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Retail to Regain Bounce after COVID-19 Blow

Updated:2020-06-17 10:55:28

A logistics firm employee arranges packages at a warehouse in Nanjing, Jiangsu province. [Photo/CHINA DAILY]

Operators pin more hopes on online solutions for momentum, says report

The retail business in the Chinese mainland is expected to return to the level seen before COVID-19 struck within the next 12 months, with an increasing number of retailers adopting multi-channel marketing such as launching online sales and introducing delivery services, a research report showed.

Commercial real estate services and investment firm CBRE said in a report entitled the Asia-Pacific Retail Flash Survey of the Chinese mainland that more than 80 percent of surveyed respondents are optimistic retail sales and business would return to levels prior to the pandemic outbreak within 12 months.

Some 13 percent of those surveyed expressed the intention of expanding, second only to India among all Asian markets.

In addition, 67 percent of respondents said they had already resumed business within three months of closing down due to the pandemic. Over 80 percent believe businesses would get back to normal within the next 12 months.

The flash survey by CBRE Asia-Pacific Research was conducted between April 28 and May 21. It mainly focused on experience-based and product-based retail in the Asia-Pacific region, and looked to gauge the industry response to the pandemic.

"In view of the relatively upbeat recovery in the Chinese mainland, CBRE expects business activity to return to pre-COVID-19 levels by the middle of 2021," said Xie Chen, head of research at CBRE China.

China has seen a gradual recovery of business activity and a steady rebound in shopping center footfall. Sale promotions rolled out in many cities in the second quarter have boosted traffic and sales, Xie said.

"Multi-speed retail recovery recorded was supported by work resumption, effective epidemic countermeasures, improving consumer confidence, and government support," said James Macdonald, the head and senior director of Savills China research.

All respondents in the Chinese mainland received relief measures from their landlords, although 91 percent said they expected further steps to help them in the future, the CBRE survey showed.

Though more retailers are readjusting brick-and-mortar store network plans and increasing their focus on online sales capacity due to the epidemic, the research report showed that 13 percent of Chinese respondents planned to open new stores, the second highest percentage level among all markets surveyed in the region.

The retail market, along with the travel and hospitality sectors, was hit hard by COVID-19.

Loss of sales was identified by respondents in the Asia-Pacific and Chinese mainland as their top concern. All key retail categories in the Chinese mainland, and those related to discretionary consumption in particular, recorded a contraction in sales during the first quarter.

Tourists shop at a duty-free shopping mall in Sanya, South China's Hainan Province, on March 12, 2020. [Photo/Xinhua]

Up to 77 percent of food and beverage retailers said it has become more challenging to meet their financial obligations. F&B sales tumbled by 44 percent in the first quarter, followed by declines in jewelry by 38 percent, clothes by 32 percent, automobiles 30 percent, electric appliances 30 percent and cosmetics 13 percent, the CBRE survey said.

The other concerns of retailers in the Chinese mainland were supply chain disruptions at 36 percent, ensuring safety at 30 percent, the handling of infected cases at 27 percent, and disruptions in online deliveries, it added.

China is the world's second-largest economy and its second-largest consumer market, as well as one of the fastest-growing large markets in the world.

China's share of the global consumer market rose from 3 percent in 1990 to 13 percent in 2018. Online channels grew significantly in the first four months this year, with online sales accounting for a historic high of 24 percent of total retail sales, said a research report by Savills on how China's retail sector coped with COVID-19.

The CBRE report said the pandemic highlighted the importance of online channels, and 27 percent of those polled stated that digital sales comprise part of their core business. It is a trend which is particularly prominent among fashion and apparel retailers.

The report also revealed that 67 percent of Chinese mainland respondents said they intend to increase investment in online shopping apps and delivery services. Some 81 percent planned to make greater use of social commerce, while about one-third of F&B retailers introduced food delivery services during the contagion.

Although shopping malls and retailers have significantly boosted their online presence to engage customers since the outbreak of COVID-19, retailers suggested paying more attention to increasing space efficiency, optimizing the mixture of tenants, improving management capabilities, and better integrating online and offline channels, Xie said.

"People's consumption habit has changed a lot in the past few months because of the epidemic, and this trend may continue in the near term," said Zhang Hongwei, chief analyst with Shanghai-based property consultancy Tospur.

The retail market has become one of the most innovative sectors of the Chinese economy with product categories, retailer business models, distribution and marketing channels, and consumer financing leading the global changes over the past five years, said the Savills report.

It suggested more innovation to adapt to the changing consumer habits and preferences through new technology, online penetration, domestic retailers, new retail categories, as well as mall design and operations.

Though COVID-19 has encouraged the popularity of various online business models, consumers will still return to brick-and-mortar stores for a better retail experience after the epidemic, Zhang said.

"We will see a combination of online and offline business in the middle to long-term for the better development of the retail sector," he added.