Coronavirus Industry Impact in China

Coronavirus Industry Impact in China

Currently, we are experiencing a progressing shutdown in most European countries. At first the events and public activities, then sport facilities and companies encouraging home office, now most of offline retail stores and even restaurants.

In the supermarkets, fresh food such as fruits and vegetables are quickly sold out. Disinfectants and hygiene products are becoming hot buzz everywhere. The videos go mostly viral are people fighting against each other for toilet papers.

Goldman Sachs revised the 2020 global GDP growth forecast to 1.25%—implying a recession less severe than in 1981-82 & 2008-09, but worse than in 1991 & 2001.

Goldman Sachs 2020 GDP Forecast
Despite what we are observing every day, more and more people are wondering, what does all these phenomena really mean from the industry perspective? Which industries gain extravagant sales from the corona crisis and which categories will suffer the most?

Since China has been going through this crisis since Nov. 2019 and seems to slowly recover from it. There are some interesting data we have gathered from credible sources such as McKinsey & Company and Alibaba Group to share with interested industry fellows in Europe.

1. The corona virus forced industry player to explore more potential online

Alibaba announced last week on March 10, 2020 that the world’s largest furniture retailer – IKEA has opened its flagship store on China´s biggest B2C online marketplace Tmall.
Ikea Tmall Store
In just 7 days, IKEA already generated 1.01 million store fans and more than 1.5 million RMB (~0.2 million EUR) sales. (Source: data from Tmall on March 17, 2020, eTOC analysis) The corona quarantine forced most IKEA stores in China to close for about 2 months. IKEA made full use of e-commerce that brought phenomenal additional sales which greatly compensated the offline sales loss.

2. Coronavirus industry impact varies

According to McKinsey & Company recent mobile survey published in March 2020, the consumption of discretionary categories (i.e. skincare, make-up, and alcohol) suffered with significant sales decrease. Home cleaning & hygiene received a boost as hygiene awareness rises facing the virus. Fresh food and snack food consumption vary during COVID-19 likely due to the changing supply availability.
Coronavirus Industry Impact
Because many consumers can’t go to restaurants, they have to cook at home. According to China´s 2nd biggest e-commerce platform JD, kitchenware sales have grown significantly with biggest sales increase for baking tools with 332% YoY growth.

3. Chinese consumers are paying even more attention on product safety

Product safety due to coronavirus
Chinese consumers have already been paying high attention to product safety, environmental product, and exercising and heathy eating. COVID-19 situation has renewed this attention on these aspects, this trend will therefore keep going.

4. Under quarantine, people in China turn to livestreams and brands shift marketing more to digital

To cope with corona virus quarantine, people in China have been using more digital means to kill the time.

Traffic to Alibaba’s Taobao Live streaming platform has been more than doubled in comparison to the same time in 2019.Among others, pets have become an obvious hit online, especially pet pigs, as “pig livestream” was one of the most popular search keywords in February 2020. JD also noticed a sales jump of pet products.

Both confirmed by McKinsey & Company and Alibaba Group, brands and retailers have shifted resources more to digital.

Nike launched livestreaming initiatives to provide exercising classes and created “at home sports” themes to engage with consumers.

Loreal Increased overall social spending and digital sales.

Mead Johnson created COVID-19 relevant branded assets to build emotional bonding (e.g. video of Mead Johnson CEO to customers).

Reported by Alibaba Group News Alizila, local cosmetics brand Forest Cabin temporarily closed about half of its 337 stores across China due to the virus. Sales had dropped 90% during the Spring Festival holiday, traditionally a peak season for shopping, confirmed by the brand founder. He also estimated a loss of up to RMB30 million ($4.26 million) a month and possible bankruptcy in under two months. But the brand embarked on a turnaround strategy with livestreaming. In just 15 days, Forest Cabin’s sales surpassed the same day last year by 45%.

5. Industry impact in Europe

Since the European countries are going through the same situation as China experienced 2 months ago and we start to observe some industry impacts, there might be some insights can be learned by the European brands and retailers to better prepare for the crisis.

Want to have a first free consultation session about selling and growing in China via e-commerce and digital marketing? Contact us.