捆绑SM社区

As governments in the US, Canada and Europe start to plan for the progressive reopening of their respective economies including retail, we can turn to China (and some other Asian countries) to extrapolate lessons from their initiatives to re-open retail.

Having lived for more than 10 years in China and close to 15 years in Asia, I can attest that one must be cautious in interpreting what鈥檚 happening there and making extrapolations to the Western world.听 Their culture and overall sentiment to retail and consumerism are different. Unlike the West, they have recently lived through serious pandemics that have rendered their countries inoperable for months- most notably during SARS. As a result, they鈥檝e been much better prepared and pro-active to combat the crisis and prepare for the post COVID-19 world, especially in the areas of health & safety. For instance, China is leveraging off two centralized digital platforms to dictate behaviors:

• The social credit system (SCS) that the government announced in 2014, recently piloted in 43 cities and now rolling out across the country. The SCS is designed to encourage good behaviours and deter bad ones. It uses big data to monitor and score the compliance of individuals and corporates with laws, regulations and other directives. This can lead to fines and drops in creditworthiness for individuals and to fines, more frequent audits and other penalties for corporations. This is certainly one reason why Chinese citizens continue to be vigilant in wearing masks and respect social distancing; while retailers apply strict guidelines to check consumers before they enter their stores and then once inside, to dictate behaviours by both consumers and employees.
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• And more recently, the digital contact tracing app which allows the Chinese government to track each individual contact history for potential COVID-19 transmissions. You are free to move around if you test green on the app, signaling zero contact with an infected individual. Those in yellow who have been in contact with an infected person can move under severe restrictions and those in red who have been in contact with more than one infected person, are ordered to self-isolate.

These measures apply across the country. Due to tensions surrounding the topic of data privacy, it could be very challenging for Western countries to implement such platforms, even if we could pull it off from a technological standpoint.

Another significant difference with Western countries is consumer confidence post-crisis. In McKinsey鈥檚 April 2020 report on 鈥淎 global view of how consumer behaviour is changing amid COVID-19鈥�, 55% of Chinese respondents indicated they were optimistic about the economic recovery from COVID-19, among the very highest in the world. Americans are also quite optimistic at 41%, but European countries and Canada are much less so, ranging from 10% to slightly over 20%. Also, China overall continues to view consumerism positively, especially outside tier one cities like Beijing and Shanghai where consumers may be adopting more Western consumer trends, notably the emphasis on environmental sustainability.

Sources: Daniel Hodges Webinar 鈥淥pening-Up America for Business 鈥� Learning from China鈥檚 Retail Industry鈥�, April 15 2020 and Alexis Lanternier, EVP E-Commerce Walmart Canada presentation at 捆绑SM社区 on April听 2 2020听

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Chinese Consumer听Sentiment & Behaviours

With this in mind, we still only see a progressive return to normalcy in Greater China, Korea, ...In most areas of retail, we鈥檝e seen most stores reopen. According to various sources, 85-95% of all of China鈥檚 store formats had reopened by mid-March. At the same time, foot traffic in malls was at 30% of normal activity during the last week of March. With 90% of apparel stores open, sales are still only at 50% of pre-crisis levels across all channels.听

One troubling development is that, Chinese are still far from willing to return to their old consumer habits and levels of consumption. In the same McKinsey study, Chinese are only willing to increase their spending in 10 product categories out 32 in the next two weeks, including groceries, personal and cosmetic products, products for their children and pets, home entertainment, health and wellness, and gasoline. The sectors most negatively affected are anything concerning travel and outside entertainment, followed by restaurants and fashion. Chinese consumers are comfortable going back to restaurants as long as strict physical distancing, safety and hygiene regulations are put in place, which undoubtedly would negatively impact these businesses recovery for the foreseeable future.听
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The rise of digital & e-commerce solutions

One of the areas of retail that remains attractive are brands that have embraced digital and e-commerce solutions for their businesses. It鈥檚 clear that e-commerce and digitally driven sales increased significantly across all categories of retail during the pandemic. As China moves to a 鈥渘ew normal鈥�, the intent for online spending continues to rise, even as stores open up 鈥� especially for food, household essentials and home entertainment.听

Some companies have quickly mobilized and have been aggressive in enhancing these capabilities by launching or improving new channels. Nike, whose digital sales had grown by 36% in the quarter ending in February, have leveraged Taobao livestream bloggers during the lockdown to drive sales. WeChat had a number of live broadcasting sessions with influencers. As McKinsey aptly highlighted, 鈥渞ather than asking what benefits online can offer offline channels, players should ask how their brick-and-mortar presence can support e-commerce sales鈥�.

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Engage, delight and surprise

Another area that has proved to be effective is implementing special consumer-centric initiatives that engage, delight, surprise and show that you care about them. Here are some examples:

• On International Women鈥檚 Day 2020, international brands like L鈥橭real, Shiseido and lululemon through consumer-centric initiatives saw a significant increase in their sales compared to 2019. A particularly noteworthy initiative by local Chinese beauty brand Chando, was the launch of a short digital movie on the Modern Mulan woman focused on COVID-19 heroes - medical professionals, community helpers, policewomen, and volunteers. Jing Daily reported that it already garnered 7.4 million views by March 10th.
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• Launching mashups听 (brand tie-ups) with limited edition products, such as Adidas with McDonalds, or Levi鈥檚 and New Balance Jean-ius shoe launched on March 26th.
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• As mentioned by Deborah Weinswig from Coresight Research during a book launch webinar on April 14th, 鈥榖rands, whose sales associates used WeChat just to check up on how each of their customers was doing during the crisis, seem to have rebounded faster than others鈥�.

And lastly, just taking advantage of pent-up demand has proven to be effective. One cannot avoid mentioning Hermes that just set a record daily sales of US$ 2.7 million when it reopened its store in Guangzhou on April 11th 2020.

Jean-ius Levi鈥檚 NB听 limited edition shoe	Chando Beauty Brand Short film听celebrating Modern Mulan Heroes	Hermes record day Guangzhou reopening

Patriotism and the rise of Chinese brands

Some China experts, like Thibault Villet (Co-Founder and ex-CEO & Chairman of Mei.com), Chloe Reuter (Founding Partner at Shanghai-based Reuter Communications) and Jason Yu (Managing Director Greater China at Kantar Worldpanel), indicate that leading local Chinese brands and retailers will come out of this crisis emboldened and stronger than ever. Patriotism towards Chinese brands was already on the rise before the crisis and has certainly increased with the pride in how the country has handled the pandemic compared to Western countries. This should bode well for not only the likes of Alibaba and JD.com, but also brands like Luckin Coffee, sportswear leader, Li Ning, down jacket giant, Bosideng all the way to community supermarkets who have seen sales increase by up to 150% since the crisis began.

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Supply Chain challenges

One area of retail which remains problematic on the road to normalizing consumption levels is the supply chain. Due to the isolation policies and lockdown, retailers need to apply green passes with local governments to ensure the smooth flow of goods. At the same time, Chinese suppliers have been hard hit by the lockdown in their own country, followed by the standstill of businesses in the rest of the world. Many of the more SME type suppliers will probably not survive. In this integrated world of supply chain, they are also dependent on materials coming from suppliers in other countries which have been strained. This may strongly be to the advantage of local Chinese brands and retailers whose supply chains are already strongly localized, in many instances with dedicated suppliers.

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Insights from Starbucks in China

There are interesting insights from the letters from Kevin Johnson, President and CEO and Patrick Grismer, CFO, of Starbucks Coffee Company to stakeholders following the end of the 1st Quarter in 2020. They have been able to reopen 95% of their locations in China with reduced hours and limited seating in accordance to local regulations. February comparable store sales declined 78% and started a slow recovery in March with sales declining 64%. It is worth noting that the last week of March saw sales decline only 42%, indicating 7 weeks of gradual improvement.听

To improve sales performance during the crisis, they quickly shifted to mobile orders. In the last week of February, they accounted for approximately 80% of sales mix, with 30% Mobile Order & Delivery and 50% Mobile Order & Pay for drive-thru and pickup orders. In the last week of March, as in store traffic returned, mobile orders still represented 27% of the sales mix.听

Lessons in safety & hygiene, digital commerce, drive thru and new pick up options are being transferred and adapted to their North American operations.

Pre-COVID-19 Starbucks	Post-COVID-19 Starbucks

Conclusion

The lessons learnt from China and some other Asian countries show reopening the retail sector will be a slow and gradual return to a 鈥渘ew normal鈥�. Given that China is 1) better prepared to guarantee the safety of its people, 2) has had a less dramatic drop in purchasing power and 3) has a more optimistic and consumption-oriented population, the news is not encouraging for a quick recovery of retail in North America and Europe. Consumer & retail activities that bring a lot of people together will be severely curtailed for months to come鈥� if not longer.听

There is a silver lining for those retailers and brands that have shifted digitally, engaged customers in innovative ways and adjusted their business offering to a new shopper reality. As mentioned above, we may be pivoting to a new reality for a large part of retail where 鈥渞ather than asking what benefits online can offer offline channels, players should ask how their brick-and-mortar presence can support e-commerce sales鈥�.

Finally, as nationalism and community spirit rise around the world, there are most certainly even more opportunities for local and community-driven retail to grow.

Sources

• Insights from Greater China听retail experts (Discussions/webinars/articles):

  • Daniel Hodges hosting Retail Store Tours Webinar 鈥淥pening-Up America for Business Learning from China鈥檚 Retail Industry鈥�, April 15 2020 with:

    • Xin Yue Hu Executive, T11 Supermarket Beijing

    • Kevin Peng (Secretary General China Chain Store & Franchise Association Beijing),

    • Sharon Shi, Founder at CHACCRA Retail Store Tours Hangzhou,

  • Deborah Weinswig, CEO & Founder of Coresight Research
  • Thibault Villet, Co-Founder and ex-CEO and Chairman of Mei.com
  • Chloe Reuter (Founding Partner at Shanghai-based Reuter Communications)
  • Jason Yu (Managing Director Greater China at Kantar Worldpanel)

• McKinsey April 2020 Report on 鈥淕lobal view on how consumer behaviour is changing with Covid 19鈥�

• McKinsey and Business of Fashion 鈥淪tate of Fashion 鈥� Coronavirus Update鈥�, April 2020

• Inter-China Consulting 鈥�#2 Recovering from Covid 19 鈥� Lessons Learnt from China鈥�, April 9 2020

• Bain & Company Brief 鈥淒efending Retail against the Coronavirus鈥�, March 2020

• Kevin Johnson, President and CEO and Patrick Grismer, CFO, of Starbucks Coffee Company 鈥淟etters to Stakeholders鈥�, March 5 and April 8 2020

• Jing Daily.com 鈥渉ow-these-five-campaigns-celebrated-women-empowerment-this-international-womens-day鈥�, March 10 2020

• BoF article 鈥淧atriotic Consumers Are Changing the Chinese Market. Here鈥檚 How鈥�, April 16 2020

Charles de Brabant Executive Director Bensadoun School of Retail Management