China offers glimpse into post-covid retail industry

The post-covid retail industry will draw heavily from the online shopping trends already seen in China. Asia Pacific generates about three quarters of global retail growth, and about two thirds of online growth. Riding that growth are three Chinese retailers Alibaba, JD, and Pinduoduo, which together with Japan’s Seven & I now rank among the top 10 retailers worldwide.

About a decade ago, only one or two Asia Pacific-based retailers made the top 10 list. What is happening in China today is going to happen in other markets to a lesser or greater degree depending on the market. People need to be looking at China, especially with regards to the future of retail. Covid has since infected more than 22 million people worldwide and killed over 786,000 people.

In an effort to limit the virus’ spread, local governments have announced stay-home orders and limits on social gatherings, which have accelerated pressure on already struggling malls and brick-and-mortar stores. Even in China, where the covid outbreak stalled in the first quarter, overall retail sales still fell 1.1% in July from a year ago. However, the share of physical consumer goods sold online climbed from about 19% last year to 25%, or a quarter, of retail sales this year.

One of the trends that has taken off in China this year is livestreaming-driven online shopping.

Everyone from farmers to professional internet personalities can sell thousands of yuan worth of goods in just a few minutes through interactive streaming sessions on platforms such as Alibaba’s Taobao Live, Kuaishou, and ByteDance’s Douyin. Livestreaming accounted for about 7% of China’s online sales prior to the covid pandemic, and could more than double this year. A survey of 4,700 consumers in China in the spring, found that respondents were now more likely to use livestreams and short videos to make online purchases than prior to the outbreak.

It is less clear whether livestreaming will become more of a brand marketing tool versus a direct driver of what can often be impulse purchases. Livestreaming is just one example of the digital shopping ecosystem that has developed in China due partly to high penetration of smartphone and broadband internet access. A broad logistics network and back-end technology have also helped cut delivery times and costs, making one-hour delivery of goods such as fresh grocery, something consumers in China now expect.

When looking for similar growth opportunities in other countries, retailers will need to consider unique aspects of the local infrastructure and consumer behavior. Even within Asia Pacific, there are 48 countries that include mature markets such as Japan, and fast developing ones such as India and Indonesia, which may follow more closely in China’s retail development footsteps. Regardless, the covid has shown all retailers they need better information on their supply chains and changes in consumer demand.

A retail organization may have more engineers and data scientists than buyers in the future.