China Retail Bounces Back

by Ker Zheng

It has now been two months since the coronavirus first surfaced in China and things are finally getting back to normal. China is reporting no new domestic infections and is turning its efforts to quarantining those returning from abroad, where infections have risen dramatically.

Wuhan is shutting down its temporary hospitals and Hubei province is lifting travel restrictions on those going in and out of the region. Across China restaurants, bars, and retail stores are opening up, though the vast majority of gyms, KTVs, movie theaters and other entertainment venues remain closed. 
Alibaba reports that 72% of its 130,000 POS systems across China are now online again, signaling that provincial and municipal governments have given the green light to small businesses to re-open again. In Sichuan, this rate has hit 81%, while in Hubei province, the center of the coronavirus pandemic, has seen just 43% of its POS systems come online. 

On the e-commerce side, both Tmall and saw a recovery in sales for Womens Day, the largest e-commerce holiday in the first quarter of every year. Demand for health, FMCG, OTC pharmacy and home & kitchen products has been relatively resilient, given that people are turning more to e-commerce for delivery of everyday essential goods. 

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What have Chinese retailers been doing to stay alive? 

Some have turned to livestreaming to keep their businesses afloat. Demand for livestreaming hosts has more than doubled with recruitment posts growing by 132% in the period after Chinese New Year. On March 10th, furniture retailing conglomerate Ikea started a live-streaming session to draw attention to its Tmall launch, attracting 27,000 viewers within the first ten minutes and peaking at 300,000 viewers.

Ikea’s launch on Tmall was the first time it’s partnered with a third-party platform to retail its products. Historically, furniture retailers such as Ikea have relied heavily on its showrooms and offline stores to drive sales, but in the face of the current coronavirus, it is now realizing how important e-commerce is. 

Which verticals will continue to see a delayed recovery? Travel, leisure, luxury, furniture, and fashion apparel. We believe that any discretionary spending category that relies heavily on offline sales will continue to see a muted recovery. While people are going back to the office, crowds at shopping malls and on the streets still remain sparse. 

And lastly, there continues to be disruptions in global logistics & shipping as the coronavirus crisis intensifies around the world. While Chinese couriers and postal services have remained open to carry out last-mile delivery, importers are facing issues in shipping goods from overseas to Chinese warehouses due to the severe decline in capacity.

Nonetheless, logistics companies and freight forwarders are finding solutions to solve these issues and demand for bonded warehouse capacity has increased to ensure that the end customer in China enjoys a positive customer experience.

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