Part I: What international retailers can learn from how the Chinese are fighting coronavirus

New York – China was the first market severely affected by the novel coronavirus pandemic, offering a great example both in terms of fighting the virus outbreak and in order to keep the retail industry afloat. From planning ahead to ensure supply chain strength to focus on securing a healthy cash flow, FashionUnited analyses the lessons learnt from Chinese retailers in coping with coronavirus.

Recently, Euromonitor International has launched a comprehensive industry report The Impact of Coronavirus on FMCG and Service Sectors in China, pointing out that with the Asian Tiger accounting for 56 percent of global apparel production, their temporary halt of production capacity has posed and will continue to pose a challenge to apparel brand owners’ supply chain management.

Cultivate stronger online habits across generations

As families are spending more time together indoors – points out Euromonitor’s report - there is strong potential to cultivate online shopping habits among the older generation, with apparel and beauty categories most likely to benefit.

The Chinese apparel and footwear industry reached CNY2, 621 billion in 2019 in retail value, with healthy growth momentum over the past five years. However, it is currently going through a rough period given its heavy reliance on offline channels. Closed stores and disrupted marketing campaigns due to virus outbreak will negatively impact many apparel and footwear companies 2020 sales forecast. Q1, during which the spring festival occurs, is normally the peak season for the industry, therefore, the sales loss in the quarter might be difficult to compensate for throughout year.

Consumer adoption of online channels accelerated. As the crisis grew, 80 percent of Chinese consumers expressed a preference for online grocery, though only about half could make purchases due to the lack of supply, explain analysts at Bain. In this regard, JD.com reported that its online grocery sales grew 215 percent year-over-year from late January to early February.

Planning ahead to ensure supply chain should be a priority

Supply chains posed a huge challenge for most companies, as production and distribution activity slowed down significantly (or stopped) due to forced extended holidays and quarantined workers. Restrictions on travel networks created logistical bottlenecks, exacerbating inbound and outbound supply chain obstacles. These constraints left some suppliers unable to meet the surge in demand for staple items; the resulting empty shelves only fueled more panic-buying—a phenomenon that retailers outside China are starting to experience, too.

Quickly assessing the risk of deliveries being delayed for the upcoming season is key, as well as weighting the likelihood that this will translate into lower revenue through fewer sales at full price and possibly more end-of-season markdowns.

Experts looking at lessons learnt from China also advise to review planned deliveries and develop contingency plans if demand rapidly decelerates. Stop planned deliveries of nonessential products; postpone production cycles for permanent items if inventory levels are sufficient. Finally, it’s advisable to prepare adjustments to pricing/promotions/markdowns.

Private chat groups

In a recently released study, Fung Business Research, analyses the lessons learnt by Chinese retailers and offers some ideas for retailers around the world to see through the coronavirus pandemic.

During the COVID-19 outbreak, many department store and shopping mall operators have been working relentlessly to enrich the functions of their Mini Programs, set up more WeChat private groups, produce livestreaming shows more frequently to reach out to customers and pilot contactless delivery services, among other efforts.

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