Six months have passed since Wuhan was the first city in the world going into lockdown on January 23rd in response to the C19 outbreak. At first glance traffic, crowds and street views have returned to pre-pandemic imagery, with masks. But purchase attitudes and habits have changed.

Evolution of ecommerce

In the 1-2 months that most of China was under lockdown, the closing of retail doors pushed the last businesses to seriously develop their ecommerce strategy. But long before the outbreak, ecommerce has been a booming business with multiple record-breaking online shopping holidays per year.

During the lockdown period ecommerce, particularly in combination with live-streaming, went into overdrive. With no other purchase channels available and a lot of free time, these streams served the double function of low-barrier entertainment and discount hunting, creating a short-termist mindset of ‘deals deals deals’. This pressured brands to keep up with the pace of content creation and hunger for discounts packaged in online activities.  

Investing in ecommerce seems to be a step into future-proofing businesses, but for brands not operationally set up for this it’s a double-edged sword. An example of this is Nike reporting 75% growth in digital sales (representing around 30% of total revenue), but growth in ecommerce also means higher shipping and return expenses. In their 4th fiscal quarter the margins dropped 8.2%, putting pressure on Nike’s profits.  

Brands like Allbirds known for their sustainable DTC footwear took the pandemic as an opportunity to innovate with new digital tools in China. Physical store teams shifted to fulfilling online orders, which was a smooth transition as both channels have unified inventory and logistics operations. In addition, a new feature was launched allowing customers to video call staff in-store to ask questions, view product display and receive styling inspiration. This popular feature minimized disruption of customer experience and the brand is now looking into how to preserve it post pandemic.  

Elevation of physical stores

While (window) shopping has steadily returned, foot traffic in luxury malls is still down. Many upbeat images of queues outside luxury stores are connected to rumored price hikes, rather than the reported 'revenge spending' phenomenon.

Seeing how people have mostly gone back to restaurants, there’s more to it than only a concern over safety and hygiene. Especially in non-essential categories like fashion, physical stores have been losing their appeal as point of sales as it’s easier to find better value online. Instead, stores have become a the most experiential touch-points in the consideration journey.

After the successful 2018 launch of the first global Nike House of Innovation in Shanghai, the brand launched an entire new retail concept Nike Rise in Guangzhou in July 2020. The digitally enabled footwear sizing technology and product customization stations with local team jerseys drew shoppers to the store, while establishing the hub for workshop sessions and access to local sports activities builds the community. Experiences beyond product are put at the centre of the 22,000 square feet retail space at a level ecommerce isn’t able to deliver (yet).

Domestic travel retail

As new infection clusters are quickly brought under control, the desire to go on shopping holidays is growing with affluent Chinese. Whether it’s to discover new products or purchase foreign quality, people are missing their duty-free shopping fix the longer foreign countries restrict travel and China mandates centralized quarantine on inbound travel. In an attempt to tap into this market, Hainan province has raised their duty-free allowance to RMB100,000 per person each year.  

The underlying motivation to boost the economy and support Chinese design is an opportunity for brands to develop interesting retail offers only accessible in Hainan. Besides being price competitive, it would be interesting to build out retail as drop location for collaborations with local designers and foreign limited editions coming into China.  

Opportunity ideas

One of the side effects of ecommerce further developing during the C19 outbreak is the insatiable desire of Chinese consumers to find new and better deals. As this trend will further press on content creation bandwidth and profit margins, there’s a need to think about new ways of creating value to move away from being purely transactional to being more service led and high touch.