Retailers might have been hoping that when the worst of the COVID-19 outbreak is over, consumers fed up with being confined to their homes would hit the shops in big numbers, but early evidence from China, the epicentre of the pandemic, shows it’s not proving quite that simple.
Beijing has been keen to highlight the success of its efforts to contain the virus and get businesses back to normal. The Ministry of Commerce reports that around 80% of restaurants and more than 90% of commercial facilities have reopened across China. Even in Wuhan, the city worst affected, shopping centres are reopening.
But the Financial Times notes that even though the shutters are up and the cash registers are ready to ring, consumers are wary of going back to business as usual, concerned that their safety is still at risk. It reports the electronics retailer Suning.com saying some of its stores are only getting around half of their usual footfall.
The government had hoped that state-issued vouchers would encourage a spending spree to aid economic recovery. That seems not to have materialised, at least not yet, as people have lost their jobs or fear being laid off so remain reluctant to spend big.
“Even if shoppers come into the store, they won’t buy anything unless goods are on special offer,” an employee at a Carrefour grocery in central Shanghai told the FT.
The fast-fashion retailer H&M’s performance in China could be seen as a sign of what’s to come for the rest of the sector, not just here but around the world as other markets pass their peaks of infection and start to allow normal life to resume.
Week-by-week analysis of sales by GlobalData shows that even at the point when 89% of H&M’s China stores were back up and running, sales were still 79% lower than during the same week in 2019. By mid-March, when 99% of stores were open, sales nationwide were still 23% down, InsideRetail Asia reports.
GlobalData principal analyst Honor Strachan said this points to a need for retailers to think carefully about how quickly they reopen bricks-and-mortar stores, given that they will be incurring running costs they aren’t necessarily recovering via sales.
And she cautioned that the recovery time could be even longer in the US and Western Europe than it is in China, where there is a stronger propensity to spend. Each retailer must adapt their recovery strategy according to consumer sentiment in each market, spending levels on fashion, online penetration and the time in the season.
“All of these factors will impact how and when physical stores should reopen,” she said. “Understandably, retailers will be keen to reopen stores to clear seasonal stock and recover lost revenue, but the impact to profitability by opening these stores too early could be severe.”
Sourced from Financial Times, Inside Retail Asia; additional content by WARC staff