The coronavirus is likely to change the face of retail the world over. Brick & mortar retailers have taken the double-hit of falling consumer spending, and a pivot to ecommerce as consumers seek to minimise their risk of infection in public spaces.
The numbers in China highlight the shifting dynamics of retail in this market. Between April and June this year, retail sales of consumer goods were 3.9% below 2019, while ecommerce platforms had their biggest quarters yet: Tmall sold 27% more worth of goods than the same period last year. Its cross border platform Tmall Global was up 40%. JD’s sales increased 47.4% and Pinduoduo climbed 67%, with an extra 81.4 million monthly active users on its platform since March.
From what we’ve seen, many of China’s new online shoppers have overcome their initial barriers to ecommerce, and are likely to continue shopping on their phones even after the pandemic wanes. As a result, many brick & mortar retailers from before are unlikely to be sustainable.
Yet the outlook for physical retailers isn’t as grim as some may think. A study by Savills found that footfall at high-end shopping malls in three of China’s top five cities last month had returned to, or exceeded, pre-virus levels. This has been helped by the inability to travel causing many Chinese to buy their luxury wares in China, when they’d normally buy them overseas. But it is also driven by the simple fact that many Chinese still rate shopping as their favourite pastime and a genuine form of entertainment.
Whilst there are positive signs for brick & mortar retail in China, the new pain points from the pandemic means that retailers need to work harder than ever to attract shoppers. Many retailers and caterers have used the Covid downtime to renovate their premises to create more interactive and entertaining in-store encounters. Some are incorporating art into their retail experience and others – particularly luxury retailers – have kept things new and fresh by rolling out pop-up stores aligned with festivals and trending themes. On top of that, 188 new stores in Beijing (including 96 eateries/cafes), 173 in Shanghai (69 eateries), 192 in Shenzhen (60 eateries) and 128 in Guangzhou (84 eateries) have opened since June.
Even the ecommerce giants have continued their drive into the brick & mortar retail space. Late last month, JD announced it had completed a full buyout of China’s third-largest home-appliance chain 5STAR, and recently announced plans to roll out 20 modern E-Space stores in first tier cities and thousands of other stores beyond. In April, Pinduoduo invested $200 million into appliance retailer Gome. Alibaba has long been growing its physical footprint, particularly in the FMCG category, owning a share of many of China’s top supermarket chains. Their department store InTime, has used smart o2o integration to see their revenue recover despite footfall being just 70% of pre-Covid levels.
In short, physical retail in China remains vibrant for stores who connect with shoppers through interactive and engaging experiences. Get in touch with China Skinny to learn more about how we can assist with refining and integrating your retail experience.
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