Stay-at-home Economy in China

Market Tidbits transcript #2: The rise of the Stay-at-home Economy in China

Matthieu David: Allison Malmsten and I today we are going to have a market tidbit on the Stay-at-home Economy in China and we wrote a report a few weeks ago, about this stay at a home economy which was of course impacted by what happened in February, March, April with the Covid-19, the coronavirus and we mentioned through the report a new type of segmentation which is not totally new with the Covid-19, but which is new with the expansion of the internet and apps and so on, Zhai generation, Zhai people – what are the Zhai people, what do we say within the report?

Allison Malmsten: Yeah, so Zhai people is basically definition for people who prefer to stay at home than go out and previously this would include maybe more introverted people, as also related to the Japanese word Otaku, which is related to the Otaku economy which is the economy of watching anime at home, playing video games all day, but now the Zhai economy, and especially since Covid-19 has expanded to include a lot of different services that you can do at home – so the original definition was a little bit geekier, but now it really includes everyone, even people who work out, anybody who has to go to school or anybody who has to telecommute into work.

Matthieu David: So, we couldn’t mention not only the Zhai people but the Zhai economy, meaning you could become a Zhaist from time to time and the pandemic made some more people Zhai people right.

Allison Malmsten: Yeah, and so originally the Zhai economy was a little bit more male than female, about 55% male, 45% female and the age group was mostly 18 to 34-year old’s. It’s a very digital group of people and they’re very plugged in. traditionally they would be gamers but yeah, like I mentioned now it really includes just anybody even shopping for groceries as participating in the – if they’re doing it from home, they’re participating in the Zhai economy from home.

Matthieu David: So, we know that people spent more time online during the Covid-19 pandemic and we know that they actually emphasized some use – they already had but they also had new use of the internet. What are the trends which could have explored and impacted the stay at the home economy with Covid-19?

Allison Malmsten: So some of the trends that we can talk about an increase in social media use and then online shopping is a really big one, of course before in China a lot of people shopped online but now it’s even more so and including online fitness and then, of course, remote work and study platforms is also increasing and lastly mobile gaming and other entertainment including attending concerts from your living room.

Matthieu David: Yeah, I’m talking about fitness app – there is one app which was a winner during this lockdown which is the app Keep – K-E-E-P – what kind of app succeeded in this category, fitness, news app, can you mention a few of them?

Allison Malmsten: Yeah, since you mentioned Keep – what Keep did is it’s an at-home workout app and what they did is they hogged onto all of the short video platforms like Douyin, TikTok and they – for one they invited celebrities or professional athletes like a volleyball player Hui Ruoqi for example and then the athletes would also teach classes and so that was a really big factor to attract a lot of people into doing fitness from home and so its inspired a lot of people to engage in fitness when originally China’s population of gym-goers was relatively low.

Matthieu David: Interesting, so you mean that deliveration through some kind of KOL or people with an authority in fitness in order to get new users and new –

Allison Malmsten: Yes, and this started – they mostly did this during the Covid-19 so as you can see, the way the pandemic has impacted Chinese people it can be really surprising.

Matthieu David: You mentioned that not only eCommerce went up but also entertainment apps, would you mind sharing what kind of app went up and for what kind of use? We all know that Douyin was a big winner in 2019 and it should be not surprising that it would be the winner for the Covid-19 lockdown.

Allison Malmsten: Yeah so actually there are three short video apps that we’ve really looked at. Douyin, Kuaishou, and Xigua so they all have slightly different user bases and they all increased quite significantly. So, for example, Douyin in December 2019 had 459 million monthly active users and then come March it is now 518 monthly active users and Kuaishou and Xigua have similar statistics and each of these groups they target slightly different user base so Douyin is more GenZ and millennials tier I to tier II cities, Kuaishou is a little bit the lower-tier cities and Xigua is actually known for its high-level content and it actually has a more male user base, so you can see that these are all tapping into and expanding in those unique user bases, so the short video market is really expanding from Covid-19. Additionally, we can also talk about online reading, around half of the Chinese chose to read novels every day during this time and reportedly a majority of them – 86.2% of them plan to continue reading online after the epidemic. So, we will see how long this lasts but its another area that has really grown during the pandemic.

Matthieu David: Interesting, something we forget but the biggest market for books is China and reading novels on a smartphone or on an iPad would be quite natural actually, an increase during the Covid-19 lockdown, that’s what you are saying and its quite interesting how people are going to continue to read novels.

Allison Malmsten: Right. And according to a survey a lot of people will keep reading, but then again self-reported like everybody likes to think that they will continue to read but we’ll see how that plays out.

Matthieu David: You mentioned eCommerce and a lot of people who were not allowed to go out had to use and to rely on eCommerce and – I was going through the report, I was actually surprised by the low level of users for Hema for instance where I would have expected it to be much higher in terms of active users, but still, of course, it increased massively during the epidemic in China. What about the grocery eCommerce more specifically and do you see that as a game-changer or just a period of time or a few months where people had to use it?

Allison Malmsten: I do think it could potentially be a game-changer because once you’ve used it once it really releases a lot of the friction to using it the first time. Everybody was basically – they have a lot of pressure to use it for that first time but now the app is downloaded on their phone, their payment method is plugged in and so it’s a lot easier to maintain a consumer than to acquire a new one and it looks like the monthly active users for Hema and some of the grocery apps, they stayed pretty stable between January and April and in April China was – it was very open. People could really leave their apartments and go grocery shopping almost like normal again and they still maintained a lot of their userbase.

Matthieu David: And what’s surprising to me is that we’re talking about 2.8 million monthly active users for Hema which is for the size of China very small and it increased massively again during Covid-19 but the base was much smaller than what I expected. Was this your feeling too when you were reading the report?

Allison Malmsten: Yeah for the amount of attention that Hema specifically has gotten I would have expected the monthly active users to be possibly a bit higher but what’s not surprising is the amount of growth, I mean its grown like nearly seven-fold from December 2019 to January 2020 so over a month-long period. So I think that’s what’s the most interesting to me is that it’s grown so much and then it continues to grow through February, March, April and so a lot of the users they appear to be staying on the app, granted they might not be ordering the same amount of volume as they were before, but its still definitely has made a big impact in China.

Matthieu David: Carrefour left China like nine months before the Covid-19 lockdown and they could have benefitted from that. I feel that’s really the wrong timing for this player to go out, I mean they could have benefited from a very unpredicted event like this. You mentioned also online education and it grew naturally because students were not at school and actually, they just went back to school a few weeks ago and I think it was early June or mid-June –

Allison Malmsten: Yeah so online education absolutely exploded and this is mostly to do with schools, they still require an education and so these students they have to download these apps and they have to learn the way of telecommuting and so what’s interesting is that some of these apps have actually grown 50 fold, for example [inaudible 11:41] is an app that it used to have only a 124,000 weekly active users but now that’s 6 million – 6.1 million, so that’s quite a bit and what’s also kind of funny is if you look at – for some of these telecommuting apps if you look at the reviews on the Chinese app store, the reviews are actually quite negative, because if you look at what the reviews are saying, tis a bunch of kids, the reviews say like – my school makes me do this online instead of playing my video games, it’s a very disruptive app, I wish it didn’t exist. So that really shows that a lot of the user base is students who whether they like it or not they use these apps for school.

Matthieu David: Funny. Was not designed for it initially?

Allison Malmsten: Yeah well, I think the students are just mad that they have to go to school when they could be sitting at home gaming, participating in other parts of the Stay-at-home Economy in China.

Matthieu David: Yeah, not focusing much on the app and the function but the fact that its taking time out of their games.

Telecommunication, of course, the time spent on telecommunication has increased a lot. What can we conclude on that, what are the key learnings on telecommunication apps and meeting apps for work, for meeting with family, to get news, what kind of learnings can we get?

Allison Malmsten: So, some of these telecommunication apps they have a massive amount of users and a short amount of time. On the first day of resumption of work on February 3rd, 200 million people logged onto DingTalk to work from home. So that’s a lot – whether the telecommuting apps will continue to be used in the future – of course, Covid-19 is a huge factor that has again – its kind of lowered the friction to use it, it’s already downloaded on their computers, but whether people continue to use it really depends on the trust in the workplace. That’s a really crucial factor and then there’s also demand for working across regions. 80% of large and medium sized enterprises in China set up offices in at least two different areas, so telecommuting will definitely continue to be used on a large scale but it will be interesting to see if downloading, if having used this apps before during Covid-19 will make it easier for a large amount of people to start working from home and even start working from home on a daily or like, permanent basis or if it’s just going to be something that they will continue to use only for meetings.

Matthieu David: Interesting, I guess we will have to update this report in 3 or 4 months to see how the Stay-at-home Economy in China has been impacted for the long term, or it was just for the short term that it was impacted during Covid-19. Thanks, Allison, for sharing.

Allison Malmsten: Yeah thank you for having me.

Find the full Stay-at-home Economy Report