Back On The Streets
China’s post-COVID economy is seeing a revival as we know it – not in luxury shopping centres or Tmall, but back on the streets like the olden days, armed with a ring light for live-streaming and digital vouchers for all. Beginning May, Premier Li Keqiang (equivalent to the role of a Prime Minister) reintroduced street vendors as an initiative to boost the local economy after the country faced a wave of unemployment at a (dubious) rate of 6% (based on National Bureau of Statistics), but has since generated 100,000 jobs with the erection of 36,000 street stalls in the city of Chengdu alone. It is expected to further generate employment for over nine million people this year.
Ironically, street vendors were unwelcomed in the past few years as the Communist Party originally had cracked down on vendors and shuttered stalls to deter poor migrant workers from evading rent and taxes. Unlicensed street hawkers would scamper at the sight of police authorities, known to use violent measures to evict them off the streets in an attempt to beautify its cities.
Fast forward to today, street vendors have regained a new status and recognized importance to the economy – merchants belonging in wet markets are abandoning their original stalls and moving their businesses onto the streets, saving 2500 yuan (USD$350) a month by doing so. New innovative mobile services from fashion stores to barbers roam on the streets, firing up Hong Kong-listed vehicle manufacturer Wuling Motors’ stock price by 217% in a week after having sold hundreds of its minivans to new demands. Baidu
China’s tech giants flocked to offer their support to the new rural migrants-turned-business owners, where Alibaba
Yet within a week of the new movement, the government has begun to reel back and shun the scheme. Amongst the fancy trucks and decorated vegetable stands, rural residents took the opportunity to sell their unwanted goods – a less glamorized version of the Rose Bowl flea market with the absence of Los Angeles Instagram influencers. Big retailers like McDonald’s
Farmers Turned Influencers
The unfathomable success of live-streaming has set the new standards for retail and has been the clear winner during and even before the pandemic. Alibaba’s recent fiscal year 2020 results indicated an 88% growth of Taobao Live usage from its daily active merchants, contributing to its USD$1 trillion GMV.
Expanding from fashion and beauty livestreams led by expert KOL’s, retailers have also welcomed the new retail model, empowering its employees to reign in sales as the high streets were frozen. The livestream phenomenon spread across the country far and wide once President Xi Jinping acknowledged the impact livestreaming has on rebuilding the economy.
Yet instead of beautiful models, county government officials and municipal parties worked with local business owners and farmers to promote their local town’s famous offerings. Guangzhou – a major trade and export center – was one of the first cities to launch a livestream shopping festival with WeChat in June to promote sales of its local produce. Meanwhile, China’s Central Television network (CCTV) broadcasted a daylong livestream shopping session – similar to the likes of QVC
Other provinces opted for other digital platforms as Jilin province promoted its infamous ginseng and honey products on e-commerce platform Pinduoduo, drawing 800,00 viewers and 430,00 yuan (USD$61,000) in sales. Meanwhile, Yuan’nan county sold over 280,000 yuan (USD$40,000) of yellow tea, shitake mushrooms and more through JD.com’s marketplace. Other municipals used traditional forms of livestreaming through Taobao Live to showcase local homestays as well as farms, production workshops and tourist attractions as done in Deqing county to attract domestic travellers across the country.
Digital Vouchers For All
China’s retail sales in consumer goods dropped 19% year-on-year during the first quarter of 2020 just as the outbreak hit the economy. While the U.S. have been waiting on their stimulus checks, consumer spending in the States had actually seen a 13.6% decline in April and an increase in personal savings. The Chinese, on the other hand, opted for digital coupons instead to prompt revenge purchasing and drive spending, as opposed to saving or investing.
In the cashless society, local governments have been working with third-party payment platforms such as Alipay and WeChat pay where digital vouchers are weaponized as a means to recover offline businesses. At the Alipay Partner Conference hosted in May, Ant Financial CEO Hu Xiaoming shared that with every yuan distributed generates extra spending of eight to 15 yuan of spending.
More than 30 provinces and cities have rolled out digital coupons as part of their revenge consumption scheme, in the example where Nanjing of Jiangsu province has distributed 318 million yuan (USD$45 million) in coupons. Meanwhile, Beijing alone has offered coupons worth 12.2 billion yuan (USD$1.71 billion) to spur spending as part of their “Beijing Consumption Season” campaign, launched by China Media Group (CMG) and Beijing Municipal People’s Government. The campaign comes perfectly in time as China’s pride and joy e-commerce platforms will be rolling out its annual mid-year shopping festivals to boost consumption. The coupons will also cover industries such as dining, retailing, tourism, education and sports, and will run till National Day in October where week-long of frivolous spending will be held in celebration.
The differences in behavior during the post-COVID economy is stark between China and the West. Though China is facing a quicker recovery than the rest, discretionary spending continues and offline retail are still making a slow rebound. But with digital vouchers and innovative tactics to inject fresh momentum into the economy and encourage spending, the Chinese market is on track towards a rapid recovery; while consumers in the West are tightening their purse strings and sitting amongst a heap of Chapter 11 bankruptcies.
Although seemingly a great initiative to foster small businesses and temporary relief to unemployment, the long-term implications in these newfound formats are yet unknown – especially as model cities such as Beijing are clamping down street vending once again. However, an impact on brick and mortar is expected to evolve from the street stall economy. With easily accessible and mass funding in place, this will spur an uprising in small businesses and entrepreneurship, with an increase of local specialties brewed from small-town provinces. For Alibaba and JD.com who have been offering credit for the stock, this can help migrate their merchandises from online to offline as additional retail channels, which in turn can capture growing businesses into their retail ecosystem, and leverage their B2B services in the future.