in sports to enhance their physical fitness after a serious epidemic.

• After the epidemic ends, sports events, fitness training, sports equipment,

sportswear and other related industries will usher in a golden period of development. Sports marketing is still worth to pay attention to.

• The home indoor fitness industry including fitness APP, fitness live streaming and

fun fitness equipment will also enjoy a considerable growth.

• An increasing number of sports brands will focus more on digital marketing,

eCommerce and brand community establishment.

• We believe that 2020, with the European Cup and the Tokyo Olympics coming, will

still be a sporting year.

SPORTS

Disadvantage: ★★★☆☆ Advantage: ★★★☆☆

17

IMPACT OVER RETAIL INDUSTRY

Due to the epidemic, department stores and shopping centers in China have closed or reduced their business hours. To offset some of the losses, more than 70 commercial real estate companies in China announced a reduction or exemption in commercial rents. However, there are still significant fixed expenses that will expose difficulties for continued operation under the epidemic.

DEPARTMENT STORES & SHOPPING CENTERS

Disadvantage: ★★★★☆ Advantage: ★★☆☆☆

19

Data source: suning.com, rainbow.cn

Rainbow Department Store has launched a "door-to-door" service, enabling consumers to place orders with free shipping by means of the "Rainbow" App

Department stores with established online platforms have seen a smaller impact than traditional ones.

DEPARTMENT STORES & SHOPPING CENTERS

Disadvantage: ★★★★☆ Advantage: ★★☆☆☆

Suning Plazas in different cities, have set up their own digital community where consumers could join by scanning QR codes and to buy products and services at home through online

• rder placing and delivery services

20

• In the short term, the decrease of consumers caused by the epidemic will

affect the business to varying degrees.

• In the long run, the epidemic would push business to accelerate digital

transformation, strengthen digital marketing, utilize new digital tools and technologies, integrate online and offline data to protect against the impact of such crises.

The importance of online platforms such as brand official website, WeChat accounts, WeChat mini program will be emphasized for department stores or shopping centers throughout the year and the future as the economy recovers. CRM, data integration and analysis, personalized products and precising marketing to achieve high-value member and sales growth could be the core strategy of business in the future Experience will continue to be the core value of offline shopping. However, it is also very important for the industry to find out how to create an immersive online shopping experience by taking advantage of new technologies.

DEPARTMENT STORES & SHOPPING CENTERS

Disadvantage: ★★★★☆ Advantage: ★★☆☆☆

21

Even though malls and supermarkets have shouldered the task of ensuring people's daily supplies, there still have been great challenges under these adverse situation.

HYPERMARKET

Disadvantage: ★★★☆☆ Advantage: ★★★☆☆

• Declined profit due to

rising costs and a principle of "stable supply with no price rise”.

• With the labor shortage and

increased workload for disinfection and sterilization, many supermarkets hired temporary staff from catering industry.

• A substantial backlog of

Spring Festival good and gifts (such as tobacco and wine) caused significant pressure on capital turnover.

22

Carrefour Small supermarkets Wal-Mart

However, crisis breeds opportunity:

• During this period, we have seen that offline supermarkets are able to quickly fill

supply gaps, taking the opportunity to alleviate the impact of consumer decrease brought about by a rise in eCommerce adoption.

• Wal-Mart, Carrefour and other large supermarkets are developing more online

channels to push services through their own and third-party apps / mini program; small supermarkets are expanding their sales scope by relying on O2O services within the city, such as Ele.me / Meituan.

HYPERMARKET Disadvantage: ★★★☆☆ Advantage: ★★★☆☆

23

The self-checkout machine featuring contactless transaction shows an

• pportunity to develop new checkout habits, which in the long run can save

labor cost for retailers, by achieving the full automation of cash register.

HYPERMARKET Disadvantage: ★★★☆☆ Advantage: ★★★☆☆

24

• The performance of the malls/supermarkets

under the epidemic is remarkable and they have improved their brand reputation and public favor in the crisis.

• The long term challenge is in-store traffic.

Consumers would stay less for every shopping than before

• Stock up behavior would be more and more

popular and basket size would be larger

25

HYPERMARKET Disadvantage: ★★★☆☆ Advantage: ★★★☆☆

Even in the face of the epidemic, most of the chain convenience stores remain open. Those stores nearby living community have taken advantage of their geographical position and won new business

• pportunities, while others in close proximity to transportation hubs

and commercial areas have had to close due to business downturn.

CONVENIENCE STORES

Disadvantage: ★★☆☆☆ Advantage: ★★★★☆

26

Suning CVS, backed by Suning Fresh, has become a service hub of communities by enabling users place an online order on Suning APP before 9 p.m., and pick up at the neighborhood store at 7:00 a.m. the next day. Today convenience stores in Wuhan are relying on Ele.me, using the in store pickup method to reduce personnel contact.

During the epidemic, fresh food become the most important commodity. Community convenience stores quickly adjusted the category structure and increased the supply of fresh food, making it convenient for residents to purchase nearby.

27

CONVENIENCE STORES

Disadvantage: ★★☆☆☆ Advantage: ★★★★☆

The efficiency of convenience stores and their role of as community hubs has raised their standing in consumers mindsets:

• After the epidemic, consumers' behaviors of shopping in the

convenience store nearby the home will continue in the short term.

• The community stores formed in the special period will last.
• The epidemic will further expand category within convenience

store -- increase in the proportion of fresh food, vegetables and instant food.

28

CONVENIENCE STORES

Disadvantage: ★★☆☆☆ Advantage: ★★★★☆

Data source: Kantar Worldpanel

• Data from 2013 Worldpanel, a division of Kantar, showed that during the SARS
• utbreak, grocery stores and “mom and pop” stores suffered.
• Affected by this epidemic, quite a number of grocery stores were forced to be

closed and many store owners said a large backlog of goods stocked before the Spring Festival. This coupled with high store rents as commercial real estate booms, has posed a considerable financial pressure on these low margin businesses.

• The business of traditional grocery stores will significantly suffer this year.

TRADITIONAL GROCERY STORES

Disadvantage: ★★★★☆ Advantage: ★★☆☆☆

29

Data source: Public interview with LST

• There has been significant disruption in the supply chain for these stores across

distributors and wholesalers. Digital platforms play an important role to help small store owners ensure adequate supply of goods while refraining from going outdoors.

• According to the data provided by Alibaba LST, more than 3,000 stores on the LST

platform in Wuhan remain open to provide services for the community.

• We predict that after the epidemic, store owners will be more used to the

contactless one-stop purchase through B2B platform, leading to an acceleration of the reform of the traditional RTW and traditional retail stores.

30

TRADITIONAL GROCERY STORES

Disadvantage: ★★★★☆ Advantage: ★★☆☆☆

Data source: China Chain Operation Association, Zhongyan Puhua Industry Estimates

UNMANNED SHOPS & VENDING MACHINES

Disadvantage: ☆☆☆☆☆ Advantage: ★★★★★

• With the completion of Huoshenshan Hospital on February 2nd , the first unmanned

supermarket in the epidemic area in China came into being.

• The idea of unmanned retail was put forward in 2016 and developed rapidly in
• 2017. The industry had investment of 6.3 billion yuan with more than 200

unmanned stores at its peak. However, after only one year, the model was challenged by the market due to the low acceptance of consumers and immature technology

• During the epidemic, unmanned supermarkets have had somewhat regained

public attention as it has expand consumption occasion due to crisis. We believe that unmanned supermarkets industry would gradually gain the momentum in the future

31

Data source: China Chain Operation Association, Zhongyan Puhua Industry Estimates

• Vending machine was more preferred by consumer thanks to its advantage of

not requiring human contact. The growing trend of vending machines has already been caught by many FMCG manufacturers before the outbreak.

• Compared with the mature vending machine markets such as US and Japan,

the Chinese market of vending machines still has great growth potential. It is believed that the outbreak will result in a rise of the number and frequency of consumers using vending machines. We may also see that more and more categories and brands will start to try selling through vending machines. At the beginning of the year, Luckin coffee announced its vending machine smart retail strategy. Vending machine density 25 machines per person 50-60 machines per person Less than 7,000 machines per person

32

UNMANNED SHOPS & VENDING MACHINES

Disadvantage: ☆☆☆☆☆ Advantage: ★★★★★

The SARS outbreak in 2003 stimulated the growth of eCommerce. In the face of the NCP outbreak this year, eCommerce enterprises have become an important force to support medical materials and residents' living materials, owing in part to their advanced logistics systems and rapid fulfilment capability . According to JD.com, sales value of rice, flour, grain, oil and dairy products up 154% year-on-year. eCommerce sales of products related to people's livelihood surged during the Spring Festival: Sales of Suning offline supermarket also doubled Taobao has set up a platform “helping farmers by eating”, using live streaming to promote featured agricultural products those are unsold due to the epidemic limitations.

ECOMMERCE PLATFORMS

Disadvantage: ★★☆☆☆ Advantage: ★★★★★

33

Data source: Big Data on Spring Festival Consumption released by JD, Tmall.com, JD.com

JD Fresh actively faciliated catering industry to develop production of semi-finished products and fast food, and expanded new sales channels for catering industry through its omnichannel during the epidemic. Taobao offers the service of "buy medicine without going outdoors", which enables consumers to purchase drugs and epidemic prevention supplies through online consultation, prescription and medicine delivery.

34

ECOMMERCE PLATFORMS

Disadvantage: ★★☆☆☆ Advantage: ★★★★★

• The epidemic will undoubtedly further accelerate the

development of eCommerce and drive more consumers to switch from offline to online. In particular, it will increase the penetration of eCommerce in lower-tier cities and strengthen

• nline consumption habits.
• As the epidemic temporarily suppresses consumers' spending

during the traditional Spring Festival holiday, eCommerce should see a peak of consumption after the outbreak is over.

• If the epidemic is brought under control by March, the peak will

coincide with the March 8th promotion campaign which is typically a sales peak on the eCommerce calendar.

35

ECOMMERCE PLATFORMS

Disadvantage: ★★☆☆☆ Advantage: ★★★★★

Data source: Big Data on Spring Festival Consumption released by JD, official websites of relevant platforms

A significant growth in O2O businesses such as delivery to home has been seen during the epidemic period, with some O2O platforms seeing a surge in orders during the Spring Festival.

O2O

Disadvantage: ★☆☆☆☆ Advantage: ★★★★★

Sales increased by 374% compared with that of last year. Since the Spring Festival, the mall and supermarket orders on Ele.me in Beijing have doubled. From the New Year's Eve to the fourth day of the lunar new year, the turnover of Missfresh increased by 321% over the same period last year.

• New users acquisition at rates of up to 40,000 per day.
• Optimized its product structure, pushing semi-finished food and

successfully expanding into new categories. Launched “meat and vegetable combo”, and sold out 5,000 combos quickly on the first day of the launch.

36

Data source: Big Data on Spring Festival Consumption released by JD, official websites of relevant platforms

Companies providing toB services should try to provide business to individual users during the epidemic. For example, Meicai, previously serving more than 2 million catering businesses, has expanded toC businesses

B O2O

Medicine O2O platforms have been performing well during the

• epidemic. The daily average basket size of Dingdang Medicine, a

vertical platform of medicine, is 7-8 times compared to normal times. During the Spring Festival, it made 1.8 million home deliveries to consumers; from the New Year's Eve to the third day of the first lunar month, JD Daojia saw an increase of 430% in orders of medical products. Ele.me and Meituan whose core business is food delivery might have been affected in Q1 due to a sharp decline of the orders caused by closure of a large number of chain food stores, but after the

• utbreak, they are bound to recover quickly.

37

O2O

Disadvantage: ★☆☆☆☆ Advantage: ★★★★★

• In general, before the epidemic, the “indoor economy” had

already spawned a series of O2O business model, a new and promising business model of the physical retailing.

• It is believed that after the outbreak is over, consumers will get

used to O2O shopping, and the categories they purchased will be largely expanded

• The O2O platforms with supply chain advantages will gain

profits in the medium and long term, by taking this opportunity to take the share of home business and consumers' minds.

• All manufacturers and brands should increase investment and

marketing on O2O platforms to capture opportunity.

O2O

Disadvantage: ★☆☆☆☆ Advantage: ★★★★★

38

• Community-based WeChat groups have rapidly risen, much favored by
• consumers. Many residents use WeChat to establish a variety of “ fresh food

shopping groups".

• Convenience stores, small chain supermarkets and other qualified community

convenience business service outlets allow shoppers to place an order online via its APP or public account, to provide offline delivery to meet daily necessities needs.

• Consumers are more willing to believe their acquaintance during the epidemic and

use social platform such as Wechat Daigou to buy emergency goods.

SOCIAL ECOMMERCE

Disadvantage: ★★☆☆☆ Advantage: ★★★★☆

39

Data source: Public interview with Forest cabin

• More than 140 Forest cabin stores have closed nationwide due to the epidemic.

However, they are still enjoying a strong performance as the shopping promoter at home can still do the sales by contacting regular consumers via "Dingding+ Taobao APP”, or by enabling consumers to place an order via WeChat.

• In just one day, there were more than 3,000 new members registered on Dingding,

compared with 700-1,000 a day at normal times. In this way, one Forest cabin store in Wuhan, ranked second in terms of sales on February 1st -2nd.

"Dingding+ Taobao APP" smart shopping promoter, "WeChat + Mini Program" and other digital shopping promoter models enjoy rapid development. After the epidemic is over, social eCommerce and digital shopping promoter in stores will be a powerful way for traditional brands to create a new consumption battlefield, continuously acquire new consumers and enhance consumer loyalty.

40

SOCIAL ECOMMERCE

Disadvantage: ★★☆☆☆ Advantage: ★★★★☆

CONSUMER IMPACT

0% 20% 40% 60% 80% 100% Medical/life insurance Nutrition and health products Online entertainment Household cleaning products Food and beverage Medicine Advanced epidemic prevention products Basic epidemic prevention products

Categories with consumer demand increased due to the epidemic Categories with consumer demand less affected by the epidemic

Home fitness equipment Consumer electronics Small appliances Large appliances Financial management/stock Beauty products Alcohol Luxury Medical beauty Clothing and accessories Fitness group classes/personal… Hairdressing/manicure Travel Out-of-home entertainment Out-of-home dining and gathering

Categories with consumer demand decreased due to the epidemic

0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Personal care products Increased due to the epidemic Unchanged Decreased due to the epidemic

/

During the epidemic

42

After the epidemic

Categories that consumer may demand less Categories that consumer may demand more Categories that consumer demand unchanged

0% 10% 20% 30% 40% 50% 60% 70% Luxury Online entertainment 0% 10% 20% 30% 40% 50% 60% 70% Beauty products Financial management/stock Fitness group classes/personal… Hairdressing/manicure/ eyelashes… Personal care products Nutrition and health products Household cleaning products Medicine Clothing and accessories Medical/life insurance Advanced epidemic prevention… Food and beverage Basic epidemic prevention products Out-of-home entertainment Travel Out-of-home dining and gathering 0% 10% 20% 30% 40% 50% 60% 70% Medical beauty Home fitness equipment Alcohol Consumer electronics Large appliances Small appliances Strong consuming desires Unchanged Decreased consuming desires

/

43

Spending decreased/canceled Less affected by the epidemic/ Almost unchanged Spending increased

During the epidemic (Forecast) After the epidemic

Out of home entertainment Out-of-home dining and gathering Travel Hairdressing/mani cure Fitness group classes Basic epidemic products Household cleaning products Medicine Online entertainment Food and beverage Online entertainment Luxury Out of home entertainment Travel Out-of-home dining and gathering Epidemic prevention products Food and beverage Large appliances Small appliances Consumer electronics Alcohol Home fitness equipment Medical beauty Personal care Medical beauty Clothing and accessories Luxury Alcohol Beauty products Financial management/stock Consumer electronics Large appliances Small appliances Advanced epidemic prevention products Nutrition and health products Medical/life insurance Medical/life insurance Clothing and accessories Advanced epidemic prevention products Nutrition and health products Household cleaning products Personal care Products Fitness group classes Financial management/sto ck Hairdressing/man icure Beauty products

Impact overview of the epidemic on consumers’ category consumption

Data source: Kantar Consulting

44

Purchase channels chosen by consumers during the epidemic

58% 55% 35% 35% 34% 33% 30% 26% 21% 19% 18% 14% 14% 12% (N=1093)

45

17% 23% 23% 25% 26% 27% 28% 30% 31% 32% 36% 36% 37% 42% 58% 64% 59% 52% 62% 60% 54% 57% 57% 51% 55% 53% 52% 51% 25% 13% 18% 23% 13% 13% 18% 13% 13% 17% 10% 11% 11% 8% Small shop/Mon and pop store Personal care products store Boutique/import supermaret Traditional farmer's market/vegetable market Convenience stores Social eCommerce Community Wechat ordering Vertical eCommerce website/APP New retail experience shop O2O food delivery platforms Fruit Store/fruit and vegetable convenience store Hypermarket Supermarket Integrated eCommerce platform The frequencey of use gradually increases The frequency of use unchanged The frequency of use gradually decreases

Change in consumers’ channel choice and purchase behavior after the epidemic

(N=1093)

46

Things consumers do when staying at home during epidemic

58% 56% 54% 41% 39% 33% 30% 28% 26% 24% 23% 23% 23% 20% 20% 17% 10% 7%

Watch online long videos Watch short videos APP Sleep Watch TV Play mobile game/online games Chat with friends and relatives E-learning Cooking/Banking DIY Offline learning/reading Online entertainment Indoor fitness Parent-child interaction Supervise children’s learning Telecommuting Watch live streaming Indoor entertainment Skincare/care Stay with pets

47

44% 42% 37%

Short Video APP Video Website APP News platforms

Media touchpoints consumers use more frequently during the epidemic

Social media TV advertisement Online music

34% 33% 26%

(N=1093) – TOP 6

Top 6 Media Touchpoints

48

Things consumers tried as first time during the epidemic

Online consultation Online education courses Pay for online entertainment Telecommuting software Watch live streaming through mobile phone Social eCommerce/Community groups Try online banking Buy indoor fitness equipment

34% 33% 29% 26% 21% 18% 14% 13%

(N=1093)

49

Things consumers mostly want to enjoy after epidemic

65% 58% 55% 53% 45% 45% 20% 19% 16% 14% 11% Out-of-home dining and gathering Out-of-home shopping Out-of-home entertainment Out-of-home sports/exercise Travel Out-of-home indoor entertainment Hairdressing/manicure Weight loss/shaping Massage sauna Fitness group class Medical beauty

50

SUMMARY

PAY attention to the changes of consumer mindsets, consumption behavior and lifestyle, and thus timely adjust the annual business plan, marketing & channel strategy, and the investment plan, putting more focus on home occasion marketing ACCERLATE digital transformation and bring digital initiatives into the real business such as increase investment on O2O channel STRENGTHEN brand-owned digital platform and embrace social eCommerce to efficiently interact with shoppers, enhance consumers stickiness, and thus enjoy the first mover advantage of the new consumption battlefield. Pay attention to community-based eCommerce. PROACTIVELY EXPLOIT new tools such as the digital store promoter, immersive experience tools to restore the physical store shopping experience for online shopping.

Summary:

52

Oceanne ZHANG Partner

Thank you！

53