The impact of Coronavirus on China’s eCommerce industry

Smartphone with Red Outline of China Superimposed
May 13, 2020
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The health crisis that has been caused by the continued spread of coronavirus across the world has gravely affected business. In the epicenter of the pandemic, China, most business sectors have been brought to a sudden halt. However, the pandemic has had a mixed impact on e-commerce as a whole. Statistics show that over 62% of China’s consumer power has been moved online, with consumers trying to avoid crowds in shopping malls and grocery stores. On the flipside, consumers aren’t spending their money on non-essential services and products, which has hurt many e-commerce businesses. To help you understand the extent of this crisis, here are a few impacts of Covid-19 on China’s e-commerce industry:

1. Drop in fashion sales

The demand for fashion and apparel has, unsurprisingly, declined significantly over the last 4 months. Fashion e-commerce businesses have been registering reduced sales and profits as more and more Chinese opt to save their money for a rainy day. Sportswear brands have also been negatively affected by the continued lockdown in China’s major cities. Gyms are closed and not many people are exercising outdoors, after all. Surprisingly, Chinese cosmetic brands have maintained a steady upsurge in sales since the coronavirus outbreak in late 2019.

2. Increase In Contactless Payments

Demand for digital payment services has grown as more Chinese continue to go into voluntary quarantine and change their shopping habits. Shoppers who were reluctant to use online payments pre-coronavirus are converting in huge numbers. These surges have grown by over 82% in Wuhan, creating an massive challenge for payment platforms to keep up with the huge payment volume. Experts predict that this could be a lasting change in payment behavior.

3. Increased service robot usage

Increased online demand in China during this crisis has forced many service providers to increase their robot reliance, particularly unmanned vehicles and drones. Millions of food businesses- eateries, restaurants, and steakhouses, etc.- are open for business, but they aren’t allowed to let in customers. Their only option for generating revenue and keeping their overhead cost in check right now is through online sales and robot usage. Automating tasks using robots also helps minimize human-to-human contact in e-commerce delivery.

4. New e-commerce management challenges

Managers of essential businesses are now faced with an urgent need for line management training in order to get the most from their employees without compromising their safety and without losing customers. There is no right way to, for example, deliver food to quarantined people, so everyone is trying to figure out what works best for them. E-commerce businesses are forced to find a way of leveraging what is currently working for them, while they experiment on new strategies that might keep their businesses afloat. Employees, on the other hand, are facing the biggest hurdle yet in their career and are looking up to their line managers to provide the needed leadership out of this quagmire. Line management training might be the solution managers need right now.

5. Growing online grocery space

China’s online grocery market had grown by 63% to 264 billion Yuan by March 2020, up from 30% growth by the end of 2019.  Grocery is one of the essential areas that have witnessed significant and steady growth during the coronavirus crisis. That explains why e-commerce bigwigs such as Alibaba and JD.com have been investing heavily in online grocery business. And to ensure that they get the lion share of the new-found lucrative online grocery space, the bigwigs have invested in cold chain supply too.

6. Discretionary goods lose appeal

The increased demand in low-priced items such as groceries has spelled doom for high-priced items such as furniture and interior décor items. These items have been affected by weakened consumer sentiment in the same magnitude as fashion items. Many Chinese consumers are not decorating their homes, for example, because they don’t see the need for such huge investments when their financial future is not guaranteed. Besides, not many people are moving between apartments, so property owners aren’t remodeling their houses as they normally do.

Final thoughts

As the coronavirus continues to spread and disrupt major supply chains, it is safe to say that the future of the country’s eCommerce is uncertain. The extended lockdown is causing significant changes to businesses and consumer behavior, and eCommerce is feeling most of the effects, both positive and negative. It remains to be seen how businesses will respond to this crisis and remain afloat until the pandemic is contained.

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