As Americans navigate the country’s reopening, China is well ahead. Chinese officials relaxed a strict lockdown on the city of Wuhan on April 8 and have reopened many businesses, like restaurants and retail stores, though some restrictions remain. European countries are starting, albeit slowly, to follow suit. What’s happening in China today —particularly as it relates to consumer behavior and spending habits — may offer a preview of what we can expect when most businesses in the U.S. start to open their doors.
The main takeaway: While old habits die hard, trends such as mobile payments, contactless delivery for food and packages, and e-commerce for nontraditional items (think cars and furniture) have a good chance of gaining more traction in the U.S. in a post-COVID-19 world. And investors would be wise to track innovative startups building businesses in these areas.
Unsurprisingly, Chinese consumers are still cautious right now. A recent New York Times story noted that Chinese retail sales fell about one-sixth in March compared to a year earlier. A Morgan Stanley survey cited in The Wall Street Journal found that 69% of consumers were going out only for essentials during the last week of March, compared to 75% early in the month.
An oft-cited statistic suggests it takes 21 days to form a new habit. While there’s debate about the exact timeline for habit formation, it’s a simple fact that billions of people have been forced to adopt new behaviors for weeks, even months, during the recent lockdown. That’s definitely enough time for new habits to stick — but which ones?
As a venture capital investor in consumer marketplaces, I’m tracking several trends based on early post-COVID-19 data from China. These five below are some consumer habits that could stick post-lockdown and proliferate globally.
1. Contactless delivery is the new norm. Many Chinese apartment complexes stopped allowing deliveries inside buildings during COVID-19 lockdown, according to Chinese e-commerce company JD.com. So, complexes built new self-pickup lockers near their front gates. It’s new infrastructure that will allow this habit to continue for convenience’s sake long after it’s needed to prevent the spread of disease.
In the U.S., we’ve seen companies getting creative in this area, too. Food-delivery giant DoorDash recently adopted a new policy making all deliveries contactless unless otherwise specified. In these cases, a driver drops food off at an agreed-upon location, takes a photo of it, and then texts the customer to confirm the delivery has been completed. I can see this approach being taken for other types of transactions.
2. Welcome to the cashless society? Mobile and QR-code payments were already advanced in China pre-COVID-19, but the pandemic has thrown more gasoline on this hot trend. This year, more than half of Chinese consumers will use proximity mobile payments, and that number is projected to grow to 60% by 2023. In the U.K., the use of cash has plummeted during the COVID-19 crisis; mobile-payment service Venmo in late April, responding to increased usage, upped its weekly spending limit by 40%. Contactless payments are more hygienic, more digitally secure, faster and more convenient. Why would we go backward?
3. Telemedicine gets its close-up. Millions of people around the world are trying telemedicine for the first time during this crisis. When Chinese tech giant Tencent reported earnings in March, it talked up the growth in its digital health care tools. In the U.S., non-urgent doctor visits, such as well-child checkups, are now routinely being done over video, and I think there are many opportunities for startups to innovate in this area as this trend continues post-pandemic. Expect virtual house calls to normalize this year.
4. Distance learning takes off. Online education tools were already booming in China before COVID-19 hit. The rapid shift to online classes during the pandemic will likely accelerate a trend that was already in motion. Educational apps are now the second-fastest growing category in terms of number of users, growing faster than social media, entertainment or lifestyle apps.
5. E-commerce is exploding. A long-term expansion of online shopping has accelerated rapidly due to COVID-19. Under lockdown, consumers are buying things they would never before purchase via the internet.
In China, JD Home (the home improvement/design division of Chinese retail giant JD.com) reported providing free online home design services to 100,000 families. In February, transaction volume for renovation services increased 263% month-over-month, suggesting that many of those online demos resulted in actual sales. In the U.S., Carvana is promoting a 100% online, touchless car-purchasing process. Other expensive items, such as home workout equipment, are also routinely being purchased online now, and that trend may continue after stores reopen. Survey data shows that total consumer spending is down since the pandemic began but also revealed increased spending on electronics, clothing and furniture.
Some are predicting a sharp, “V-shaped” recovery when we emerge from our COVID-19 lockdown. It’s true that recovery may look like a V — but only because any growth looks sharp when it’s set against the steep, sudden declines in economic activity we’re seeing now. Early data from China suggests consumers will be slow to resume their “normal” spending habits, but in some areas may shift to a “new normal” driven by habits they’ve picked up during lockdown — and companies should be prepared to adapt to take advantage of those new business models. I know as an investor, I’ll be paying close attention.
The information contained herein is based solely on the opinions of Roger Lee and nothing should be construed as investment advice. This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity.
This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and is for educational purposes. The anecdotal examples throughout are intended for an audience of entrepreneurs in their attempt to build their businesses and not recommendations or endorsements of any particular business.
Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy or completeness and cannot be guaranteed. Battery Ventures has no obligation to update, modify or amend the content of this post nor notify its readers in the event that any information, opinion, projection, forecast or estimate included, changes or subsequently becomes inaccurate.