RSi COVID-19 Insights from Around the Globe – China Recovery Update
China, the first country to endure the COVID-19 crisis, started to ease quarantine restrictions in April, officially entering the recovery phase of the pandemic. Wuhan, the “eye of the storm” for COVID-19 began to open up again on April 8, 76 days after the start of the outbreak. As citizens begin to ease themselves back into their day-to-day lives, some notable signs of a return to normalcy include:
- The reopening of Disney Shanghai on May 11th, the first Disney Park to reopen
- Schools reopened to students on May 6th
- Restaurants started to reopen, with especially long lines for dinner on Labor Day
- Outlet shops had $15 million in sales between the weekend of May 1-4 as consumers were able to shop in person again
3 Months Post Outbreak – What can suppliers and retailers learn from China?
During the outbreak: Online and Neighborhood stores drive growth for CPGs
- During the epidemic, online channels and neighborhood supermarkets drove growth of retail sales for FMCGs. Online sales were up 29% while the sales at grocery stores and hypermarkets declined significantly.
During the outbreak: Hand Wipes, Frozen and Convenience Foods drive growth
- Consumers increased their purchases of frozen and convenience foods, items that were easy to cook and would last during an uncertain time. Instant noodles saw an increase of 63% and 40% at Hyperstores and Convenience Stores respectively. Similarly, the frozen food category saw an increase in sales of 59% ad 71% at Hyper- and Convenience Stores.
- Due to the increase in consumers cooking meals at home, the consumption of related oils, salt, soy sauce and vinegar as well as other non-staple foods increased.
- Spring Festival and Valentine’s Day-related chocolate categories showed a sharp decline in sales as consumers stayed home and celebrations were minimized or postponed.
During and after the epidemic: Demand fluctuates but tends to follow one of 3 patterns
Pattern 1 – The product’s demand spikes during the outbreak because of panic buying but has a stable recovery soon after the outbreak ends.
This pattern applies to daily necessities with regular purchases, such as fresh food and baby care products.
Pattern 2 – The product’s sales spike in a crisis, but have relatively low demand after the outbreak due to pantry loading during the epidemic
This pattern applies to daily necessities with pantry-loading behavior, such as disinfectant or hand sanitizer, home cleaning products, and dried goods.
Pattern3 – The product sees little increase in sales, followed by a decline but has a quick rebound after the epidemic, releasing demand that was squeezed during the epidemic.
This pattern applies to discretionary purchases that consumers may not have had access to purchase, such as apparel and personal care products.
After the epidemic: 3 strategies are being used to recover the retail market
- Offline accelerates the pace of online integration. Over 40 retailers launched JD.com home delivery during the pandemic and the number of registrations for o2o platforms has increased rapidly. On top of the movement to online channels, the sales volume here has doubled.
- Upgrade supply chain and logistics strategies to fully meet consumers demand of both online and offline.
- Social media played a greater role in improving sales and spreading information quickly in a more popular form. For example, McDonald’s CEO, Zhang Jiayin, livestreamed the launch of their new chicken products over Bili Bili, China’s Youtube equivalent. Similarly, Lou Yonghao, CEO of cellphone company Smartisan, sold over 900,000 devices in his first livestream on Douyin (TikTok). In China, online sales through social media platforms is becoming the new normal.
CPGs with the ability to use big data will win the new opportunities brought about by these new changes. As the rest of the globe transitions into the next phase of managing the CV-19 pandemic, China’s experience can be used as a way to prepare your business for the coming months.