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Coresight Research’s Coronavirus Blog features insights from our global research analysts on the impact of the outbreak on retailers and consumers in the US, Europe and Asia, and provides free research and data on the coronavirus crisis. Check back regularly for updates.
You can also view our Coronavirus Insights reports, which provide deeper coverage on the retail impact, and our Coronavirus Tracker, which brings together key data including timelines, event cancellations and temporary store closures.
On June 26, UK grocery market leader Tesco provided a trading update for the first quarter of fiscal year 2021 (ended May 30), which included an update on the impact of Covid-19.
1. Tesco Had a “Good Crisis” Online
Tesco’s multichannel model, with a substantial online grocery business built on manual picking in regular supermarkets and dark stores, proved highly resilient as online demand surged. Tesco was able to scale up the number of weekly delivery slots from around 600,000 to 1.3 million in around 5 weeks. This was in contrast to highly automated, fixed-capacity online models, which found themselves constrained when demand jumped.
Source: Company reports
2. Tesco UK Sales Mix Revealed the Shape of Lockdown Demand
Reporting on the impacts of the coronavirus crisis by major category, Tesco provided a rare look at its UK sales mix (shown below). This showed strong growth for packaged food, while fresh food grew strongly (at 7.6% year over year) but slightly underpaced the 8.7% growth in total UK comparable sales. Tesco saw a decline in demand for clothing, where comparable sales were down by almost one-fifth, and a more modest slowdown in general merchandise.
Assuming clothing’s 2.6% share of Tesco UK sales in the first quarter of last year was representative of FY20 overall, Tesco UK and Ireland will have turned over approximately £1.2 billion in clothing sales in the year ended February 2020. For context, this compares to £3.2 billion in UK clothing and home sales at apparel market leader Marks & Spencer in the year ended March 2020.
3. Tesco Confirmed a Reversal of the Shift to Discount Formats
Tesco management noted the reversal of the multiyear trend toward discount formats—or at least Aldi. Tesco saw a sharp increase in shoppers switching from smaller-store, limited-line Aldi to full-range Tesco, and this coincided with shoppers looking to consolidate their grocery shops into fewer trips to supermarkets.
This week, data from Kantar Worldpanel confirmed the trend of Aldi underpacing larger incumbents: In the 12 weeks ended June 14, Aldi grew sales by 8.0% versus 12.1% at Tesco, 10.2% at Sainsbury’s and 10.5% at Morrisons, according to Kantar.
To stimulate the economy and encourage consumers to release pent-up demand post Covid-19, the Shanghai Municipal People’s Government co-launched a new, large-scale shopping holiday with the retail industry on the evening of May 4, 2020. The two-month-long “55 (Double Five) Shopping Festival” involves online and offline retailers and platforms, including Alibaba, JD.com, L’Oréal, Pinduoduo, Suning, Tesla and Shanghai retail conglomerate Bailian Group. The shopping festival will run till the end of June.
The omnichannel festival will feature around 830 marketing campaigns in total, with promotional coupons and vouchers being issued on mobile e-commerce platforms and at shopping mall terminals to drive consumers that shop online to return to malls to access deals. Bailian has pledged to send out vouchers worth ¥1.2 billion ($169.4 million) across its 22,000 supermarkets and department stores in Shanghai. Alibaba’s platforms will offer vouchers worth ¥2 billion ($282.3 million), and its platforms will also feature products from the Hubei province, where the coronavirus originated.
Shanghai is encouraging offline retailers to use digital tools to market products and creatively engage with consumers. For instance, Suning asked its shops in Shanghai to promote products via livestreaming, with shop assistants showcasing products in front of a phone camera; consumers can purchase directly through embedded links in the videos in real time.
A Suning livestreaming session during Double Five
The 55 Shopping Festival had a successful start. On Tmall Global—Alibaba’s cross-border e-commerce platform—sales of imported products grew by 239% year over year on the first day of the festival. Sales in offline shopping malls—such as Global Harbour shopping mall, Hang Lung shopping mall and Mixc shopping mall—reportedly saw 20% year-over-year growth during the period May 5–13 , 2020.
With China’s economy experiencing a big hit from the coronavirus pandemic, Internet giants are seeking opportunities for growth in lower-tier markets. Online retail sales of physical goods in lower-tier markets will account for an estimated 45% of total online retail sales in China in 2025, worth some ¥8.1 trillion (around $1.25 trillion), according to Xingye Research. This would represent a CAGR of 18.3% from 2018 to 2025 (although these estimates were made before the disruption caused by Covid-19).
Group buying has proved to be a successful sales strategy in these markets. On April 29, 2020, Tencent launched a mini program, Xiao’e Pinpin, to allow users to purchase products at lower prices by forming groups: In essence, it is a group-buying mini-program, similar to Pinduoduo. The mini-program shows products in a content feed, featuring details about items from various sellers. Currently, categories on sale include electronics, apparel, grocery and cosmetics. Tencent charges merchants a deposit to sell through the platform; they must ship orders in a timely manner and follow Xiao’e Pinpin’s regulations in order to avoid having money deducted.
Xiao’e Pinpin mini-program
Western brands and retailers looking to grow in China could partner with these group-buying platforms to tap into lower-tier markets following the coronavirus crisis.
With China returning to normalcy, people have been increasingly venturing outside, undertaking more outdoor activities. We have seen retailers and brands seize this opportunity to promote their outdoor products.
Sports retailer Decathlon launched a Super Brand Day campaign together with Alibaba’s Tmall e-commerce platform on April 24, 2020—through which it sold protective sports gear, skateboards and roller blades, outdoor apparel and tents on the platform. The concept of Super Brand Day, which was introduced in 2015 by Tmall, is a marketing campaign that showcases select brands to Chinese consumers. Each participating brand has a 24-hour period in which to provide consumers with special offers and unique shopping experiences.
Decathlon store on Tmall
Decathlon saw sales of its outdoor products rise considerably on its Super Brand Day, and the company sold around 10,000 trampolines in just 10 minutes before running out of stock. Part of Decathlon’s success came from its marketing strategy and the upgrading of its delivery services. The brand designed a mobile game for the day, which consumers could play while they were shopping. The retailer also offered an in-store pickup service across 150 offline stores, as well as launching a two-hour home delivery service for addresses in close proximity to its stores.
As lockdowns begin to ease in Western countries, brands and retailers could look to capitalize on a likely increase in demand for outdoor categories. Furthermore, there could be opportunities to stimulate demand for such products over the summer months as consumers search for alternative means of outdoor entertainment rather than traveling post Covid-19. Companies can partner with e-commerce platforms to launch campaigns that drive brand awareness, and they should implement strategies to engage with consumers through upgraded services and experiences, such as mobile gaming and fast delivery services.
During the international Labor Day holiday (May 1–5, 2020; also known as “May Day”), China saw 104 million people make domestic trips, contributing ¥43.2 billion ($6.1 billion) to tourism revenue, according to the Ministry of Culture and Tourism. That is a big increase compared to the three-day Qingming holiday (April 5–7), during which 43 million trips were made by Chinese travelers, according to the China Tourism Academy—and the three-day holiday brought in revenues of ¥8.3 billion ($1.2 billion).
Online sales across all e-commerce platforms saw 36.3% year-over-year growth during the Labor Day holiday, according to China’s Ministry of Commerce. However, compared to the 2019 May Day holiday—which lasted for four days—this year saw a 40% decrease in the number of domestic trips made, from 195 million last year. Tourism revenue was down 60% from ($9.9 billion) in 2019.
With the holiday falling after the Covid-19 outbreak in China, the Ministry of Culture and Tourism highlighted the adoption of “intelligent travel” technology in popular tourist sites. These sites were required to track guest capacity using mobile technology in order to limit crowds and thus reduce the risk of spreading the coronavirus.
Tourism industries in Western countries could develop technologies to implement similar measures in coping with large gatherings when tourism resumes, such as tracking guest capacity at major social sites.
Given the temporary store closures and depressed demand in the West amid the coronavirus crisis, retailers selling discretionary goods could explore opportunities to sell in non-Western markets, in order to boost sales and clear inventory—as long as products still have relevance and stocks are cleared in a way that maintains brand integrity.
In China, demand following the Covid-19 crisis is strong in the off-price luxury sector. As such, we have seen some Chinese e-commerce platforms recently launch luxury outlet channels:
Western brands and retailers could consider collaborating with these luxury discount platforms in China to clear some of their inventories, given that many are likely to be grappling with excess stock in the wake of a coronavirus-led downturn in demand.
Retailers and brands turned to livestreaming amid the coronavirus outbreak as they continued operations online. This trend extended to events, and e-commerce functionality was integrated to maximize sales opportunities.
Shanghai Fashion Week, held on March 24–30, 2020, became the world’s first fashion-week event to livestream its shows. The event was initially postponed due to Covid-19, but organizers then decided to partner with Tmall instead, to move Shanghai Fashion Week online. The event comprised more than 150 designers and brands presenting over 1,000 products of their autumn-winter collections via livestreaming. Its “see now, buy now” format allowed consumers to purchase or pre-order products they saw on the runway directly from their smart devices while watching the livestreaming sessions.
According to Tmall, the entire event drew over 11 million views and generated more than ¥20 million ($2.82 million) in sales. Chinese luxury brand Icicle attracted over 238,000 views during its two-hour livestream show, and sales through its Tmall store increased by 100%.
While traditional fashion weeks are unlikely to be replaced, this innovative online model may accelerate the combination of digital and physical in future fashion, and wider retail, events.
International brands continued to launch on Tmall and Tmall Global during the coronavirus outbreak. In March 2020, IKEA, streetwear brand Bape, sneaker and apparel brand Undefeated and luxury brands Prada and Miu Miu all made their debuts on Alibaba’s e-commerce platform.
The launch on Tmall of cosmetics brand Huda Beauty—which sells eyeshadow palettes, liquid lipsticks, foundation and false lashes—came at an appropriate time, as demand for eye-makeup products in particular have been soaring in China. We have seen an ongoing trend on social media whereby influencers share makeup looks and tutorials that focus on eye makeup. Eyeshadow sales on Tmall increased 40% year over year between January and March 2020, according to the platform. Beauty has also proved to be a more resilient discretionary product category in China during Covid-19: Data provider ECdataway reported that sales of cosmetic and skincare products on Tmall jumped 89.5% during the International Women’s Day (March 8) promotion period.
According to Tmall Global, 300,000 people visited Huda Beauty’s flagship store on its opening day, March 25. Furthermore, KOL Austin Li featured the newly launched “Mercury Retrograde” eyeshadow palette during one livestreaming session, which accumulated over 12 million views.
KOL Austin Li recommends Huda Beauty’s eyeshadow palette during a livestreaming session
With brick-and-mortar stores having been temporarily shut down during the pandemic, international brands actively turned to digital channels to sell their products: Alibaba’s e-commerce sites remain the most-visited destinations for China’s shoppers—for instance, Tmall has more than 800 million monthly active users.
On May 20, 2020, Marks & Spencer (M&S) reported its full-year results and provided management’s thinking on the outlook for its core operating segments of UK clothing and home and UK food. We discuss three learnings from management’s presentation.
For 4Q20, the company reported comparable sales growth of (13.8)% in UK clothing and home, versus consensus of (14.2)%; and +4.6% in UK food, versus consensus of +5.2%. For the subsequent six weeks, ended May 6, M&S reported total sales down 75.0% in clothing and home and down 8.8% in food.
1. There is resilience in diversity.
M&S’s mix of clothing, homewares and food has proved to be a strength, with the relative resilience of food demand offsetting weakness from enforced closures of clothing and home stores. As shown below, M&S has seen a variation in performance by product and channel, with online sales up almost 20% in the quarter to date and much more strongly in the most recent weeks.
2. The crisis can be a catalyst for organizational change.
M&S could come out of the crisis a leaner and more nimble company. CEO Steve Rowe said the crisis would “accelerate transformation” at M&S, showing how the retailer can work faster, more flexibly and more effectively. Operating as an online-only business in clothing and home forced M&S to “thinking and organizing with almost a pure-play mentality to compete effectively,” Rowe said. In apparel, the crisis has forced the rationalization of SKUs and will prompt M&S to work with fewer, larger suppliers.
M&S has been reshaping its store estate and “there has probably never been a better time” to relocate stores and improve the quality of store space, Rowe said. The company has opened negotiations with landlords of stores to establish whether onerous lease terms will be viable in the post-coronavirus world.
The company plans around £500m of cost reductions in FY21, including in marketing, recruitment, technology, logistics and fixed property costs.
3. The shape of future consumer demand remains highly uncertain.
Based on sales trends in the first quarter so far, M&S management laid out a scenario of a 74% fall in sales in clothing and home in 1Q21. Under this scenario, sales declines would ease in 2Q and 3Q but still be down 6% in 4Q. Rowe emphasized that this did not represent a forecast, but is the scenario against which M&S has planned steps to reduce costs and manage cashflow.
Management noted that from the outset it has planned for a crisis that will last through the year and beyond. And even once the crisis phase is over, “customers may never shop the same way again,” said Rowe.
On April 9, 2020, Chinese food-delivery platform Meituan started to incorporate new types of products—such as smartphones, beauty products and books—in order to boost sales, as its food business was negatively affected by the coronavirus crisis. The company had warned of negative sales growth and operating loss for its first quarter of 2020, due to challenges in both demand and supply.
On the Meituan platform, consumers now can now purchase smartphones from Huawei in three Chinese cities and beauty products from Sephora in 16 Chinese cities. Nonfood delivery can be made within 30 minutes to an hour depending on location.
These offerings build on Meituan’s existing services in the physical goods category. In March 2020, the company partnered with 72 physical bookstores in Beijing to sell their products, waiving the fees for them to join the platform and reducing service fees to alleviate the burden on bookstores amid the coronavirus crisis.
By furthering its move to sell nonfood goods, Meituan recognizes that consumers are more likely to eat at home for the near future following the pandemic. Also, the wide range of offerings should boost demand for the platform’s services. It is a good time for the company to diversify its offerings as consumers spending priorities begin to settle to some normalcy, gradually return to purchasing discretionary goods.
Coresight Research continues to build out its data sets and analysis related to the coronavirus and retail, across its Coronavirus Tracker data portal and its Coronavirus Insights reports. Here’s what’s new.
Newly added to our Coronavirus Tracker are:
New in our Coronavirus Insights reports are:
Away from the coronavirus crisis, this week sees the launch of our Amazon Databank, which offers subscribers an abundance of proprietary data on the retail giant. This includes Coresight Research survey data on rates of purchasing for different categories on Amazon.com, including data that are trended year to year for apparel and groceries; penetration rates for Amazon Prime membership in the US; Amazon’s global and US gross merchandise volume (GMV) and its US e-commerce market share; and more. Find all the data here.
In the UK and other European countries, new data points show the magnitude and shape of the declines in discretionary retail sales during the recent lockdowns.
Figure 1. Next: Full-Price Sales per Week
Figure 2. Zalando: GMV Development
Benchmarked to data from the Office for National Statistics (not the BRC), we expect total UK retail sales to have fallen by around one-quarter year over year in April. We estimate the UK store-based nonfood retail sector will report a total year-over-year sales decline of close to three-quarters in April, with e-commerce accounting for the lion’s share of remaining sales in this sector. The Office for National Statistics reports UK retail sales for April on May 22; find our report covering March data here.
JD.com’s fintech unit, JD Digits, launched a round of promotions for its social app Liwo, which was launched in September 2019 and is aimed at facilitating communication and interaction among university students.
Apart from socializing, Liwo also has e-commerce functions—businesses can open online stores on Liwo to sell products such as books to students. The app also provides student-only discounts.
With universities temporarily closing in China due to the coronavirus crisis, the Liwo app had particular salience in encouraging students to engage with each other as well as shop while they were not at school. JD Digits looked to increase traffic to the app through promotional content. For example, between April 9 and April 21, students were offered the chance to win ¥10,000 (around $1,420) by sharing personal photos on the app; other rewards included hairdryers and water bottles.
The coronavirus-enforced quarantine in China impacted how consumers spent their time at home, including their screen time. People hunted for mobile content that met their needs at home, and short-video platforms such as TikTok proved very popular. The number of daily active users on TikTok increased by 42.7 million between January 24 and February 2, 2020, according to data firm QuestMobile.
We review the types of online video content that proved popular among Chinese consumers during the outbreak.
Education and learning: Short-video platform users turned to educational content—such as computer skills courses and cooking classes—to make productive use of their quarantine time at home. Key opinion leader (KOL) Amanda posts cooking tutorial videos on TikTok; she had accrued 1.6 million followers, as of May 5. One of her videos, which featured instructions on how to make a Japanese-style black-bean dish, received 23,000 likes between February 24 (when it was posted) and May 5.
Amanda’s cooking tutorial for a black-bean dish
Interior design and do-it-yourself (DIY): As people spent more time at home, they had a greater desire to make their homes more attractive and comfortable, prompting them to turn to TikTok to look for content on home décor and DIY projects. Reflecting this, KOL Yanzi’s video on “how to better design your kitchen”—posted on March 14—received 19,000 likes by May 5.
Yanzi’s video on “how to better design your kitchen”
These video trends might continue post crisis, so brands could consider exploring creative ways to leverage these types of content as part of product marketing strategies going forward.
On February 15, 2020, Alibaba’s supermarket chain Freshippo (formerly Hema) began to sell its products via a community group-buying model to ease delivery pressure, as many customers were doing their grocery shopping online.
Residents from the same community compound could form a group on WeChat to communicate what they wanted to buy from the Freshippo store near their home. Freshippo staff would deliver the orders to the designated collection point the following day. This community group-buying model helped to reduce the number of deliveries made to the same area.
The community group-buying model was popular before the coronavirus outbreak: Popular community group-buying platform Xing Sheng You Xuan was processing an average of 4 million orders per day by September 2019, when it achieved monthly gross merchandise volume (GMV) of ¥1.1 million (around $155.3 million)—three times the GMV from January 2019. The coronavirus outbreak made this model more popular due to its community-based nature—making it easy to deliver orders in bulk and with less labor required due to a reduced number of deliveries. Many other retailers in China also implemented their own community group-buying model. For instance, multicategory retailer BBK launched its community group-buying unit Xiaobu Youxian on February 27, 2020.
Companies in the US could look into implementing community group-buying models as part of their delivery strategies during the coronavirus crisis, which would reduce labor and delivery requirements as well as minimizing contact and reinforcing lockdowns, because residents of a community would not need to visit physical stores.
The announcement of the nationwide lockdown in India due to the coronavirus pandemic brought about a lot of challenges for retailers across numerous sectors. For grocery retail, there was a sudden surge in demand, while the supply chain experienced severe constraints. However, leading players in the industry found innovative ways to operate during the crisis; we outline some examples below.
1. Forging Strategic Partnerships
Online and offline grocers and FMCG retailers have partnered with various food–delivery services, cab aggregators and e-commerce firms that usually focus on non-essential goods.
Food-delivery platform Zomato has joined forces with online grocer Grofers for the delivery of essential items. According to Economic Times, Zomato is also considering an acquisition of Grofers for a valuation in the region of $750 million, although Zomato has refuted those reports.
Pizza chain Domino’s entered into a partnership with ITC Foods to launch Domino’s Essentials, an essential goods delivery service that first started in Bengaluru and was then made available in Chennai, Hyderabad, Kolkata, Mumbai and Noida.
After recently entering into a $5.7 billion deal with Facebook, Reliance Industries’ online grocery shopping platform JioMart has gone live in selected suburban regions of Mumbai. Consumers can order via JioMart by messaging via WhatsApp. They are then sent a link that opens up a mini store on the browser. The JioMart-WhatsApp partnership is one of the key components of the Facebook-Reliance deal.
Uber has partnered with retail store chain Spencer’s Retail, e-commerce firm Flipkart and online grocer Bigbasket to help deliver groceries and essentials.
Metro Cash & Carry has entered into a deal with food-delivery platform Swiggy for last-mile delivery of essentials. The service was piloted in Bengaluru and is expected to be rolled out across Metro stores in all cities by early May.
Online bike taxi aggregator Rapido has tied up with retail chain Big Bazaar, Bigbasket and Spencer’s Retail to aid these companies with their last-mile delivery.
FMCG company Britannia Industries partnered with online delivery platform Dunzo to launch its “Britannia Essentials” store. Dunzo began delivering food essentials in Bengaluru, and the service will be made available in other major cities.
2. Reverse Supply Chain as a Temporary Procurement Arrangement
With the countrywide lockdown in India having put a spanner in the works for FMCG companies and suppliers in terms of the distribution of goods, some retailers have stepped up to ensure that their operations are not unduly affected.
Retailers such as Grofers, Spencer’s Retail and Lots Wholesale have been dispatching their own trucks to the distribution centres of FMCG companies and large suppliers.
3. Bulk Delivery to Resident Welfare Associations (RWAs)
Both offline and online grocery retailers have launched a system in collaboration with RWAs (voluntary legal associations that represent the interests of the residents of a society) of India’s apartment blocks and condominiums, whereby they supply essentials to RWAs who then handle distribution. The idea is to optimize logistics by catering to a maximum number of consumers with limited resources.
Grofers tied up with more than 100 RWAs across metro cities to deliver essentials during the lockdown. Metro Cash & Carry, Reliance Retail and Spencer’s Retail are among the brick-and-mortar retailers that have entered into such partnerships. Under this arrangement, apartment residents send their order lists via WhatsApp to the RWAs, who then forward the aggregate order to the retailer for delivery.
4. Ramping Up Hiring Activity and Reallocating Labor
Shortly before the nationwide lockdown was announced, scores of essential services workers returned to their hometowns, leaving grocery retailers significantly understaffed at a time when demand has increased multifold.
Bigbasket announced in early April that it will hire 10,000 new staff while Grofers announced that it will add 4,500 new workers in addition to the 2,500 that it had already hired.
Future Group, Reliance Retail, Tata Trent and other hypermarket operators have temporarily reallocated many of their employees from consumer electronics, fashion and other discretionary goods divisions to groceries and essentials. As a case in point, Tata Trent has reportedly transferred some of its staff from its consumer electronics chain Croma to its supermarkets business, according to Economic Times.
Coresight Research continues to build out its coronavirus-related data sets and analysis, across its Coronavirus Tracker data portal and its Coronavirus Insights reports. Here’s what’s new.
Newly added to our Coronavirus Tracker are:
Keep checking back to our research reports and data pages as we add further insight and analysis.
In a previous blog, we highlighted how Chinese e-commerce platforms upgraded their functionality to help businesses to sell online. With merchants suffering losses due to the coronavirus disruption, e-commerce platforms also launched financial aid efforts to support these businesses, such as reducing fees and offering loans.
Figure 1. China’s Major E-Commerce Platforms: Reduced Fees for Merchants
Source: Company reports/Coresight Research
Figure 2. China’s Major E-Commerce Platforms: Loans to Merchants
Western firms can learn from Chinese e-commerce platforms—such as Alibaba and JD.com—and alleviate the financial burden for merchants on its platforms, such as by reducing service fees and offering loans. This support could reduce the impact of the coronavirus on retail and ease recovery for retailers.
We continue our series of blog posts on learnings from the China market. With stores shut down temporarily, Chinese e-commerce platforms upgraded their functionality to help businesses to sell online.
Little Red Book’s new official account “Enterprise Assistant”
Source: Taobao Live
A store on JD.com
Source: Company website
In the current context of ongoing store shutdowns, Western firms can learn from Chinese e-commerce companies and upgrade their platforms’ functions to enable more business to sell online in a faster and easier way.
As China returns to normality, we look at the timeline of store and mall shutdowns and reopenings in China to shed light on the potential progress of retail recovery in the US.
Week one: China’s store closures started around the week of January 19–25, 2020. The picture of the mall shutdown in China is complex with some malls closing from January 23 (such as in Wuhan) but others only reducing their operating hours.
• Stores in the US began to close in the second week of March (8–14).
Week two: China’s store closures peaked in the week of January 26–February 1 (around 12,157 stores closed).
• Store shutdowns in the US began in earnest in the third week of March (15–21), which saw the largest number of individual store closures.
• Around 250 malls were shut down in the US in the same week—those operated by Simon Property Group, the largest mall operator in the country—and other malls followed suit soon after.
• All nonessential stores were closed across 46 states by April 4.
Week four: China’s store reopenings began in the week of February 9–15 and peaked in week seven (March 1–7), with around 12,340 stores reopening. The store reopening process took around seven weeks in China.
• The shutdown in the US is now in its eighth week and is therefore continuing for longer than in China. We estimate that the shutdown could last for around three months from the week of March 15–21, when most US retailers implemented store closures. We expect to see a slower process to recovery in the US, because the nation saw a more gradual shutdown and generally implemented less severe restrictions than China.
US retailers had originally planned to reopen stores from week four (March 29–April 4), but most have officially changed this expectation to “until further notice.” However, we also note that select stores are reopening, as some states are relaxing lockdown measures as of April 28.
Given our expectation of a three-month shutdown from mid-March—the peak time of store closures—the US might see substantial store reopenings from around week 10, May 10–16. Notably, guidance for closures varies from state to state, so it could be that the rate of reopenings is staggered across the country.
Coronavirus Timeline: Store Closures and Reopenings, US vs. China
Source: Coresight Research
In the UK, the lockdown, coupled with hot weather, a four-day Easter holiday and two upcoming public holidays, has prompted a surge in online sales of outdoor-living products. Amid deep declines across most discretionary nonfood categories, garden products look to be in relatively strong demand—with capacity to fulfill demand online proving to be the major constraint on sales.
The UK government instructed nonessential retailers to close from later March, pushing demand for seasonal goods online.
April will be the first full month in which nonessential stores are closed, and on April 16, the UK government extended the lockdown by another three weeks. The UK sees two public holidays in May, and these are traditionally a peak time for home and garden improvements. While we expect total retail sales to be down sharply in April, outdoor-living categories are likely to outperform, supported by selective store reopenings and strong growth in e-commerce
We continue our series of blog posts on learnings from the China market.
Companies have been prioritizing their support in the areas of China that were most heavily hit by the coronavirus, such as by setting up dedicated pages on their e-commerce sites and leveraging livestreaming to promote products from Hubei, the province where the coronavirus originated.
On April 8, 2020, Alibaba launched several measures to revive businesses in China, including helping merchants from Wuhan to sell local products.
Alipay’s “Wuhan Special” section
Ele.me’s pre-order page
China has been leveraging the popularity of livestreaming to sell products from Hubei. On April 6, national television channel CCTV had Zhu Guangquan—a well-known key opinion leader—host a livestreaming session via Taobao Live to sell products from Hubei. The live broadcast also featured Austin Li, “the Lipstick King” join, who once sold 15,000 lipsticks in 15 minutes during a livestream show. The live broadcast was 130 minutes long, and the two hosts promoted a dozen of local products from Hubei, including dry noodles, lotus root, mushrooms and tea. The livestreaming session attracted around 10.9 million viewers, with 160 million likes. It achieved ¥40.1 million (around $5.7 million) in sales.
Zhu Guangquan and Austin Li sell products made in Hubei via livestreaming
US companies could support the recovery of the retail sector in similar ways, by launching dedicated spaces on e-commerce apps and sites to promote products from areas/retailers that need the most support, as well as by using livestreaming to promote products/brands and boost sales.
In our latest weekly survey of US consumers, we saw hints that the apparel category may be past its weakest point amid the coronavirus crisis. Our April 15 survey recorded a decline in the proportion of respondents making fewer clothing and footwear purchases and a further increase in the proportion that are making more apparel purchases.
In our most recent survey, we saw a leveling-off in the rate of US shoppers buying less of certain categories overall, at just under two-thirds of respondents. Although this metric remained stable at the overall level, we saw a number of category movements underlying it—including in clothing and footwear.
The fashion category has been the biggest loser so far in this crisis: each week, our surveys have found it is the #1 category for cutting back. However, our April 15 survey recorded a decline in the number of shoppers making fewer apparel purchases and an increase in the proportion saying they are making more apparel purchases—that marked the third consecutive week that we had recorded an increase in the number buying more, although this group remains outnumbered by those cutting their spending.
These trends have resulted in a decline in the ratio of respondents purchasing less apparel to those purchasing more: On April 15, that ratio stood at 4.7 shoppers buying less apparel to each shopper buying more apparel, versus 5.6 one week earlier and 8.4 two weeks earlier.
Most stores selling clothing and footwear are closed, although some including mass merchandisers such as Walmart and Target remain open. In this context, those consumers returning to apparel are doing so largely through e-commerce: In our survey, we recorded a further increase in the number of consumers buying apparel online.
These trends may reflect green shoots for clothing and footwear sales, and that the category has passed its nadir. However, any improvement is in the context of deep discounting as retailers and brands seek to recover some lost sales, and the data points do not suggest any return to near-normal levels of spending on fashion.
Alongside lower levels of air pollution and greater family time (for many), one of the few beneficial impacts of the coronavirus outbreak has been the creativity with which organizations, including government agencies, have approached communications such as public-health messaging.
In this blog post, we feature selected retail-related images from a campaign by the Ministry of Culture and Information Policy of Ukraine, which has adapted classical artwork to convey important messages in a humorous way.
Source: Ministry of Culture and Information Policy of Ukraine
During the two-month lockdown in China, companies widely adopted digital strategies to maintain business.
JD.com uses ChatBot to help with basic diagnosis
JD.com’s self-driving delivery robot (left) and customers collecting parcel from the robot (right)
Many businesses in China—ranging from hotels to food brands to shopping malls—introduced innovations in the ways they engaged with consumers during the coronavirus shutdown.
With a high temperature being a symptom of the coronavirus, Hongyuan Park in Hangzhou has equipped its security staff with artificial intelligence (AI)-powered glasses that utilize thermal augmented reality (AR) technology to check the temperature of park visitors. Each pair of these glasses weighs around 100 grams, and they digitally record when an individual with a fever has been identified.
The glasses, developed by AI tech startup Rokid, can measure the temperature of several hundred people within two minutes at a distance of up to one meter, so visitors do not have to queue up for long time to go through the temperature check before entering the park.
This technology is especially important as more public facilities open after temporary closures of around two months. Since large numbers of people are now venturing outside following nationwide lockdowns, it will be critical in the near term for China to be able to identify potential virus-affected individuals quickly. According to Rokid, the AI-powered glasses have been distributed to police as well as traffic control authorities.
Since the coronavirus lockdown was announced in India over a fortnight ago, we have seen three key themes surface in the nation’s e-commerce landscape, with many companies innovating in response to changing consumer demand
1. New partnerships have emerged: Various food-delivery providers, ride aggregators and nonessential e-commerce firms have partnered with online grocery retailers and other retailers to deliver groceries to customers. We outline some of the key partnerships in the table below.
Source: Company reports/The Economic Times
2. E-commerce companies are resorting to gaming, entertainment and informational content: Most e-commerce businesses that are classified as nonessential have added gaming, entertainment and informational content to their websites and apps. For example, Flipkart’s fashion e-commerce arm Myntra has launched various games on its app to keep consumers engaged.
Source: Company app
Myntra has also introduced innovative methods of categorizing its merchandise on the app: It showcases work-from-home outfits and home décor merchandise, which is likely to increase customer engagement during the period of home quarantine.
Another example of this type of innovative advertising comes from fashion retailer H&M. The company’s app features a “home-office outfits” collection that includes T-shirts, joggers, shorts, hoodies, socks and sweatshirts.
3. Online grocery retailers face a labor crunch: India’s largest online grocery retailer Bigbasket and its close competitor Grofers have not been able to meet the recent surge in grocery orders, primarily due to a shortage of labor; they are currently operating at 60–70% of their original capacity. A large number of migrant workers have moved to their hometowns after the lockdown was announced, which has caused the labor shortage in warehouses and delivery fleets.
To meet the surge in demand, Bigbasket announced that it will hire 10,000 workers to oversee its warehouse operations and delivery. Grofers announced that it will hire around 2,000 temporary workers from industries that have been deeply impacted by the coronavirus. Furthermore, in its most recent announcement, Grofers revealed plans to hire 5,000 additional workers over the next two weeks. However, both Bigbasket and Grofers expect their operations to be back to normal after only two weeks.
The following figure summarizes the impact of the coronavirus lockdown on the operations of Bigbasket and Grofers.
A few provincial governments in China, such as Zhejiang, Hubei, have launched a mini app that is embedded in Alipay or WeChat and assesses the coronavirus risk level of individuals. Each user is required to record personal information such as identification number, phone number, residential address and 14-day travel history, as well as whether they have visited areas that have been heavily affected by the coronavirus, such as Hubei province and Wenzhou city.
The app rates people on a three-color scale based on information about their recent travel activity and their current health status—from green (no infection, low risk) to yellow (mild symptoms, moderate risk) to red (symptoms of infection, high risk). Users that receive a yellow rating are required to self-quarantine for seven days, which is increased to 14 days for a red rating. The risk rating provided by the app refreshes when the user inputs updated travel and health information.
Residents of the areas utilising this system must scan a QR code at staffed checkpoints in order to enter an apartment complex or market, with guards only allowing green-rated individuals to pass. Users have raised concerns about data privacy issues in using the health code system, as it as it records the movement of the user by accessing the geolocation data on their smartphone. In addition, some have reported that residents of the same household that have travelled to the same places have received different color codes from the rating system.
Retailers in the US are starting to acknowledge that coronavirus-driven store closures could last for months, not weeks. In the past couple of days, we have seen Gap reportedly ask suppliers to pause production on fall 2020 ranges—up until now, apparel retailers had been cancelling spring/summer ranges only. We have also seen outdoor-goods retailer REI provide an update in which it indicated its hope to “begin a gradual reopening of… stores in the coming months”.
When retailers first announced temporary closures in mid-March, most were set to last for approximately two weeks. These closure timelines were then typically updated to “until further notice” (see our timeline graphic below). From the start, we have expressed skepticism that closures would be implemented for just a couple of weeks, and we see closures of around three months as more likely.
The impacts of long-term, coronavirus-driven store closures will be severe, and we will continue to cover this topic in our research reports, on our Coronavirus Tracker and here on our blog. Over the weekend, we published our tentative estimates for the impact on US retail sales of closures and depressed demand, and what the shape of a retail recovery could look like.
As shopping malls resume normal opening hours, they have been innovative in providing safe environments for consumers. For instance, in Guangzhou’s Tee Mall, shoppers are required to pre-book appointments with stores in order to try on clothes. Customers can select clothing styles and sizes via the mall’s WeChat official account, which are then disinfected before each shopper arrives in store and after they leave.
Even in Wuhan—the origin of the virus in Hubei province, which was hit heavily by the pandemic—consumers are being encouraged to shop in physical stores. State-owned media People’s Daily is showcasing the shopping and dining venues on Chuhan Street, a well-known commercial pedestrian street, through livestreaming broadcasts, which it calls “cloud shopping.”
News: Department stores Macy’s and Kohl’s and specialty retailers Ascena and Gap have all announced employee furloughs due to coronavirus-driven store closures. While e-commerce represents between 24.4% and 31% of these retailers’ revenues, online revenues alone will not sustain operations of these multi-billion dollar retail operations. The table below shows select major retailers that announced furloughs on March 30, 2020.
Coresight Research Insight: In our Coronavirus Retail Robustness Index, we evaluate the retailers best able to weather the coronavirus pandemic. Based on this information, we predict today’s announcements are only the beginning of many more to some in retail. We further predict a new estimate of permanent store closures of 15,000 in the year 2020, up from our previous estimate of 8,000. Even market leaders are struggling as foot traffic disappears, and many are exercising all options including drawing lines of credit, cancelling orders, cutting spending—and even taking corporate pay cuts. For some mega-retailers such as Macy’s, the magnitude of the physical footprint and cost of the physical space (not to mention the lost revenue) means furloughs and store closures are inevitable. The only question is: How many store closures and employee furloughs will become permanent if the situation continues?
In the space of just a week, US shoppers have become much more worried about the coronavirus outbreak: Our latest US consumer survey, undertaken on March 25, recorded a significant week-over-week uptick in the proportion of respondents that are extremely concerned about the pandemic. We also found that a much greater proportion of US consumers are reducing their purchases of discretionary categories than just one week earlier. The cutbacks in spending are reflective of shoppers battening down the hatches for the long haul: Over half of respondents in our March 25 survey thought the severe impact of the outbreak on everyday life in the US will last for three months or more.
Shopper cutbacks also mirror the shutdown of a huge tranche of US brick-and-mortar retail. As of Friday, March 27, we recorded almost 62,000 temporary store closures by major US retailers. Coresight Research estimates that discretionary retailers make up around three-quarters of brick-and-mortar stores, and the effects of a universal shutdown are likely to be profound and lasting—as we noted in our recent 2020 US Store Closures Outlook, we anticipate that some of the retailers that recently announced temporary store closures, including some well-known names, will never reopen their doors.
Find our rolling list of the major retailers that are closing stores in our Coronavirus Tracker—which we update every working day.
Coresight Research recently introduced the Retail Robustness Index, a tool for evaluating how retailers are positioned to weather the current, unique retail environment caused by the coronavirus outbreak.
The Retail Robustness Index evaluates five main criteria:
Our Index calculates a Robustness Score based on a weighted average of these five factors and can be used to understand the factors that position retailers better to navigate the current retail environment.
With nearly all of India on shutdown due to the coronavirus outbreak, businesses in the country are responding by implementing innovative ways of working with customers and the larger community. Here are 10 of the innovative approaches we have seen from companies in the Indian market:
As the impacts of the coronavirus outbreak emerge and crystalize at a rapid pace, the Coresight Research team is changing how we cover this crisis. With this post, we launch our blog on the coronavirus crisis—allowing our analysts to offer their insights and analysis on the outbreak more immediately and in a bite-size format.
Our inaugural post runs down our 15 “must dos” for retailers in the US and other Western markets—and these include learnings from our coverage of the China market and how we saw retailers there responded to the coronavirus shutdown. Here are our 15 things that US retailers must do now:
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