While the coronavirus remains a trending topic in most conversations, no one doubts the impact and influence it’s having on our consumer habits.
More than 10 years ago, Trilogi opened offices in Shanghai and Hong Kong with two clear goals: helping companies grow their online business, and learning about and adopting first-hand the latest eCommerce, marketing and technology trends in the Asian market.
Our colleagues in Shanghai and Hong Kong have been dealing with the restrictions and limitations linked to the pandemic for weeks, and want to share with us their day-to-day life in the Asian giant, as well as what the immediate future holds for them.
Beyond the almost desperate search for face masks, the economic effects are hitting every sector.
Tourism: the first major casualty
Tourism has been affected from day one. China is a case in point: as the epicenter of the pandemic, in 2 weeks it went from over 15,000 flights to barely more than 2,000, according to Flightradar24, and the picture seems to be spreading worldwide. This impact affects not only passenger flows but also the shipping and receiving of products globally.
Major retailers like Apple have already announced they won’t meet their Q1 targets in China, largely due to problems in their distribution and sales channels, while events, launches and meetings are being canceled day after day, with no clear guidelines or criteria so far.
Traditional business and online business: different challenges and opportunities
While Starbucks, Uniqlo, Nike and Apple have decided to close their physical stores, at least temporarily, in China’s major cities, small retailers look on in resignation as foot traffic falls and they fail to get back to their usual pace of business.
Worker migration: many workers have decided not to return to the big cities after the Chinese New Year holidays for fear of the pandemic, which is hurting large, medium and small companies operating online. According to our colleagues, an estimated 30%+ of Shanghai’s population hasn’t returned to the big cities.
Online, the sectors that have benefited are mainly those related to essential consumer goods. Trilogi’s supermarket and essential-goods clients in China have quadrupled their revenue at the start of this year. Carrefour increased fruit and vegetable deliveries by 600% during Chinese New Year, while JD.com has grown online grocery orders by 215%, delivering more than 15,000 tons between late January and early February.
That said, despite multiplying their “online” numbers, major fast-food brands are starting to reimagine delivery to avoid person-to-person contact as much as possible, as reported by Reuters
Average spending: according to a study by Rehub, although the Chinese population is pessimistic about a solution to the virus, expected average spending remains stable, so digital channels for essential purchases will be key to driving sales in the sector.
Online content consumption: according to QuestMobile, average time spent on online entertainment rose from 6.1 hours to almost 7 hours at the end of January, reaching 7.3 hours a day during the quarantine in China. And it’s not just online content: consumption of traditional media such as TV has increased by 20% in recent weeks.
Tourism: with Easter around the corner, bookings are down 20% compared with the same period in 2019, and agencies are already looking for ways to stimulate tourism at the start of the high season.
Undoubtedly, after the first few weeks the real impact can’t be quantified, but the first cases in Spain could push some businesses to breaking point in terms of sustainability, supply and product delivery.
The CNMC reports that eCommerce in Spain grew by 9.38% at the end of 2019 and already exceeds €11 billion in 2020. In the absence of specific growth data, concern about the virus and the impact of COVID-19 news suggest a positive impact on online sales, especially online purchases of essential goods.
Locally, not only has interest in face masks quadrupled searches, but in the food sector the most forward-thinking users have started showing interest online. According to a Tiendeo study on online searches, the products with the biggest increase in searches include pasta (+76%), oil (+54%), cookies (+87%), rice (+34%), water (+58%), canned goods (+15%) and frozen food (+8%).
Although in recent years major food companies have made a clear, strategic commitment to online sales, according to the observatory on the evolution of online grocery retail, 76% of the Spanish population has still never made an online purchase.
Back in 2003, Alibaba and JD.com evolved their business models because of SARS. At the time, the two giants were focused outside online, and as people avoided public spaces and trade fairs for fear of infection, they began pushing sales by phone, messaging and simple platforms. Today, both have become online benchmarks well beyond China.
On the other hand, many eCommerce businesses stock their extensive catalogs with products made in China. Some of our clients are already having problems receiving stock, so they’re scaling back marketing and promotional activity for fear of being unable to fulfill orders and meet potential customers’ needs.
In terms of transport and logistics, the growth in online sales is expected to directly affect the final step of the purchase process: delivery. Some logistics operators, besides taking measures when receiving goods, have seen the increase in orders for fresh produce and groceries force them to rethink their operations. Express and urgent deliveries may be affected in the coming weeks due to the surge in these orders.
It’s still too early to tell whether this underlying concern will be an opportunity for online sales, but everything suggests that a complex and increasingly tough sector will benefit from these forced changes in consumer habits, in both B2B and B2C online businesses.
