In the first instalment of our new Worldview series gleaning insight and inspiration from global markets, Eliam Huang analyses how China is bouncing back from Covid-19.
China was the first nation to be impacted by the Covid-19 outbreak and it was also the first to emerge from lockdown restrictions.
While the recovery of the country’s retail sales has been gradual, many global names such as Burberry, Nike and Tapestry have reported strong post-crisis bounces in revenues.
The former said last month that full-price digital sales in China registered “triple-digit” growth during its crucial Christmas quarter.
So, how have retailers and consumers in China adapted and driven a recovery for retail?
As has been the case in other markets, lockdown restrictions prompted consumers in China to turn to digital channels. Shoppers flocked to livestreaming — the digital equivalent of TV shopping.
Such was the boom in livestreaming that in the first half of 2020 alone the Chinese Ministry of Commerce recorded more than 10 million livestreaming sessions for retail in China, with these generating a combined 50 billion views.
Brands have turned to live video content as a way of engaging with consumers and driving sales during and after bricks-and-mortar shutdowns.
Hong Kong-based jewellery retailer Chow Tai Fook Jewellery, for example, started livestreaming on Taobao Live in March 2020. By partnering with top key opinion leader Austin Li, the company recorded sales of 5,000 products within 30 seconds on March 31 last year.
Short-video apps recorded increasing numbers of active users – and shoppers – during the pandemic. Gross merchandise values on TikTok’s marketplace Xiaodian skyrocketed 45 times higher between January and November last year compared with the same period in 2019.
Brands have turned to live video content as a way of engaging with consumers and driving sales during and after bricks-and-mortar shutdowns
China has also led the way with mini programmes, or apps within apps. These are designed to use little phone space and do not require a separate download, but offer much the same functionality as apps. Current major providers of mini programmes include Chinese search engine Baidu and social media platform WeChat.
According to Chinese tech giant Tencent, the GMV of physical goods sold on WeChat mini programmes between January and August 2020 increased 115% year on year, with the fastest growing merchants including daily necessities and luxury retailers, shopping malls and department stores.
Reasons to return to stores
Post-lockdown, Chinese consumers returned to bricks-and-mortar stores with enthusiasm and showed strong demand for online-offline integration.
According to an AlixPartners survey published in October 2020, 60% of Chinese consumers expected to visit stores on Singles’ Day 2020 — the November shopping festival created by Alibaba that has expanded to other retail platforms and offline. Some 40% of survey respondents expected to collect discount coupons online to use in stores.
Reflecting the popularity of couponing and special gifts post-lockdown, bricks-and-mortar operators sought to drive shopper traffic with freebies, often with some digital integration.
Beauty retailer Harmay issued coupons and free membership points to visitors to its Shanghai store in order to attract new customers and encourage the return of existing members.
Bricks-and-mortar operators sought to drive shopper traffic with freebies, often with some digital integration
The Manner Coffee store offered a host of deals – such as free coffee within the first three days of opening – to draw in crowds. And in Shanghai, lifestyle brand The Beast Shop offered a free bouquet of flowers to each customer that registered as a new member by scanning a QR code.
Product and fulfilment innovations
Throughout the Covid-19 pandemic, innovation has continued to be a hallmark of the Chinese retail landscape.
To drive sales, we saw greater adoption of consumer-to-manufacturer (C2M) products by brands and retailers. The C2M model connects manufacturers and consumers for the production of tailored products.
Retailers collect information from customers and use big data to create customer profiles and analyse consumption characteristics to make mass-customisation possible.
C2M products have been well received by consumers and sales have jumped. JD.com said that sales of C2M products on its platform surged 654% year on year between January and November 2020.
Other major ecommerce platforms in China, including Alibaba, have ramped up their efforts in C2M. The etail titan launched a dedicated C2M app, Taobao Special Offer Edition – the first shopping app with a C2M model at its heart.
The community group buying model – a location-based approach of selling in bulk to customers living in close proximity of one another – has also proved popular during the pandemic in China.
The community group buying model – a location-based approach of selling in bulk to customers living in close proximity – has also proved popular during the pandemic in China
The market is forecast to be worth 102bn yuan (£11.4bn) in 2022 in China, which would represent growth of 44% a year between 2019 and 2022.
Walmart began testing the community group buying model last November. The retailer hired community leaders to run community buying groups via WeChat, guiding customers to place orders and providing customer services. If the test goes smoothly, the retailer plans to expand this service in the near future.
Lessons for retailers
Invest in experiential ecommerce: Online shopping is evolving beyond its traditional functional focus. Major retailers in the West are starting to leverage livestreaming and short-video formats to drive sales. Amazon has launched livestreaming on its platform, while Walmart has trialled livestreaming on TikTok. In discretionary sectors in particular, retailers must avoid being left behind online and explore how they can use these platforms to drive sales and offer improved online experiences.
Apply omnichannel strategies to drive traffic both online and offline: Retailers should synchronise data across channels in a seamless manner. Digital integration in couponing and other promotions will encourage online shoppers to return to stores, once it is safe to do so.
Innovation will be more important than ever: To serve cross-channel shoppers and drive consumer interest, product and service innovation are likely to be of increased importance. Retailers in the West can continue to learn from innovations in the Chinese market, such as community group buying and C2M products.