Consumption is the primary growth momentum. Since the COVID-19 outbreak, the social distancing policy has accelerated the arrival of a so-called home-based new consumption era featuring the digital economy, such as online shopping, distance medical diagnosis, online education and entertainment. Consumers and suppliers have formed new connecting channels in a short period of time. The online-to-offline new consumption pattern, backed by digital technologies and with social media networks as the main channel, has grown exponentially popular.

Shanghai has rolled out <Several Measures to Boost Consumption Confidence and Unleash Consumption Demand>, hosted the “May 5 Shopping Festival”, and created a number of iconic activities highlighting its stance as an international shopping center. All these efforts have bolstered the further development of the new consumption pattern. New consumption pattern backed by the digital economy will foster the new type of international consumption city.

Instead of being a makeshift to tame the economic impacts brought by the virus, new consumption is, in essence, the establishment of a new relationship with customers using new technologies and new models. As a matter of fact, new consumption represents where consumption upgrade is heading even prior to the pandemic. The key to the long-term development of new consumption lies in suppliers’ competence in understanding consumer needs and providing high-quality products and services.

Shanghai has seen over 90 percent high-end international brands to set foothold in the city, and it is home to many well-known online service platforms. Meanwhile, Shanghai is also a leader in digital economy, taking the top spot in terms of the number of livestreaming viewers on major e-commerce platforms. With deepened division of work, the value of production and delivery of products and services will be conveyed mainly in digital forms, and digital economy will account for an increasingly high proportion in the entire economic output. It is estimated that 51 percent of global IT spending will come from digital innovation/upgrade, whereas the number in China will surpass 70 percent.

With the aid of digital technologies, enterprises stand to leverage the likes of big data analysis and artificial intelligence to capture consumer needs and make low-cost, high-quality products, or even come up with tailored services. Consumers also manage to express their preferences from the design end.

From consumer touch points like product design, to customized manufacturing and experiential consumption, digital economy can promote new consumption in an all-faceted way. The level of digitalization upgrade adopted by a company determines to what extent it can reap gains from the new consumption wave. In the long term, the value of new consumption is co-created by enterprises and consumers. This infinite market can be a constant source of economic growth.

In order to create a beautiful life for consumers, new consumption, apart from making new connections between physical goods and consumers, mainly focuses on creating internet services and a suite of digital offerings. Digital products feature relatively lower distribution costs, fairly robust adaptability, and consequently boast vast market potential. The key to successful digital products lies in its ability to explore customer needs. Currently, industries like culture, entertainment, education and medicine are all embracing the digital trend, yet there still lack high-quality digital products compared with the enormous demands out there.

Three breakthroughs must be achieved to develop new consumption backed by digital technologies.

First, enterprises should go beyond traditional thinking and complete the digital transformation. New consumption in the digital era isn’t simply moving businesses from offline to online-it requires the precise command of customer needs using digital technologies to improve shopping experience. Second, various departments and sectors should coordinate the opening, sharing and exchange of data so as to unleash more potential for value creation. Third, the levels of consumer trust and devotion determine the market size of new consumption.

It is imperative to explore the protection of all parties’ interests through rules, such as how to protect consumer privacy and ensure their rights to know and manage?

Once these bottlenecks are broken, the productivity advantage of the digital economy can be given full play in a bid to unleash new consumption potential and reshape consumption pattern.

Currently Shanghai has high global connectivity. According to a study by GaWC, a global leading institute focusing on world cities in the context of globalization, Shanghai has long ranked among the top across Alpha+ cities worldwide. Shanghai should not only seize the day but capture the future of new consumption to build itself into a novel international consumption city.

This requires Shanghai to create a new global consumption pilot, gathering new technologies and new models worldwide to support new consumption. These will serve to provide pilot zones for innovative enterprises engaged in new consumption and offer new experience to consumers from China and around the globe.

At the same time, leveraging the ‘dare to pilot’ policy advantage entitled by the Shanghai Free Trade Zone, the city can adopt regulatory sandbox, introduce management rules that are compatible with international standards, provide efficient channels bridging international markets in order to make digital products accessible worldwide. Gathering content creation in the realm of new consumption and fostering talents on technology innovation will propel Shanghai to become an innovation highland for new consumption. Author: Liu Mingyu (Vice-director, Business Development and Management Innovation Research Centre, Fudan University)