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Why shouldn’t you cut your marketing budget for China?

The recent lockdowns in Shanghai have been a setback for China. But don’t let this scare you from investing your business there.
Shanghai being under lockdown doesn’t mean the whole country is slowing down. A study conducted by a research institute based out of the People’s University of China shows that the Chinese economy is doing better than expected. China's gross domestic product grew by 4.8% year-on-year in the first quarter of 2022, accelerating from the 4.0% expansion registered in Q4 2021 and beating economists' expectations. Despite the pandemic and lockdowns, China continues to grow.
We don't know if there will be other lockdowns, but this doesn't undermine the fact that China will remain an excellent market for companies.
In this series of articles, we will explain to you why, despite the pandemic and the lockdowns, you should still invest in China.

As the pandemic continues, it's tempting to cut your marketing budget for China. But we suggest you rethink this idea, and here's why.


China is a big country.

Shanghai's lockdown will undoubtedly impact the country's economy, but it's not all bad news. Take into account that China is a huge country with cities at different development tiers. While Shanghai may be under lockdown, other tier-one cities (as well as other cities and towns from different provinces) such as Shenzhen and Guangzhou can still function with limited interruptions from this particular event.



Even in Shanghai, people are still willing (and eager) to spend money on things they like.

Shanghai might be under lockdown, but it doesn't mean people are not living life anymore. According to Covid Update 2022 published by Publicis, compared to 2020, when there was a lot of fear and incertitude, people now are trying to live with the situation. Instead of hunkering down in front of movies and TV dramas all day, they stay productive with work or studying remotely.



Sources: Publicis, Covid Updates 2022


Since the Shanghai lockdown started, community group buying has become the way for people to get food and supplies. As the quarantine continues in Shanghai, apart from the daily essentials, people are also group-buying things they enjoy, such as flowers, house plants and premium coffee. Despite the lockdown, Shanghai is still keeping its class, and people certainly don't want to compromise their lifestyle just because there is a lockdown.

Some are adding items to their shopping cart and making purchases online even when their purchases can’t be delivered to Shanghai yet. “I just want to spend some money and buy stuff,” millennial shopper Juan shared in her WeChat moments.




According to Publicis, as of April 16, the daily delivery capacity of JD has recovered around 40% in Shanghai. As of April 17, the daily delivery volume reaches approximately 1.8 million orders. Just on April 18 alone, 10,000+ packages were delivered from the warehouse of Tmall supermarket to Cainiao stations in the residential areas.

All this shows that the spending power is still strong, and people are eager to spend their money on anything they like.



Sources: Publicis, Covid Updates 2022


People are already making their plans for life after lockdown. Brands must stay in people’s minds and plans.

People are making plans for post lockdowns. It's easier for brands to get attention during this period because people are actively looking for something new and exciting in their lives. Brands need to continue marketing to remain or make it in people's plans.

For FMCG brands, demand remains strong for day-to-day goods. Whilst logistic begins to scale up, minimizing advertising during this period will mean a loss of TOM when consumers are able to purchase later.

We should never forget that marketing isn't an expense; it's an investment with potential return (ROI), and if you do things right, that return will be higher than the initial investment.

Besides, when your competitors are cutting their marketing budgets, it only makes yours more valuable because your share of voice is bigger. Brands that have invested at the beginning of 2020 have witnessed such benefits. Adidas launched its Tmall Super Brand Day on February 21 2020. The February sales on its flagship store reached 340 Million RMB; Nike Tmall Flagship's sales for that month only reached 172 Million; LiNing and Anta only had 73 Million & 86 Million, respectively.



To conclude

There is no doubt that the lockdown in Shanghai will impact the economy and cause uncertainties in the future. However, if we look beyond this event, China is not slowing down. The purchasing power is still going strong.

Now is a particularly critical time for brands to keep their marketing presence up to maintain their reputation in this market, which will help retain their competitive advantage and stand out among all other brands. We believe that brands that decide to take the plunge and earn more profits in China will survive and thrive.

People are also spending more time on their phone, it's time to reach them online. Contact Duhno to work on a strategy !



In the forthcoming articles, we will discuss what would happen if you cut your marketing budget, the lessons we could learn from the past and how to leverage your post-pandemic strategy better.