Some retailers have said that the buying trends among their U.S. customers since the outbreak of the coronavirus and its resulting COVID-19 spread in North America match those that they saw in China when the crisis started in that country. As such, they're using China as a model to gauge how the current health and economic situation will unfold domestically, and creating “playbooks” for engaging U.S. consumers during the current economic climate based on their successes in connecting with the Chinese consumer during similar stages of the crisis in Asia.
However, it's a mistake not to account for key differences between the two markets. U.S. and Chinese consumers have very different habits, and the tactics that work with one will not necessarily be transferable to the other.
While it's tempting to look at the similarities between the two countries, it's important not to ignore key differences between them. First, all indications are that the health crisis will last longer in the U.S. than it did in China. That difference alone should give retailers pause before making any assumptions that consumers will follow similar patterns and that the timetables for recovery will match. Additionally, Chinese economic data has a history of proving to be inaccurate, as government agencies look to paint a rosier picture of their economic footing. There are already examples of data provided by Chinese governmental agencies during its crisis that are following this trend. While many retailers are using their own internal data to assess the recovery or any new habits of Chinese consumers, they should be wary of relying heavily on external information to assess the recovery of the consumer and their true sentiment following the crisis.
As retailers monitor the reactions and news habits of the Chinese consumer, it's important to remember that Chinese and American consumers have always acted differently in terms of their shopping habits. For example, before the crisis even happened, the spending of Chinese consumers online far outpaced that of Americans. It would therefore not be surprising to see that many retailers were able to continue their business in China throughout the crisis through their online offerings. This won’t be true in the U.S. It would take a significant change of consumer habits towards increasing online spending for retailers to be able to implement the same strategies that are successful in China.
While there's a narrative that China has recovered and consumers are returning to their normal lives, it could also be very short lived. China was impacted by the crisis before the rest of the world, so it didn’t feel the impact of the global recession as it dealt with managing its health crisis. This puts China in a position for an economic “double-dip” as the country feels the impact of its trade partners. Additionally, China’s corporate debt to GDP ratio increased from 97 percent to 163 percent of GDP in 10 years since 2007, which puts the country in a vulnerable economic position. Retailers should be watching consumers closely as the recovery in China could be short lived.
As retailers continue to address the current situation and start planning for the rest of 2020, they should look beyond the parallels across markets, focus on domestic economic trends, and prioritize their need to have a clear view of the evolving habits of U.S. consumers, which may prove to evolve at an unprecedented pace. Retailers that have a true understanding of consumers and their evolution during the crisis will have the best chance to identify and capitalize on new opportunities in 2020 and beyond.
Andrew Duguay is chief economist at Prevedere, a cloud-based business intelligence solutions provider that delivers forecast accuracy by harnessing the predictive power of global economic data.