Leading the way out of crisis

Recovery takes root in China

With domestic cases of COVID-19 in China continuously declining, life across most cities is returning to normalcy, according to a new study by Reuter: Communications. To what extent is consumer confidence on the rise, asks Jason Holland.

Photo by Cheng Feng on Unsplash

The COVID-19 outbreak began in China just before the Lunar New Year holiday in January 2020. With the country now seemingly on the road to recovery, can the rest of the world be hopeful that a similar path awaits?

“As domestic cases of COVID-19 in China have continuously declined to ultimately zero new cases, many aspects of life across most cities are returning to normalcy,” reports Reuter: Communications.

The agency, which aims to help luxury brands succeed in China and Asia, has published a new study called ‘Green shoots – Is recovery in sight in China?’. As of mid-March, business in China appears to be bouncing back, according to the study. Analysts expect pent-up consumption to contribute to +15% GDP growth in the second quarter, it says.

Recovery rates across the world will not be uniform though, and in large part will depend on a country’s response to the outbreak. In all cities in China, people took self-imposed home-quarantine for all of February, Reuter: Communications notes.

“With the entire country on lockdown, retail sales dipped -20.5%, industrial output declined by -13.5%, and fixed asset investment by close to -25%.”

Tmall sales of Lancôme flagship store (RMB million)

Source: quingbaomofang.com, WalktheChat Analysis

Tmall sales of Perfect Diary flagship store (RMB million)

Source: quingbaomofang.com, WalktheChat Analysis

Photo by Erik Mclean on Unsplash

But the path to recovery began in March. More than 50% of employees returned to work as of the first week of March, according to the agency, including 74% and 82% respectively in the retail and food & beverage sectors.

By the second week of March, approximately 95% of large companies outside Hubei province and around 60% of small- to medium-sized enterprises had resumed operations. As of 5 March, more than 90% of Starbucks’ China outlets were again operating.

Luxury brands are also returning to normal, according to the study, and are reactivating their marketing and communications. By 20 March, Hermès had reopened all but two stores, Burberry had reopened most stores, and Chow Tai Fook had reopened more than 85% of its 3,600 stores.

Online sales remained solid, with beauty brands recording steady activity on channels such as Tmall. International Women’s Day on 8 March proved particularly successful. “Many high-end beauty brands, such as Shiseido, Lancôme, Estée Lauder, Laneige and SK-II, who took part in Tmall’s 8 March promotion, saw a +200% increase in sales thanks to discounts and express delivery returns,” according to Reuter: Communications.

There has also been a +60% increase in live-streaming since the start of the outbreak, according to the study. Nearly 1,000 fashion, beauty and lifestyle brands live-streamed via WeChat Mini-Programs as part of International Women’s Day promotions. As a result, WeChat Mini-Program social commerce traffic has increased by +83%.

China room nights booked index

Volume of room nights booked across Shiji Distribution Solutions customers in china during COVID-19 epidemic

Source: Shiji Distribution Solutions

  • As domestic cases of COVID-19 in China have continuously declined to ultimately zero new cases, many aspects of life across most cities are returning to normalcy.
  • The number of imported cases increased in March, prompting government to impose severe restrictions on international inbound travel
  • As China is on a road to recovery, brands are reactivating their marketing and communications.
  • Online sales, travel bookings and offline store foot traffic are all recovering as consumers have started to release their pent-up consumption demand of the past two months.

Photo by Logan Weaver on Unsplash

Online travel company Tongcheng-Elong reported substantial booking growth during 23 February-1 March compared to the week before. Daily bookings for hotels were up +40%; daily bookings for domestic flights soared +230%; and +250% growth in domestic flights for June was recorded.

A recent survey conducted by the Pacific Asia Travel Association, IVY Alliance, and China Comfort Travel showed that both domestic and overseas destinations remain desirable, with 87% of respondents planning to travel in 2020 (32% in July-August).

The top ten overseas destinations are Japan, Thailand, Europe, the Maldives, Singapore, New Zealand, the US, South Korea, Sri Lanka and Malaysia. Health and safety is the biggest concern among these travellers, and travel agencies and destination authorities will be expected to take all necessary measures and share relevant information transparently.

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The Moodie Davitt eZine

Issue 278 | 7 April 2020

The Moodie Davitt eZine is published 12 times per year by The Moodie Davitt Report (Moodie International Ltd). © All material is copyright and cannot be reproduced without the permission of the Publisher. To find out more visit www.moodiedavittreport.com and to subscribe, please e-mail sinead@moodiedavittreport.com

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