How did commerce perform in Shanghai under the adverse impact of COVID-19 in 2020? According to Shanghai Commerce Development Report (2021) (hereinafter referred to as the “Report”) released on January 7, 2022, Shanghai came on top of all Chinese cities in terms of total retail sales of consumer goods in 2020. Shanghai also ranked the first in the country in residents’ per capita income and consumption expenditure. As its commerce continues to boom, Shanghai remains the first stop for foreign brands to enter the Chinese market.

Per capita disposable income tops RMB70,000

In 2020, the Covid-19 pandemic wreaked havoc on the world. Despite the negative impact, consumer spending in Shanghai still achieved an annual growth rate of 0.5% over 2019, higher than the national average. The Report shows that Shanghai is one of the few cities in China that actually achieved positive growth. Specifically, total retail sales of consumer goods in the city hit RMB1,593.25 billion, making Shanghai the biggest city of consumer spending in China.

According to the Report, the year 2020 saw Shanghai becoming the first Chinese city to have a per capita disposable income of over RMB70,000, which hit RMB72,232, the highest in China and up 4.0% over 2019. In addition, online transactions totaled RMB101.52 billion in Shanghai in 2020. Goods transactions amounted to RMB58.04 billion, registering a rise of 13.2% over the previous year, to become the biggest part (58.8%) of online shopping.

The Report is jointly issued by the Shanghai Institute of Commercial Development and Shanghai Research Center for Commercial Development, with guidance from the Shanghai Municipal Commission of Commerce and Shanghai Business School.

According to Cao Jing, one of the chief editors of the Report and professor at Shanghai Business School, Pudong New Area, Putuo and Changning districts saw the biggest goods sales in 2020, while Jing'an, Baoshan, Chongming, Songjiang and Minhang districts all achieved positive growth in goods sales revenue. Moreover, the suburbs generally outperformed the downtown districts in goods sales.

Besides, Shanghai residents' expenditures on goods for upgraded consumption continued to grow rapidly, showing the continuous release of their consumption potential.

For example, in 2020, sports and entertainment products, beverages, and gold, silver and jewelry saw their sales up by 62.2%, 54.6% and 27.8% respectively over the previous year. It is particularly noteworthy that as the global luxury goods market shrank by 23% in 2020 due to Covid-19, luxury goods consumption in China actually bucked the trend and grew by 48%, hitting RMB346 billion.

Cao Jing gave the example of Louis Vuitton, whose Henglong Store in Shanghai clinched RMB150 million in sales, setting a record in monthly sales per store in China.

Night leisure and entertainment accounts for more than 40% of whole-day leisure and entertainment consumption

With its strong consuming power, Shanghai has always been the first stop for foreign brands to enter the Chinese market. At the same time, Shanghai has also become the leader and source of digital commerce transformation and innovation in China, giving rise to a large number of nationally well-known representative enterprises of new business formats and models, including Fresh Hema, Pinduoduo, Poizon, BiliBili, Xiaohongshu, among others.

The Report shows that 909 first stores of various types were attracted to Shanghai in 2020, including 753 first stores in Shanghai, 26 first stores in East China, 118 first stores in China, and 12 first stores in Asia/the world. In all, 14.3% of the first stores entering the Chinese market chose to settle in Shanghai. The 6 super business circles of West Nanjing Road, Middle Huaihai Road, Xujiahui, Lujiazui, East Nanjing Road and Xintiandi are home to 1/3 of the city's first stores.  

The Report also shows that centering on the themes of night shopping, night food, night tour, night entertainment, night show and night reading, the cultural, business and tourism circles have worked together and integrated online and offline means to launch 50+ feature markets and 180+ feature events in the 9 landmark nightlife concentrated areas of Shanghai. China UnionPay’s monitoring data show that the nighttime economy contributes over RMB500 billion in sales revenue in Shanghai, while nighttime leisure and entertainment account for more than 40% of the whole-day leisure and entertainment consumption.

As far as the trend is concerned, the fashion industry has also become a major "engine" driving the growth of commerce. According to the Report, "Fashion Week on Cloud", the world’s first fashion week of its kind inaugurated in Shanghai, has opened an all-new model of consumption. The number of participating brands in Shanghai Fashion Week increased from 178 in 2018 to 216 in 2020, which surpassed for the first time the number of brands taking part in New York and London fashion weeks. Measured by the global fashion week vitality index, Shanghai Fashion Week has secured a place in the first echelon of the world fashion industry along with its Paris, Milan, London and New York counterparts.

"Shanghai Fashion Week” has now become an effective carrier to upgrade the local fashion industry, create the “Shopping in Shanghai” brand, and build Shanghai into an international consumer city and a capital of fashion," Cao Jing noted. Brand launches in “Shanghai Fashion Week” have gradually changed from focusing on international brands to attaching equal attention to both international brands and local design labels. "Shanghai Fashion Week” has also gradually transformed from merely a brand release platform to a promotional platform covering the whole fashion industrial chain, increasingly establishing itself as a shining fashion, cultural and business card of Shanghai.

Gen Z consumers gradually take center stage in consumption

In light of the Report, Professor He Ying, who is also Vice President of Shanghai Business School, pointed out that multiple sets of data and research results all reveal the characteristics of consumption in Shanghai: strong purchasing power, high consumption potential, and greater consumer attention to the taste of goods. Currently, Shanghai is transiting from the stage of "consumption of quality goods" to one of "consumption of goods of high taste".

What is " consumption of goods of high taste"? In the Report, experts divide consumption changes in China into four stages: consumption of functional goods, consumption of brand goods, consumption of quality goods, and consumption of goods of high taste based on the different ranges of per capita GDP.

Cao Jing explained that when per capita GDP is under $5,000, consumers pay more attention to the functions of goods; when per capita GDP is between $5,000 and $8,000, consumers begin to pay attention to brands; when per capita GDP is between $8000 and $15,000, consumers demand high quality; and when per capita GDP is over $15,000, personalized consumption becomes the norm, with "easy-to-use" goods gradually giving way to "goods for enjoyment", which can meet the satisfaction of consumption and give rise to the consumption of high taste.

Especially as Gen Z consumers gradually take center stage in consumption, their consumption thinking will affect the business trend, future, direction and new increment of future commerce. Though Gen Z consumers account for only 19% of China's total population, they are a 'pure consumer population' who can truly generate consumption."

How to unleash the consumption potential of Gen Z? He Ying has the following suggestion to make: given that Gen Z consumers more pursue self-satisfaction, value realization, personality embodiment and identity recognition, with a tendency of continuous extension towards "experience consumption", "service consumption" and "mixed consumption" and online-offline integration, Shanghai needs to target its commercial development at “Nine NEWs”, namely new ideas, new positioning, new hierarchies, new markets, new elements, new products, new services, new brands and new models.

"Consumption is not a simple sell-buy relationship. Rather, it is a way of life. Commerce not only involves the sales of goods, but also touches on the transfer of care, the upgrading of service and the use of product." He Ying said.

 

Author: Wu Jinjiao, Wen Hui Daily