China's consumption to continue to rise in performance

China's consumption will perform better in the second and third quarters and will have stronger economic growth, according to industry experts.

"Taking into account the global experience, it usually takes at least two to three quarters for consumption to return back to the normal level from before the COVID. And the situation in China is similar", said Nancy Song, managing director at NielsenIQ China, a global monitoring and consumer intelligence company. "So, consumption rebound will be more obvious in the second and third quarters."

Retail sales of consumer goods — a major gauge of consumption — rose 18.4 percent year-on-year to 3.49 trillion yuan ($501 billion) in April, and expanded by 7.8 percentage points from the level in March, data from the National Bureau of Statistics showed on Tuesday.

According to Song, FMCG (Fast Moving Consumer Goods) is the first category to recover, followed by other major purchases, such as new energy vehicles and intelligent household appliances.

"With the optimization of COVID control measures, consumers have many more opportunities to spend. In that case, the rebound of consumption is sure to be stronger than that of last year," Song added.

The government has taken a combination of measures to bolster consumer confidence, which paves the way for consumption recovery. However, most consumers remain cautious and highlight their "sense of safety" in the first place, and consumers in different financial conditions vary in behaviors as they have different demands for "physical and mental health" and "financial security". So, creating multi-leveled shopping scenarios using omni-channel integration and empowering consumption upgrade through product innovation can further invigorate consumer recovery, according to Ryan Zhou, senior vice-president of customer leader at NielsenIQ China.

"Moreover, small towns and small shops will play a bigger role in consumption in the future," said Zhou.

Based on the retail audit database and the latest consumer surveys, NIQ found that consumers are less sensitive to the prices of daily health products like fresh vegetables, fresh meat and dairy products, and rising prices won't sharply lower their willingness to buy. By contrast, consumption of casual food, such as snacks, sweets, chocolate, beverages and wine, will be more affected by price fluctuations. If their prices continue to rise over the next three months, consumers will consider purchase cuts. So, only by combining differentiated pricing with promotional strategies can a full growth be achieved.

It's noteworthy that sustainable development will lead to new consumption trends. Surveys show that 40 percent of the consumers less sensitive to prices consider a sustainability-oriented/environment-friendly lifestyle as important to them, and 28 percent have taken conscious actions to change their way of consumption.

Although some industrial pioneers have adopted measures like introducing degradable materials and label-free packages and even developing carbon-neutral products, the domestic market still sees a huge gap in the support for sustainability practices. That's also a new direction for product and retail innovation to follow in 2023.