To get a sense of how China is re-opening, and where there are bumps in the road, look to the malls.
And within the malls, look to the restaurants that are housed within them. There are some warning signs that commerce – specifically retail (and within that vertical, luxury retail) – might face some headwinds in a return to some semblance of normalcy.
As Bloomberg reported, citing Changjiang Securities, restaurants account for a third of mall tenants. Those restaurants, before the coronavirus hit, had found firm footing in malls. After all, as Bloomberg wrote, the eateries were “safe in the knowledge that eCommerce rivals can’t replicate the experience of dining out with family like they can with buying a sweater.”
And here we note a bit of a ripple effect. Families who come to the eateries located within the mall are the ones who will take a few moments to notice what’s on offer in the stores and then open up their wallets and purses for impulse buys.
But in the first few weeks post-lockdown, the consumers have not been coming back in droves, which has translated into restaurants and retail outlets shutting down, or at least pushing back on rent.
The impact is likely to be widespread, not least of all for the mall operators (there are more than 41,000 malls across the country).
“This will bring a profound and long-lasting impact to the retail market,” Zhang Ping, an executive director of Citic Capital Holdings Ltd.’s real estate group, told Bloomberg by email. “If some customers face dwindling income due to difficulties of smaller companies, or if people become reliant on online shopping, this may evolve into the most rigorous challenge of the brick-and-mortar retail market.”
The headwinds seem to persist even as China’s government has been stepping up efforts to get consumers spending.
The South China Morning Post reported on Thursday (May 14) that local governments across roughly 42 cities have been issuing shopping vouchers, to the tune of almost $1 billion. Spread out over a huge population, a study from the Chinese Academy of Social Sciences noted that the vouchers, which act like coupons or discounts, equate to roughly $2.80 per consumer.
Many of these cities, as reported by China Briefing, have committed to issuing several rounds of vouchers through the next several months.
In at least some hint of consumer sentiment from China, April vehicle sales were up about 4.4 percent year on year – and here, local governments have been issuing cash subsidies.
Buying autos may speak less to rejuvenated confidence than a desire to avoid crowds, trains and public interactions. But drill down a bit and it was commercial vehicles that pulled the total tally above that 4 percent mark. Passenger car sales were down 5.6 percent year on year. In this case, getting the consumer to spend – seemingly anywhere – has been difficult.
If consumers are reluctant to spend, even with some incentives, and that reluctance comes against a backdrop where retail in general was down about 20 percent in the first quarter (though within that reading, eCommerce was up 5.9 percent, which speaks to the lockdown effect). The Chinese consumer’s appetite for consumption may continue to dwindle, putting the hoped-for retail recovery that much further out of reach.