International

Planning For Recovery: Lessons Learned From China

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In normal times, retailers plan for the holidays in July and August. These are not normal times. But it’s not too far afield for retailers to start planning ahead for normal times — or to envision what their businesses will look like 45, 60 or 90 days hence — because if China’s experience with the coronavirus is any teacher, the recovery of the U.S. economy is most likely about six weeks out.

Recent reports from China show how bad its economy dipped and how much it’s coming back. Most reports put China in the initial stages of recovery. Six weeks after the initial outbreak, supply chain congestion stands at 73 percent of 2019 levels, up from 62 percent at the worst part of the epidemic. That means 73 percent of Chinese goods are actually getting through to store shelves. Coal consumption (not the most environmentally-friendly metric) has bounced from 43 percent  to currently 75 percent of 2019 levels. Overall confidence is also climbing. Here’s a mind-boggling stat about how close the Chinese economy came to shutdown: real estate transactions fell to 1 percent of 2019 levels. They’re now at 47 percent.

“Services and consumption now contribute more than half of China’s GDP,” Bert Hofman, a former China country director for the World Bank, told the FT. “The economy is therefore more sensitive to a drop in domestic demand resulting from the epidemic and the government’s control measures. It is harder to make up lost ground in services than it is in manufacturing.”

So while the economy is struggling to regain its footing in China, its also evidence that its draconian measures to contain the virus worked. They may not have been implemented quickly enough. As several publications have reported, epidemics rise and fall with the rate at which populations interact. They also challenge the accuracy of reporting methods, such as the amount of people being tested. “When we see cases jump suddenly — for example as we’ve seen in the U.S. recently — that reflects a testing capacity issue, rather than being a true reflection of the epidemic itself,” Caroline Buckee, an associate professor of epidemiology at Harvard School of Public Health, told Wired.

Retail is bouncing back in China. Apple has reopened 42 stores in China and malls in China are also beginning to see more foot traffic. Hermes says it has reopened all but two of its stores in mainland China, after closing 11 locations. Chow Tai Fook Jewellery Group Ltd., the world’s biggest jeweler by sales, said about 85 percent of its more than 3,600 Chinese stores resumed operations this week, leading one Fortune article to speculate that a new cycle of  “revenge spending” may have started.

The best estimation of how the U.S. retail economy has been hit so far comes from Digital Commerce 360. It says 47 percent of retailers expect to take a revenue hit due to the coronavirus, according to a survey. Fifty-eight percent say the virus will impact consumer confidence, and 22 percent say there will be a significant impact. Online sales have increased 52 percent compared with the same time frame a year ago, and the number of online shoppers has increased 8.8 percent  since the coronavirus began, according to SaaS platform provider Quantum Metric.

Will eCommerce rise dramatically in the U.S.? Reliable numbers will have to wait until retailers report March and Q1 sales figures. It was apparent in China that internet users stayed away from stores and crowded locations. According to a March 2020 YouGov survey, 85% of internet users in China said they had avoided crowded public places in the past two weeks. A February 2020 Coresight Research survey showed that 27.5% of U.S. internet users were avoiding public places, on par with YouGov’s findings. But it also indicated that 58.0% would do so if the coronavirus outbreak worsens in the U.S. Shopping centers/malls were expected to be the most-avoided places.

“There is no mistaking the challenge of this moment,” said Apple CEO Tim Cook. “The entire Apple family is indebted to the heroic first responders, doctors, nurses, researchers, public health experts and public servants globally who have given every ounce of their spirit to help the world meet this moment. We do not yet know with certainty when the greatest risk will be behind us. And yet I have been inspired by the humanity and determination I have seen from all corners of our global community. As President Lincoln said in a time of great adversity: ‘The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew, and act anew.’”

 

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PYMNTS STUDY: THE CROSS-BORDER MERCHANT FRICTION INDEX – JUNE 2020

The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.

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