How COVID-19 Has Impacted Retail in China - 20 Fast Facts
It looks like the worst of the COVID-19 crisis might be over in China with the country effectively containing the spread of the coronavirus. While China is trying to return to normal, the virus continues to spread around the world. Many countries are in the early stages of containing the coronavirus and are wondering what to expect. A look at what has happened in China and specifically within the retail sector provide clues for what the future might look like.
The virus took a quick and deep cut to China’s retail sector but there are signs that it is slowly coming back. These fast facts paint a picture of how hard the retail sector has been hit as well how much progress China has made in getting back to normal or perhaps a new normal for now.
Fast Facts
Retail sales in China were down by 20.5% in January and February of 2020. Analysts estimate that the smoothed data hides a much higher decline in sales in February since the lockdowns in China only started on January 23, 2020.
Industrial output in China declined by 13.5% in January 2020 and February 2020 vs. last year, the greatest decline on record.
Apple, for example, is one of many retailers in China that has seen its sales impacted by the coronavirus. Apple, sold approximately 494,000 iPhones in China this February, versus 1.27 million iPhones sold in China in February of 2019.
It is likely that China’s economy will contract in the first quarter of 2020, for the first time in nearly 50 years.
During the pandemic as many as 80% of Chinese consumers indicated a preference for ordering grocery online, although only 50% of consumers were able to due to a lack of supply.
Chinese eCommerce company, JD.com experienced a 215% year over year, increase in sales of fresh food during the ten day period leading up to Feb. 2, 2020.
Analysts predict that the boom in online shopping in China during the crisis may permanently change shopping habits with consumers ordering more online going forward.
By the week ended March 13th, 80% - 85% of China’s population was back to work.
As the pandemic passed its peak, foot traffic in stores in China has started to increase after falling by close to 80% during the peak of the pandemic.
Starbucks, which has over 4,000 stores in China has re-opened 90% of its stores with the goal to have 95% open by the end of March 2020.
Yum China recently reported that: “we are seeing early signs of recovery, as business gradually resumed and people returned to work in China." "However, restaurant traffic is still heavily impacted as people continue to implement social distancing measures."
Many malls have reopened but customers need to have their temperature taking upon entry. In addition to having temperatures checked some malls require that customers wear masks.
Reopened stores in China like IKEA have social distancing restrictions in place which limit the numbers of people entering stores at one time.
Many stores in China are still closed or are empty if they are open. Many businesses that are open are offering promotions to get consumers spending again.
Many factories have re-opened in China but they are operating at two-thirds of capacity.
Consumer spending has not bounced back yet since many are worried about the economy. Chinese consumers are still nervous about venturing out with concerns about whether the virus will return.
Any recovery will likely be weak due to job losses during the pandemic which will spillover into reduced consumer spending.
It is predicted that post pandemic spending will follow a pattern similar to what happened in the aftermath of the spread of the Severe Acute Respiratory Syndrome (SARS). SARS took place in the early 2000s and killed nearly 800 people globally.
In the quarter following the containment of SARS sales of apparel rebounded in China while categories like food and home hygiene products which performed well during the crisis continued to experience growth.
Once SARS was contained, a previously strong economy in China returned to growth, with the economy registering growth of 10% in 2003. Growth could have been 0.5% to 1% higher if SARS had not happened.
With the coronavirus, the Economist Intelligence Unit estimates that China’s economy this year will grow at a rate of: 2.1% down from 5.4%.