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Learnings from China's coronavirus recovery

shanghai skyline

China is lifting its lockdown. What does that mean for the country’s retail landscape and what can UK retailers learn from China?

Once the centre of the global coronavirus pandemic, China is now the first nation trying to return to something like business as usual. Restrictions are slowly being lifted across the country as the spread of infection seems to slow. Even in Wuhan, the city where the crisis began, lockdown measures are being eased.

Residents were able to leave the area and domestic flights restarted from early April. Chinese shopping centres, bars and restaurants are beginning to reopen their doors.

Coronavirus outbreak in China 31 January 2020

Travel restrictions are being lifted in China

Still deep in the grip of an indefinite lockdown, UK businesses are looking to China for a view of how the coming weeks and months might pan out. If Chinese retail is able to robustly bounce back, it will give European retailers,  which are now in the thick of the crisis, hope that there is light at the end of the tunnel.

Meanwhile, here in Europe, the resumption of Chinese consumption may provide much-needed cashflow. Many fashion businesses, particularly in the luxury market, rely on Chinese custom, and the revival of demand in the market would provide a welcome sales boost to those with a presence there.

Around 60% of footfall has returned to shopping malls

Veronica Wang, OC&C Strategy Consultants

“Overall, China has started to recover over the past few weeks,” reports Veronica Wang, a Hong-Kong-based partner at business adviser OC&C Strategy Consultants. “Around 60% of footfall has returned to shopping malls and there are queues outside some popular restaurants.

“However, discretionary categories such as clothing are still lagging behind and recovering at a slower pace because consumers feel cautious. They know that demand can be fulfilled online, so are hesitant to take the potential risk of transacting offline through stores. Apparel has been one of the worst-hit categories.”

Fellow OC&C Strategy Consultants partner Sohini Pramanick warns against comparing progress in post-coronavirus recovery across different economies. Governments have taken varying approaches to the intensity and length of social restrictions.

She adds that the UK is likely to face a “yo-yo” situation similar to Hong Kong, which initially relaxed its lockdown but has since had to tighten measures again to combat a rise in new coronavirus cases.

“Countries have had different responses. The current situation we have in the UK is more severe than the lockdown across China was and, depending on the public health situation, we might be in lockdown for longer,” she explains.

Things are difficult in Hong Kong, as new cases of the virus hit footfall in shopping centres

Former fashion boss 

 

“Some of the pent-up demand will shift to the post-coronavirus period but there is a real question mark over people’s discretionary spend in the future.

“One likely scenario in the UK is that when restrictions are lifted, the virus surges, so a partial lockdown is reinstated. That is a difficult situation for retailers, because they haven’t had to plan for something like that before.”

Hong kong shutterstock 109269269

Hong Kong relaxed its lockdown but has since had to tighten measures again after a surge in new cases

A former fashion boss with knowledge of the market paints a complicated picture for Chinese retail: “Clothing shops are back open on the mainland of China, but restrictions of movement mean things are far from booming.

“Families are not out together because of social-distancing laws and therefore big-ticket buying is slightly more difficult. The appetite to shop is definitely there.

“Things are difficult in Hong Kong, as new cases of the virus hit footfall in shopping centres. Life is returning to a new normal but certainly not the upward curve of spending we have been hearing might happen.”

Chinese lessons

Nevertheless, there are learnings UK retailers can take from how Chinese businesses operated during the country’s lockdown, OC&C’s Wang argues. She points to Chinese retailers’ adoption of new social media functionality to stay front and centre of consumers’ minds – for example, by livestreaming hygiene tips or exercise classes.

Livestreaming in China involves hosts or influencers presenting items during a live video session

Elena Gatti, managing director of Azoya Europe

Elena Gatti, managing director of Azoya Europe, a solution provider for businesses looking to enter the Chinese ecommerce market, agrees that UK retailers can also use the lockdown to experiment with new ways to reach consumers: “The last two months have forced retail players to experiment with online marketing methods such as livestreaming and WeChat group marketing – going beyond investing in advertising.

“Livestreaming in China involves hosts or influencers presenting items during a live video session. Often there are raffles or games to keep people entertained, and hosts will try on outfits and give viewers a sense of what products look and feel like.

“For WeChat, some store employees set up large groups for loyal customers, where they gave out coupons and promotions. They also sometimes gave advice on how to put together outfits or apply make-up. Although the eco-system in China is very different from the UK, these measures could be ‘translated’ to the UK market.”

Starting again

Chinese factories – vital for the global retail industry – are back up and running after shutting down around Chinese New Year in late January, says John Hunt, retail analyst at Peel Hunt, but the pandemic could still have long-term implications for the country’s manufacturing industry.

“Factories were back to work quickly,” he explains. “UK retailers spent a period of time desperately trying to secure supply when coronavirus was still mainly expected to be a supply chain issue, but that disruption was short lived.

“What’s ironic is that they’re now trying to push back on that supply given the retail shut down. A knock-on effect of the current drop in demand is that ultimately retailers will look at global supply chains, and prioritise flexibility and lower levels of commitment.

A knock-on effect of the current drop in demand is that ultimately retailers will look at global supply chains

John Hunt, retail analyst at Peel Hunt

“Being able to react quickly [in case something similar to coronavirus happens again] will be a top concern that could benefit near-sourcing nations, like Turkey, more than Asian countries.”

The retail picture in China is far from clear – but there are some bright spots for UK retailers in lockdown to take hope from. Demand is returning, although consumers are, naturally, still cautious about discretionary spending.

Chinese retailers have been forced to reach consumers in new, innovative ways – something UK retailers can experiment with to ensure they are top of customers’ minds post-pandemic.

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