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China affords a glimpse into the post-coronavirus retail trade, in keeping with the Bain report

The headquarters of Alibaba Group Holdings Ltd. will be lit at night before the annual Singles' Day online shopping event on November 11th in Hangzhou, China on Sunday November 10th, 2019.

Qilai Shen | Bloomberg | Getty Images

The post-coronavirus retail industry will benefit greatly from the online shopping trends already observed in China, analysts at consulting firm Bain said in a report released Thursday.

The Asia-Pacific region generates about three-quarters of global retail growth and about two-thirds of online growth, according to the Bain report, titled "The Future of Retailing in Asia-Pacific: How to Thrive at High Speed."

This growth is driven by three Chinese retailers – Alibaba, JD.com and Pinduoduo – which, along with Japan's Seven & I, are among the top 10 retailers worldwide according to Bain's analysis. The company found that about a decade ago, only one or two retailers based in the Asia-Pacific region made the top 10 list.

"What is happening in China today will happen to a lesser or greater extent in other markets, depending on the market," said Kanaiya Parekh, expert partner in Hong Kong at Bain, in a telephone interview. "People need to look to China, especially when it comes to the future of retail."

Covid-19, which emerged in the Chinese city of Wuhan late last year, has since infected more than 22 million people and killed over 786,000 people worldwide. To limit the spread of the virus, local governments have announced stay-at-home regulations and restrictions on social gatherings, which have accelerated pressure on already struggling shopping malls and brick and mortar stores.

Even in China, where the coronavirus outbreak stalled in the first quarter, retail sales still declined 1.1% year over year in July. However, the proportion of physical consumer goods sold online increased from about 19% last year to 25% or a quarter of retail sales this year, according to official data accessed through the wind information database.

One of the trends emerging in China this year is live streaming-driven online shopping. Anyone from the farmer to the professional internet personality known as key opinion leaders or KOLs can sell thousands of yuan worth of goods in minutes through interactive streaming sessions on platforms such as Alibaba's Taobao Live, Kuaishou and ByteDances Douyin.

Parekh estimates that live streaming accounted for about 7% of China's online sales before the coronavirus pandemic and could more than double this year. The report cited a spring Bain poll of 4,700 consumers in China that found respondents are now more likely to use livestreams and short videos to shop online than they did before the outbreak.

Other analysts have estimated a lower percentage of online sales, saying it is less clear whether live streaming is becoming a brand marketing tool rather than a direct driver of frequent impulse purchases.

Live streaming is just one example of the digital shopping ecosystem that has developed in China in part due to the proliferation of smartphones and broadband internet access. A broad logistics network and back-end technology have also helped reduce delivery times and costs, so consumers in China expect goods such as fresh food to be delivered within an hour.

When looking for similar growth opportunities in other countries, retailers need to consider unique aspects of local infrastructure and consumer behavior. The Bain report pointed out that even in the Asia-Pacific region, there are 48 countries, including mature markets like Japan and rapidly developing markets like India and Indonesia, that may be more closely following in the footsteps of retail development in China.

Regardless, the coronavirus has shown all retailers that they need better information about their supply chains and changes in consumer demand, Parekh said. "In the future, we may find that a retail organization may have more engineers and data scientists than buyers."

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