China faces its first decline in prices for everyday consumer goods in five years, as a growing move toward online shopping further pressured prices and led to lower overall sales, a report by consulting firm Bain and Co. Inc. says.
Average selling prices for fast-moving consumer goods (FMCG) like home care, packaged foods and makeup, dropped by an average 2.1% between January and September, reversing a 3.4% increase for all of 2019, according to the report. Overall, the Chinese urban FMCG market during the first nine months of 2020 suffered a modest 0.1% deflation in overall sales value.
To lure customers, many online merchants also offered promotions, putting pressure on prices. Online sales accounted for 26.7% of all FMCG buying in the first nine months of the year, up from 21.9% in 2019, as many consumers were forced to do much of their buying online during China’s Covid-19 outbreak, especially in the first half of the year.
As the Covid-19 outbreak has receded in China, many shoppers have returned to buying goods in stores. But increased online buying patterns continue, extending the pre-outbreak trend that saw online shops stealing market share from traditional retailers.
One bright spot was the home care sector, which posted a 7.1% growth in sales volume for the first three quarters, with average selling prices up by 1.8% as people stocked up necessities like soap and towels during lockdowns. But average pricing for packaged food and beverages dropped 3.4% and 4.1% respectively, despite rising sales volumes.
“We all knew that Covid-19 would have a significant impact on the China FMCG market. What came further into focus is the massive change in consumer sentiment, with a lot more caution and promotion hunting,” said Bruno Lannes, partner in Bain’s Shanghai office.
Contact reporter Lu Yutong (yutonglu@caixin.com)
