Baofuxing Xiaofei? Well it is the Chinese term for ‘Revenge Buying’, first used in China in the 1980s to describe the pent up demand for foreign brands, and foreign goods per se, that had been denied to the Chinese population for many decades by poverty, deprivation and communism during the Cultural Revolution. As Chinese shoppers slowly returned to the malls and boutiques after lockdown measures were relaxed last month, store traffic in China started creeping back up after falling as much as 80%. Sales of luxury brands ranging from Burberry Group plc to Kering SA’s Gucci showed a huge spurt. The French heritage brand Hermès’ Guangzhou flagship store, in fact, reportedly achieved US$ 2.7 million in sales when it reopened post the 71-day lockdown. This sales figure is said to be the highest daily revenue achieved by a single boutique in China ever, and in many ways signals hope for luxury brands and retailers who had only been looking at gloom and despair over the past few weeks. It was déjà vu time for Baofuxing Xiaofei!
In India too, we could well be headed to our very own Baofuxing Xiaofei moment as the economy is slowly and hesitantly re-opened. E-commerce companies which had come to a screeching standstill for nearly 7-8 weeks were allowed to re-start All-India operations, and deliveries, from 18 May, including in red zones. E-commerce players were earlier allowed to only stock & sell essentials in green and orange geographies; but the last few days have seen significant relaxation in rules and guidelines, enabling deliveries of non-essentials too everywhere including red zones, but except in containment zones. There could not have been better news for the likes of Walmart’s Flipkart and Amazon. More so since India has been starved of supplies, especially of new mobile phones for well over 2 months. 40-45%, or thereabouts, of all e-commerce GMV (Gross Merchandise Value) comes just from mobiles. A Baofuxing Xiaofei — a surge in pent-up demand for high-end mobiles from the iPhone range — iPhone XS Max (512GB) priced at Rs.1,44,900 and the iPhone XS (512GB) priced at Rs.1,34,900, and the likes of Samsung Galaxy Fold at Rs.1,65,000 or Huawei Mate 30 Pro at Rs.78,990 could well perk up the e-commerce business and bring some cheer to their sentiments (and balance sheets too) in these morbid times.
Sales of categories like home, business, consumer electronics and general merchandise - women’s apparel, mom and baby products are expected to boom too.
For the record, the organised retail market comprises only 12% of all retail in India, with e-commerce currently consisting of about 25% of the organised retail sector, or only 3% of the total retail market in India. As per the World Bank, online sales as a percentage of total retail sales accounted for only 1.6% in India. This number is fairly low when compared to over 15% for China, and around 14% globally. The Indian e-commerce market was expected to grow to US$ 200 billion by 2026, up from US$ 38.5 billion in 2017. Industry watchers are of the opinion that much of the growth of the e-commerce industry has been triggered by increasing internet and smartphone penetration in recent years. The ongoing digital transformation in the country is likely to increase India’s total internet user base to 829 million by 2021, up from 636.73 million in FY19, and India’s internet economy is expected to double from US$ 125 billion as of April 2017 to US$ 250 billion by 2020, majorly backed by e-commerce. India’s e-commerce revenues were expected to jump from US$ 39 billion in 2017 to US$ 120 billion in 2020, growing at an annual rate of 51 per cent, the highest in the world. The corona pandemic could slow things down, except for a bonanza sparked by Baofuxing Xiaofei.
The pragmatists among marketers say Baofuxing Xiaofei or ‘revenge buying’ is fine (perhaps welcome, too) but this ‘revenge’ is against whom or what? The restrictions of the lockdown? Or living a forced, confined and austere life? Or just missing the ‘high’ of good ole retail therapy? ‘Revenge buying’ or rather ‘revenge spending’ is the overindulgence in retail therapy by consumers who have missed shopping and would now want to do the same with some over-zealous vengeance. With malls still shuttered, the demand is likely to get fully directed to the e-commerce companies, especially since they will also deliver to the consumer’s doorstep. For the sake of the economy as a whole, one does hope and pray that the Indian consumer also emulates the Chinese and swipes his card for some ‘non-essential’ luxuries – it will be welcome oxygen to the entire ecosystem!
But whether Baofuxing Xiaofei happens or not, an important questions beget some answers:
Why was e-commerce halted if home delivery of food was allowed? As it is, the share of e-commerce in sales of fast-moving consumer goods (FMCG) in India is extremely small, with over 85% of sales coming from traditional retail that includes neighbourhood stores. Online sales are a mere 2.8% of the overall sales for FMCG companies in the first quarter of 2020, according to estimates by market research agency Nielsen. But during the lockdown, e-commerce deliveries would have been so much more convenient for consumers – no stirring out from home during the lockdown, convenient digital payment and contactless delivery. Not very different from the home delivery of food. Then why the discrimination?
When working from home, are the laptop and mobile not ‘essentials’? It is myopic to believe that only food and medicines are essential for sustenance. That is, frankly, a bit of a primitive view to take in today’s modern age. Many whose work electronics — mobile, laptop, desktop, headphones, scanner, printer and more, conked out during the lockdown, were seriously disadvantaged. Going forward, if there is a second wave of lockdowns (God forbid, there are none), e-commerce should be kept open and definition of ‘essentials’ needs to be re-written.
Back to Baofuxing Xiaofei. Can this bonanza happen on its own? Self-trigger? With over three decades in the advertising business, methinks that brands and the e-commerce companies need to provide the stimulus. Encourage, actually seduce, consumers back to brands, to buying. And that requires some powerful and very creative communication. That too urgently.
If the economy has to revive, if jobs have to be saved, if demand has to be resuscitated, then many forces have to come together — a supportive government that does not pre-judge; an unfettered retail (including e-commerce) ecosystem; and brands & market makers aggressively advertising to woo consumers back to ‘normalcy’. This is as much a mind-game. Harvard professor Gerald Zaltman in his book, "How Customers Think: Essential Insights into the Mind of the Market," says there's nothing manipulative about helping consumers achieve desired states of emotion. Product and services are designed to satisfy a customer desire or want, and like it or not, those desires always contain an emotional component. Maybe, the better way forward is an emotional understanding of the consumer by the powers-that-be, and some stirring and emotional come-hither advertising by brands.
This article is the second of a 3-part series.
Dr. Sandeep Goyal is a seasoned strategist, and communications expert. He was Group CEO of Zee Telefilms and Founder Chairman of Dentsu India.
