Covid-19: An unexpected catalyst for digital-platform adoption in China

March 31, 2020
Arvind Sethumadhavan, Max Peiro

The “UNCTAD 2019 Digital Economy Report” published by the United Nations pegs the value of the digital economy in broad terms to be at 15.5% of gross domestic product, or GDP (US is at 21.6%, China at 30%). Necessity is often quoted to be the mother of all invention, and we are witnessing innovative examples of how, in the midst of the Covid-19 crisis in China, consumers and businesses have leveraged technology to meet their daily needs. We believe that 2020 will be the year for a significant boost in value creation from the digital economy in China, and there is a real chance that the country could become a stronger global player when all the dust has settled.

The greatest impact on daily life has been the canceling of situations that depend on close human-to-human contact, such as conferences, education in classrooms, doctor visits, and door deliveries, to name a few. These situations have led to greater adoption of human-to-machine or machine-to-human communication systems. Innovative use cases that enable social distancing have emerged to address challenges ranging from simple video conferencing to the use of autonomous mobility applications for contactless delivery. Offline businesses like gyms are resorting to online content and classes to continue engaging with their customers—even nightclubs have launched “cloud raves” on streaming platforms like Douyin, China’s version of TikTok. To maintain a semblance of the social interaction that is vital to daily life, China has been fast embracing technology across a variety of settings:

Virtual meetings. L’Oreal’s annual conference was delivered virtually on Zaojiu, an online content platform for talk shows; the Shanghai High Court recorded an increase in online court cases of more than 60% compared with the same period last year. Virtual health consultation with doctors saw a similar surge; video conferencing apps like WeChat Work and DingTalk have seen increased usage of for organizing virtual work meetings.

E-commerce and O2O (offline-to-online, and vice versa). With more time at home, consumers have been glued to their screens. Live-streaming platforms like Taobao Live, owned by Alibaba, saw a sharp rise in brand activity in February by more than 110% compared with the same period last year. Business owners like celebrity chefs are showcasing live cooking tutorials on these platforms using physical restaurants facilities to cross-promote their services, real-estate agents are providing tours of apartments, auto dealers showcasing interiors of luxury cars and rural farmers promoting their produce. Jindong, an e-commerce leader, launched contactless delivery with autonomous vehicles in the epicenter Wuhan, with consumers accepting delivery by opening their car boot for products to be dropped off. Retailers are redeploying store employees to become online influencers using WeChat to drive online sales.

Education. With schools shut, teachers and students are fast adopting learning in virtual classrooms. In a matter of weeks, millions of students embraced online lessons. Vipkid, a leading online English learning platform that offers 1.5 million free online courses for children aged 4-15, opened its Weimi live-streaming platform free of charge to schools and institutions worldwide. The surge of users will force online education institutions to polish their teaching content and technical capabilities, improving the experience and efficiency of online learning. Even physical libraries to stop people congregating are innovating in the use of QR code scanners to have books collected. The process is this: the consumer first  browses and places the order in an online app and then, when he or she is at the bookstore, scans a QR code at the door for the books to get pushed under the door for collection.

Customer experience. Due to a spike in customer queries and call centers becoming inundated, sectors such as travel and health are automating customer engagement with chatbots and other voice technologies. Uniqlo is deploying robots in some of their stores in China powered by Applesay, a startup that creates machine-learning powered smart chatbots to assist shoppers. Alibaba and Huawei have both opened unmanned stores in Wuhan to prevent staff from being exposed to infection.

Business intelligence. With traditional intelligence-gathering methods using face-to-face/door-to-door surveys rendered impossible, technology provides innovative ways of generating insights. Re-Hub produced a machine-learning-generated report within just two days, in conjunction with Zectr, on the effects of the Covid-19 crisis on China’s consumers. The report was able to address business leaders’ key questions like “When do consumers expect things to go back to normal?”—with consumers responding that they expect normality to return after 4.5 months. This is valuable information for businesses to plan for a surge in demand when usual daily life is restored.

There are many more examples of how technology is being fast embraced amidst the challenges posed by the Covid-19 outbreak. 2020, due to necessity, seems to be the year when we are going to witness a significant boost in innovative use cases of technology and new behaviors of adoption. As SARS in 2003 led to the mass adoption of e-commerce in China, we believe that this unfortunate situation might lead to permanent changes in consumer habits that push the digital economy forward. These trends will certainly be widely adopted in the rest of Asia, a region that is digitally savvy, and push the digital economy forward.

Arvind Sethumadhavan is advisor, and Max Peiro is CEO of consulting firm Re-Hub, headquartered in Shanghai.