As China sees significant improvements in the Covid19 crisis, Nordic Match hosted a Webinar together with Tom Xiong to reflect on lessons learnt from China, and to discuss how the situation might play out in the Nordic countries. Decision-makers from Nordic corporates and investment firms joined in this webinar.

Changing Consumer Habits
Chinese consumers are already used to digitalized services, and even before the Covid19 crisis, the groceries segment with companies such as HEMA saw good growth hacks. And due to the massive migration to online due to people staying at home, new user behaviors have emerged, closing an even higher penetration rate.

In China, the preexisting logistics infrastructure is also mature, and therefore was ripe to be mobilized. In the Nordics, some companies are already doing delivery services, but how they will handle the peak will be interesting to follow.

We also see this evolve in the working space. Working environment in China has been fairly traditional in the past with most people clocking into the office. This shifted instantly due to Covid19. The paradigm-shift was possible due to people already being used to digitalized communication. But was previously prevented due to older management not used to digital tools. But now people love it because of the convenience.

Corporate Engagement
Engaging with the online community has become a must. Where we see the gaming industry boom but believe the retention rate will be tough as it is a temporary boom. And as live streaming has become a popular trend, we see new ways emerging in this space, such as night clubs, yoga studios and gyms broadcasting live to their users, in ways to stay relevant to customers. This offers a lower cost of participation but allows service providers to scale for the larger masses.

We see the Chinese corporate DNA being very flexible, fast to accept the situation and adapt. What we are experiencing is not a usual recession, but a 100 to 0 in a very short time. And to counter the crisis, we see traditional companies enhancing corporate communication capabilities, and support staff for example by offering mental health support through 24/ hotline services.

Traditional companies with no prior online presence will be in more trouble than ever. Companies should do everything possible to change and hope that some of the effort will work out. This is a new situation compared to previous crises, and unique measures will be needed to stay relevant.

As business activity lowers, engaged leaders will revisit their current practices for ways to improve. In the Chinese start-up ecosystem, it is 10 years since the financial crisis, and this has built up a massive bubble, resulting to a condition where companies spend more than they create. Covid19 has accelerated the underlying problems.

What we see now is a cleansing of the condition. Where bad ideas disappear, and we think good ideas should spend on marketing as the user acquisition costs have dropped. Cash is king and this can provide a golden opportunity to focus on the correct things.

Chinese companies are innovating at an astonishing pace. Mobile payments and innovative logistics solutions are increasingly becoming the norm. The current small and medium enterprises (SME) scene in China make the entrepreneurs global from day one, where TikTok is a great example where the founders having international experience and creating a global service from the start. When we see these companies going global, however, the culture aspect will be their biggest challenge, as they face new localization requirements. This drives for new partnerships being created in regional markets.

Finally, we see many troubled companies face cash flow challenges, where companies will get hurt and thus creating opportunities for financially robust competitors. This offers a window for inorganic expansion and M&A initiatives with lower valuation levels.

On the more positive side, the crisis has got people united, which will fuel the growth for years to come. We expect many Chinese companies to grow faster than their international peers, while also targeting more aggressively global markets.

About Nordic Match

Nordic Match is a boutique M&A and Strategy Advisor headquartered in Shanghai, China. Dedicated to Sino-Nordic transactions, we have a clear vision – to support aspiring corporates and investors in search for value-creating opportunities between Nordics and China.

More about Nordic Match: