Coronavirus Blog: Insights from Our Analysts

We can expect to see very substantial year-over-year sales declines across the store-based nonfood retail sector in November 2020. Following the UK’s announcement, Primark stated that lockdowns across a number of its European markets—accounting for 57% of its total selling space—will result in an estimated £375 million (around $485 million) of lost sales; Primark does not sell online.

During the two full months of the first lockdown (April and May), total UK retail sales declined by an average 14%, year over year, according to Office for National Statistics data. However, demand for Christmas gifts and other holiday-related purchases may prove more resilient than the purchases shoppers make primarily for themselves—and so total declines during the second lockdown could be less negative than those during the first lockdown.

We expect to see shoppers and retailers make widespread use of the exemption for click-and-collect services in nonessential retail to capture holiday spending. Major names in nonfood retail such as Next and Currys PC World have announced plans to continue offering pick-up services from stores. Post lockdown, December is likely to see a strong bounce, as consumers scramble to get their holiday shopping back on track. However, the three-week period between the planned end of lockdown and Christmas Day is much too short to fully recoup sales lost in November. George Weston, CEO of Primark’s parent company Associated British Foods, and Steve Rowe, CEO of Marks & Spencer, have called for a post-lockdown relaxation of the UK’s strict Sunday-trading restrictions to help retailers recover sales.

A November lockdown will be the last straw for some retailers, who had been banking on peak holiday demand to help offset losses from the extended first lockdown of nonessential retail from March to June. We expect to see a renewed wave of retail administrations (bankruptcies) and company voluntary arrangements, which are used to reduce liabilities including shuttering stores and renegotiating rents. UK store closures, already running at 2,207 year to date versus 771 in the whole of 2019 according to Coresight Research data, are likely to accelerate.

We are already seeing major negative impacts in UK retail as a result of the coronavirus crisis. In the past week, the John Lewis Partnership has announced the axing of 1,500 head-office jobs. Sainsbury’s has announced plans to cut 3,500 jobs and close 420 stores in its Argos chain (equivalent to around 80% of the Argos estate); this follows Argos reporting solidly positive sales growth during the first lockdown, despite the enforced closure of its standalone stores.

Any extension of the lockdown beyond December 2 would be a disaster for UK retail, effectively writing off the holiday season and, so, amplifying the negative news flow around store closures, job losses and bankruptcies.

Read more in our report Holiday 2020: UK Retail Outlook Update—November Lockdown To Slam Retail.

Post lockdown, US consumer demand for online grocery shopping has remained very strong: As our most recent US CPG Sales Tracker showed, online food retail sales were up by 74.7% year over year in the four weeks ended October 4. That marked a deceleration from 82.8% in the prior four-week period, but it represented an outperformance versus other CPG categories (such as beauty and personal care) online, according to our analysis of IRI data.

For the final quarter, we estimate a 60+% year-over-year rise in online food sales; our estimate assumes that the recent trend of slowing growth continues. We estimate that online food sales will total approximately $14 billion in the final quarter.

Growth of over 60% would be roughly double the rate of increase seen in the 2019 holiday season, when food e-commerce sales increased by around 33%. And, strong final-quarter growth would take the total 2020 increase in online food sales to 75% or more.

Offline and online, we estimate that total food and beverage retail spending will climb by around 9.0–9.5% year over year in the holiday quarter. More working at home, less inclination or options to dine out and fewer social and corporate events will maintain the switch of dollars from food service to food retail in the final quarter. A rise in (likely smaller-scale) at-home entertaining in the holiday season could be a further support for growth. Total food and beverages retail spending was up 10% for the first eight months of 2020 and was up 9.8% in August, according to the US Bureau of Economic Analysis.

In this context, US grocery retailers should continue to find ways to ramp up online capacity, such as through partnerships with delivery providers or extending physical capacity for collection services such as curbside pickup.

What’s Notable for Prime Day 2020

• Still a two-day event, but with a long run up: Prime Day remains a 48-hour event, like last year, but between September 28 and Prime Day, Amazon.com will offer daily offers for Prime members.
• A greater role for livestreaming: During Prime Day, the company’s livestreaming platform, Amazon Live, will spotlight deals from small businesses selling on Amazon.com. Amazon says, “Viewers will also have the opportunity to hear directly from business owners, learn more about their products, and shop their Prime Day deals during a reoccurring segment called Small Business Showcase.”
• A push for share in fashion, private labels and grocery: In its daily deals leading up to the event, Amazon is promising discounts of up to 30% on premium fashion brands; up to 40% off Amazon brands including in fashion, pet, food, and health and wellness; and $15 off shoppers’ first order of $50 or more on AmazonFresh.
• Greater prominence for small businesses in the wake of the Covid-19 crisis: A Spend $10, Get $10 promotion will see Amazon offer a $10 credit to use on Prime Day to those who spend $10 on items sold by selected small businesses on Amazon.com from September 28 to October 12. In addition, Amazon has curated collections of products from small businesses, running up to and during Prime Day. Amazon says it will spend more than $100 million on promotional activities to help small firms grow sales and reach new customers.

What We Think

As we discussed in our September 23 report previewing Prime Day:

• An October Prime Day will contribute significantly to the expansion of the holiday season into October this year. In the context of a pandemic-driven surge in online demand, an extended holiday season will be good news to retailers and logistics firms facing bottlenecks in fulfillment of e-commerce orders.
• October 13 falls very shortly after the October 9–11 date of the new 10.10 Shopping Festival, launched by Coresight Research, Shopkick and Fashwire. Retailers can look to preempt Prime Day through participation in the 10.10 Shopping Festival or by offering their own promotional campaigns or events ahead of Prime Day.
• We estimate that Amazon’s global sales during Prime Day 2020 could hit approximately $8 billion, up from an estimated $6 billion in 2019.
• Some 38% of US holiday shoppers in our September survey told us that they expect to shop on an October Amazon Prime Day—well ahead of the more traditional Black Friday (21%) and Cyber Monday (33%) events. And remember, only Prime members can get Amazon’s Prime Day deals. In March, we recorded 54.3% of survey respondents personally having an Amazon Prime membership and a further 27.3% having access to Prime benefits through someone else in their household (while not having a Prime membership themselves).

This has underlying implications for estimates of the macroeconomic indicators and components used to calculate the nation’s GDP, which we will discuss later. The overall picture appears worrying, and it does not necessarily paint an accurate picture of India’s economic health—the fault lines extend beyond the GDP decline of 23.9%.

Figure 1. First-Quarter GDP Expenditure Estimates (INR Bil. and YoY % Change)

Source: Ministry of Statistics and Programme Implementation/Coresight Research

Breaking Down the GDP Constituents

Like any other country, GDP in India is a function of private consumption, net investment, government expenditure and net of total exports and imports. We briefly discuss these below.

• Private Final Consumption Expenditure (PFCE): PFCE denotes the final consumption expenditure of households and non-profit institutions such as religious places. India’s PFCE fell by 27% year over year to ₹14.6 trillion ($199 billion). Consumption is the largest constituent of India’s GDP and accounted for 54.3% of the total in the first fiscal quarter. Consumption is unlikely to reach pre-pandemic levels in the short-to-medium term, with the consumer confidence index recording an all-time low of 83.7 for the first quarter of 2020. Another important factor is the high unemployment rate in India: Although the unemployment rate substantially improved from a record 23.5% in April to 8.35% in August, it remains an issue overall.
• Gross Fixed Capital Formation (GFCF): GFCF, or net investment, is a measure of net increase in fixed capital. Investment is a function of interest rates and is inversely proportional to the interest rates. India’s central bank announced a repo rate (interest rate at which commercial banks can borrow money from the central bank) cut of 40 basis points in May this year, reducing the interest rates to 4%—the lowest since 2000. The monetary policy (money supply control by the central bank) has proved to be ineffective in reviving investment thus far. We expect borrowers to be wary in the short term as overall domestic demand remains muted. Furthermore, based on Gross Value Added (GVA) data, the expenditure estimates were the weakest for construction, down 50.3% year over year for the three months ended June 2020.
• Government Expenditure: Government expenditure contributed positively to GDP estimates in the first quarter. For the three months ended June 2020, the government expenditure was up 16% year over year, amounting to ₹4.9 trillion ($66.2 billion). With deflated consumer demand and dried-up investment, the government’s tax revenue is expected to be less than half of what was initially estimated for the full fiscal year. We discuss the Union Government accounts in detail at the end.
•  Net Exports: In the first quarter, imports fell by 40% year over year, while exports were down 20%. With multiple restrictions in place, the indicators directly related to imports and exports fell steeply year over year in the first quarter—cargo handled at major seaports was down 19.8% and cargo handled at airports was down 57.2%. Net exports have continued to contribute 3–4% to overall GDP. We expect both exports and imports to improve gradually in the coming months, remaining at 3–4% of overall GDP and not having a significant impact on GDP movements.

India GDP Estimates: Unveiling the Bias

Not only did the countrywide lockdown impact various sectors that contribute to the GDP but also the data collection mechanism. There are strong reasons to believe that there could be an upward data bias in the overall GDP figure. First, the deadline to file quarterly reports was extended for corporate entities, which had until September to disclose earnings. Second, GST (goods and services tax) payments due in March were allowed to be postponed to June—giving an upward bias to the first-quarter estimates. Finally, according to the official press release by the Ministry of Statistics and Programme Implementation, the data challenges in computing macroeconomic indicators such as the Index of Industrial Production and Consumer Price Index are expected to have implications on GDP estimates.

On the other hand, the lockdown severely impacted the informal sector. According to the GVA data, the unorganized or informal sector had a share of over 50% of overall GVA in 2018—a figure that has remained somewhat at the same level since the beginning of this decade. In a country of 1.35 billion people and that has a gigantic informal sector, the reliance on survey data is inevitable. The major sources of data are enterprise surveys and employment surveys, which are carried every five years by the National Sample Survey Office (NSSO). The last recorded survey by the NSSO dates back to results from the 12 months ended June 2016.

Taking a step back, in November 2016, the Government of India moved ahead with its decision of demonetization, which stripped ₹500 and ₹1,000 bills of legal tender status. This severely affected the informal sector due to a lack of awareness and limited penetration of the formal banking system in the rural and remote areas of India. More recently, migrant daily workers—the backbone of India’s informal sector—lost their livelihood when the Covid-19 lockdown was announced in March, and many had to walk back to their native villages fearing starvation. In a nutshell, no level of data extrapolation can account for the big dents to the informal labor sector caused by demonetization and the strict lockdown.

GFCE: The Only Positive; a Big Negative

The GFCE for the three months ended June 2020 amounted to ₹4.9 trillion, up 16% from the year-ago period (see Figure 1). The increase can be attributed to India’s stimulus package, which was announced in May this year. At the time of the announcement, the sum amounted to ₹20 trillion ($265 billion)—around 10% of total GDP. However, as the details were revealed over five days by India’s Finance Minister Nirmala Sitharaman, the stimulus spending summed to just around 1% of India’s GDP. The miniscule fiscal stimulus has proved anything but effective in reviving the economy from an inevitable downturn.

India’s fiscal deficit was ₹8.2 trillion as of July 2020, 103% of the fiscal deficit estimate for the fiscal year ending March 2021 (see Figure 2).

Figure 2. Union Government Accounts, as of July 2020 (INR Tril.)

Source: Controller General of Accounts, Ministry of Finance/Coresight Research

Outlook

The overall sentiment in India’s economy is of caution. Although we expect the economy to pick up in the second half of the year, it will not be enough to guard against an expected annual contraction in the range of 3–5%. With a huge debt problem, the remaining three quarters will test the government’s fiscal prudence as it tries to bring the economy back to life.

First, an initiative known as Alibaba.com Payment Terms will enable businesses to pay for products up to 60 days after shipment. This scheme will help merchants to preserve cash and stock up on products for resale, as they will be able to pay for inventory costs over a longer payment window.  

Secondly, Alibaba.com upgraded its infrastructure to incorporate a built-in freight service, Alibaba.com Freight, that will digitalize and simplify cross-border logistics for ocean and air shipments. With the new system, merchants can compare, book, manage and track ocean and air freight in real time online.  

The company’s final initiative is the rollout of online trade shows for specific categories, including supplements and nutrition, food and beverages, agriculture, and beauty and personal care. These trade shows will showcase products from US-based manufacturers and wholesalers, helping them to connect with global buyers via livestreaming. Buyers can interact and ask questions to the sellers, schedule one-to-one sessions and place orders through the platform. 

JD.com is looking at ways to better serve lower-tier markets as a major opportunity for post-pandemic economic recovery. Online retail sales of physical goods in lower-tier markets will amount to an estimated ¥8.1 trillion (around $1.25 trillion) in 2025—representing a CAGR of 18.3% from 2018 and accounting for around 45% of total online retail sales in China, according to Xingye Research. These estimates were made before Covid-19, but it could be that following the crisis, lower-tier markets will act as an even more important growth engine for an economy that has slowed.

As part of the upgrade, JD Logistics is linking its 12 highly automated logistics parks to its 13 local warehouses to form an integrated network. The company said that these local warehouses are currently seeing up to 90% of orders come from Tier 4 to Tier 6 cities. The logistics parks, known as “Asia No.1,” are located in provincial capitals including Changchun, Shenyang and Taiyuan. They feature automated sorting machines and a smart warehousing software system, which uses algorithms to perform scheduling, coordination and optimization. The integrated network of logistics parks and warehouses will enable a higher number of marketplace merchants to store merchandise, and ensure a high speed of picking, packing and last-mile delivery to the consumer.

Since then, India’s coronavirus situation has gravely worsened—the single-day tally of coronavirus cases crossed the 30,000 mark for the first time on July 16, pushing the total number of recorded cases to over 1 million. Major Indian states have recently reimposed lockdowns across various cities to curb the spread of infection.

Source: The Economic Times

This reinstating of lockdowns, along with ambiguity around when India will “flatten the curve”—a plateau and eventual fall in the rate of infection—is weighing on the country’s economic recovery and consumer sentiment alike. Below, we lay out some of the impacts to Indian e-commerce and brick-and-mortar retail.

Impact on E-Commerce: Two Steps Forward, One Step Back

E-commerce companies are facing sustained disruptions due to uncertainties around the movement of goods. For example, fashion retailer H&M halted its online business in India for five days leading up to July 13 as the local government in Mumbai city had directed warehouses to remain shut. H&M also had to pull out of fashion e-commerce retailer Myntra’s recent sale, which was scheduled from July 10 until July 14.

Differences in lockdown guidelines across regions are adding further challenges to the supply chain and last-mile delivery. For example, the Karnataka government has allowed e-commerce companies such as Amazon and Flipkart to deliver both essential and nonessential goods in Bangalore, but cities such as Kolkata and Pune have restricted e-commerce operations.

E-commerce deliveries are already taking longer than usual due to earlier disruptions and variance in local infection rates. For instance, many leading e-commerce companies have their warehouses and fulfillment centers in Bhiwandi, a warehouse hub in the suburbs of Mumbai and one of the worst hit areas in the state of Maharashtra, which has already seen the nation’s highest number of coronavirus cases. Furthermore, various restrictions on the movement of vehicles adds challenges for last-mile delivery.

Impact on Brick-and-Mortar Retailers: Intermittent Lockdowns Likely To Slow Down Return to Normalcy

Brick-and-mortar retailers have been walking a tightrope since the nationwide lockdown was lifted in May, due to unpredictable consumer demand and weak sales. However, with the momentum of pent-up demand on their side, retailers are optimistic about getting back to some normalcy by the festive season (which usually begins in October)—albeit with some caution, as the intermittent lockdowns will be an impediment for retailers to recoup lost sales and return to growth.

Sales and footfall estimates since the reopening of stores have been encouraging for various nondiscretionary retailers, according to interviews conducted by Indian business news company BloombergQuint in June:

• For brands managed by Indian multinational conglomerate Aditya Birla Group, footfall in June ranged between 60% and 70% of pre-Covid levels, according to Amit Pande, Brand Head for luxury retailer The Collective.
• Sandeep Kataria, CEO of footwear retailer Bata, said, “Judging the national direction of demand remains hard. While some stores have seen sales resume to 60–70% of the usual, at others it has been lower.”
• Sales at sportswear brand Under Armour’s few stores have been better than pre-Covid levels, according to Tushar Goculdas, Managing Director in India.
• Sales at Vijay Sales, a consumer electronics chain, are at 60% of pre-Covid levels in aggregate since reopening, according to the company’s Managing Director Nilesh Gupta. Of its 102 stores, around 30–40 stores have reopened, but these are subject to various operational restrictions (such as opening only on alternate days).

With a spike in the number of coronavirus cases across India, intermittent lockdowns may dent consumer sentiment and challenge brick-and-mortar retailers.

Impact on Consumer Sentiment: Is the Worst Yet To Come?

We expect consumer confidence to be negatively impacted by the reinstatement of lockdowns. In May 2020, the Reserve Bank of India’s bimonthly consumer confidence index fell to a historic low of 63.7, from 85.6 in March.

On the other hand, the Nomura Business Resumption Index (NIBRI), a weekly measure of economic recovery, shows that business intensity rose steadily through May and June to a peak on June 28, before falling again. The data suggest a bump in the economic recovery of India, but that the recovery may be hindered by the recent intermittent lockdowns as well as deteriorating consumer confidence—a worrying sign as the recovery may therefore not represent a “swoosh,” which many economists initially expected.

Note: NIBRI is calculated using power consumption data, air quality index, Google’s mobility report and unemployment data

Source: Nomura

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.

Source: Company reports

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.

Source: Company reports

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

Source: Suning

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.

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

Source: WeChat

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.

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

Source: 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.

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.

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:

• On April 20, 2020, Tmall unveiled a new luxury channel called “Luxury Soho,” on its Tmall e-commerce platform. The new channel runs alongside the company’s existing Luxury Pavilion, which focuses on a more affluent group of consumers and sells branded products at full price. Luxury Soho, on the other hand, will sell products from high-end brands at discount prices, just like a physical outlet.
• On April 3, Xiaomi Youpin, an e-commerce platform operated by Chinese electronics company Xiaomi, also launched a portal offering discounted luxury products.

Luxury Soho

Source: Tmall

 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.

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%.

Source: Alizila

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.

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

Source: Alizila

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.

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.

Source: Company reports

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.

Source: Company reports

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.

Source: Company reports

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.

Newly added to our Coronavirus Tracker are:

• Capital raising by selected major retail companies—including details of debt and equity raising actions.
• Management changes at selected major retail companies.
• Financial guidance updates by selected major retail companies—including the revision and withdrawal of guidance in the wake of the crisis.
• A list of bankruptcies of retail companies during the coronavirus outbreak period.

New in our Coronavirus Insights reports are:

• Our weekly surveys of US consumers—including what activities they expect to do or categories they expect to spend on once lockdowns end. We’ve been tracking US shopper behavior and sentiment on the coronavirus outbreak weekly since mid-March, enabling us to trend the changes in how consumers are acting and what they are thinking. Select findings are available each week to nonsubscribers.
• Our discussion of three consumer trends that have endured from the lockdowns in China.
• Our analysis of the impacts of the ongoing lockdown on India’s retail sector: we explore how retailers have responded to the crisis.

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 apparel, the UK’s Next Plc reported full-price product sales down 41% in the period January 26 to April 25. In-store sales were down 52% while online was down 32%. As shown below, this average conceals much sharper declines after the UK lockdown began on March 23 and Next temporarily closed its UK warehouses serving online sales on March 26.

Figure 1. Next: Full-Price Sales per Week

Source: Company reports

• Zalando, whose biggest market is Germany, pointed to a sharp decline in March followed by a recovery in April. Reporting 1Q20 results, management guided for 10–20% growth in both gross merchandise volume (GMV) and revenues for the full year.

Figure 2. Zalando: GMV Development

Source: Company reports

• H&M reported deep declines in major markets for the period March 1–May 6: UK sales were down 60%, Germany down 46% and France down 71%. At a group level, total sales were down 57%, within which online sales were up 32%.
• On May 13, the British Retail Consortium (BRC) reported total UK retail sales were down by 19.1% for April (formally April 5–May 2), the first full month of lockdown. Online nonfood sales increased by 57.9% in April, taking e-commerce to 69.9% of total nonfood sales, versus 29.9% in the same month one year earlier. For the three months ended April, in-store sales of nonfood items were down 36% (the BRC splits total food and nonfood performance on a rolling three-month basis).

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.

• Readers may be interested in our recent deep dive on European apparel retail.

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.

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

Source: TikTok

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”

Source: TikTok

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.

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.

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.

Newly added to our Coronavirus Tracker are:

• Select findings from Coresight Research’s weekly survey of US consumers—in the Tracker, we focus on how the outbreak is impacting what respondents are buying.
• US states’ reopening dates for businesses, as states begin to ease lockdowns.
• Major retailers’ announced store reopening plans, updating our temporary store closures data.
• Furlough announcements by major retail companies.

New in our Coronavirus Insights reports are:

• Our weekly surveys of US consumers—with select findings available each week to nonsubscribers. We’ve been tracking US shopper behavior and sentiment on the coronavirus outbreak weekly since mid-March, enabling us to trend the changes in how consumers are acting and what they are thinking.
• Our latest thinking on the potential shape of a US retail recovery in the US, in What Will a Retail Recovery Look Like? We see a five-stage downturn and recovery process, and we model substantial declines in discretionary retail sales even after lockdowns end, impacted by weak store traffic and depressed disposable incomes.
• Our Retail Playbook, which offers guidance to retailers in Western markets such as the US and Europe. We focus on the themes of react and adapt. React—including by cultivating loyalty, adapting communications and exploring new sales channels. Adapt—including by preparing for changes in the retail landscape and consumer habits, and by adapting to what we call the “mask economy.”

Keep checking back to our research reports and data pages as we add further insight and analysis.

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

Source: Company reports/Coresight Research

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.

• Chinese social commerce platform Little Red Book enabled self-employed individuals to open verified accounts on its platform—it had previously only allowed brands to open accounts. These accounts can host livestreaming sessions to promote their products, and they can develop mini programs for stores. To further facilitate the selling process for these newly added accounts, Little Red Book launched an official account called “Enterprise Assistant” that provides livestreaming tutorials.

Little Red Book’s new official account “Enterprise Assistant”

Source: Taobao Live

• JD.com launched an expedited channel for small and medium-sized businesses to open stores on its platform to help them sell online, given that people were advised against leaving their homes.

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.

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

The UK government instructed nonessential retailers to close from later March, pushing demand for seasonal goods online.

• On April 24, the UK’s Office for National Statistics reported that online sales at household-goods stores (which includes DIY, furniture and appliance retailers as well as other sectors) were up 53% year over year in March, versus just 2% in February. Online sales at department stores and mixed-goods retailers were up almost 35% year over year in March, versus negative growth in February. Given the shutdowns occurred from March 23, April is likely to prove stronger still.
• On April 21, department-store John Lewis reported online sales were up fully 84% from mid-March, fueled by categories related to working and living at home. On April 26, the Mail on Sunday reported that company management had confirmed John Lewis stores would reopen in May.
• DIY market-leader B&Q (owned by Kingfisher) has introduced digital queues of up to an hour, such is the demand to buy on its website. On April 21, B&Q announced that it had reopened 155 stores in phased openings, following trial reopenings at a handful of stores; over the weekend of April 25–26, B&Q stores saw long lines of shoppers. On April 27, rival Homebase announced that it would reopen 20 stores on May 2. According to the UK government’s guidelines, hardware stores are essential and are exempt from forced closures.
• Garden-supplies websites such as crocus.co.uk have seen a surge in demand and some have been forced to limit the number of daily orders they accept.

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

On April 8, 2020, Alibaba launched several measures to revive businesses in China, including helping merchants from Wuhan to sell local products.

• Alibaba’s payment unit Alipay launched a section called “Wuhan Special” on its home page. By tapping into the special section, consumers across China can use Alipay to browse products offered by merchants based in Wuhan, Hubei province. They can buy Wuhan-made snacks and find out details about tourist attractions in the city.

Alipay’s “Wuhan Special” section

Source: Alipay

• Alibaba’s local service units Ele.me and Koubei will provide ¥100 million (around $14 million) worth of support to catering businesses. It aims to support around 300,000 restaurants to launch pre-order, self-pickup and contactless delivery services.

Ele.me’s pre-order page

Source: Ele.me

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

Source: Taobao Live

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 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.

• Coresight Research subscribers can access our report with full research findings here.
• Nonsubscribers can access select findings free here, by registering for a free account.

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

1. Adopting AI for medical consultations: JD.com launched a chatbot app that answers user enquiries related to the coronavirus, such as what to do when a family member has a fever, how to wear a surgical mask and how to disinfect the household, as well as providing general self-screening information. For complicated enquiries, the app transfers the user to customer service personnel.

   

2. Using drones and robotics for contactless deliveries: JD.com used drones and Level 4 (fully autonomous in a controlled area) self-driving delivery robots to transport goods to consumers amid the lockdown when some routes were closed. For highly impacted areas such as Wuhan, the robots worked as a contactless delivery vehicle: Customers were required to input specific codes into the robot upon its arrival in order to release their packages.

   

3. Selling fresh produce via vending machines: Since the outbreak of the coronavirus, demand for fresh produce surged. Although consumers in China could still purchase vegetables from supermarkets, they had to be there early in the morning to ensure stock would be available; if they wanted to buy fresh produce online, shoppers had to reserve their delivery time slots one day in advance. Vending machines therefore increased in popularity with more diverse shopper demographics, as they offered an additional source of fresh vegetables. 

• Brands helped consumers to stay healthy: InterContinental Hotels Group and Hilton Hotels used social media and apps to share at-home workout sessions led by hotel gym staff. Similarly, Chinese social fitness app Keep partnered with Austin Li, a well-known beauty influencer and key opinion leader, to host workout sessions on March 30. The topic “Austin is on Keep” gained 11.5 million views on Weibo, as of April 3.

• Brands created at-home food products: Yum Brands’ Pizza Hut promoted its do-it-yourself (DIY) steak kit to help consumers cook candle-lit dinners at home during the lockdown. Little Sheep, which operates hot–pot restaurants, offered DIY hot–pot kits via Alibaba’s delivery platform Ele.me. Japanese cocktail brand Horoyoi shared a series of DIY cocktail tutorials on Weibo to teach customers how to make cocktails. 

• Shopping malls in China used WeChat groups to interact with consumers: Fewer consumers visited shopping malls in China during the coronavirus crisis, so mall operators looked to engage with consumers online, using International Women’s Day as the hook. Chinese shopping mall The Summit, located in Suzhou, Jiangsu province, launched an International Women’s Day campaign on its WeChat official account to offer consumers a free makeup tutorial. The mall invited beauty guru Shen Ting to do the tutorial on March 8, which was also recorded for consumers to view again at a later date if they joined a specific WeChat group.  

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.

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.

Source: Company app

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.

Source: Company app

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.

Source: Coresight Research

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.

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.

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.”

• While Macy’s did not announce the exact number of employees furloughed, the company reported that it had lost “the majority of its business” due to store closures across its banners. Macy’s had 776 stores in its portfolio at the end of the 4Q19: 551 Macy’s, 53 Bloomingdale’s and 172 Bluemercury store locations. The company reported it was moving to the absolute minimum workforce needed to maintain basic operations. Management expects fewer furloughs in Macy’s digital business, as digital will support distribution and call centers to serve customers through online channels. 
• Kohl’s announced it will temporarily furlough store and store distribution center associates, as well as some corporate office associates whose work has been significantly reduced by the store closures. 
• Ascena implemented a furlough program across its business, including all store associates and close to half of its corporate associates. 
• The Gap will furlough most store teams in the US and Canada, pausing pay but continuing to offer applicable benefits until stores are able to reopen, reducing its headcount across its corporate functions around the world. In addition, the entire Gap Inc. leadership team and the board of directors will take a temporary pay cut. 

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?

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.

The Retail Robustness Index evaluates five main criteria:

1. How was the retailer’s financial health prior to the outbreak? This calculation is based on retailers’ publicly reported financials, such as its income statement, balance sheet, and the value of its stock. Many retailers have recently drawn on their credit lines in order to give them a cash supply to weather a temporary decline in sales.
2. Does the retailer sell domestically or internationally? Retailers with geographical diversity in their sales could be better off than those who exclusively sell into a market that is shut down.
3. Does the retailer sell only in physical stores, or does it sell partially or primarily online? If a retailer’s physical stores are closed, then that channel is unlikely to generate significant cash. If a retailer has an operating online business, it can possibly expand it, keeping vital communication open with consumers and also generating precious cash.
4. What categories of products does the retailer sell? At present, consumers are more focused on acquiring the essentials and less on dressing well (especially since many are staying at home). Thus, product assortment can favor or challenge a retailer. Recent data show that sales of essentials have boomed, whereas sales of apparel and accessories have declined. Moreover, most grocery and drug stores have remained open, while most apparel stores are closed.
5. Finally, management is an essential ingredient to withstanding the current environment. Retailers with seasoned management teams are more likely to know how to get things done efficiently at their companies and they have possibly lived through and other downturns before, versus a newly arrived CEO still learning the ropes.

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.

1. WhatsApp orders and phone-in orders: Big Bazaar, one of India’s largest grocery store chains, does not have a website for online orders but has launched a doorstep delivery service amid the outbreak. Customers in select cities can place orders for home delivery by calling their local store or via WhatsApp messaging. Payment is accepted on delivery.
2. Displaying stock levels on a shopping app: Grofers, an online-only grocery delivery firm, has increased transparency by displaying stock levels on its e-commerce app, in order to abate customer anxiety and reduce consumer hoarding behavior during the coronavirus.
3. Hygiene practices and screening: Most major firms in India—including Amazon, Big Bazaar, Flipkart and Grofers—have implemented in-store health and safety measures, such as screening employees by checking their temperature, making sure staff wear medical masks and providing hand wash and sanitizers to clean hands and disinfect trolleys, baskets, surfaces, toilets and shelves at regular intervals.
4. Contactless food delivery: Food delivery firms Swiggy and Zomato are offering contactless delivery services, whereby parcels are dropped at the doorstep so that consumers do not need to interact with delivery persons.
5. Educational technology startups offer free services: India has some 500 million people aged five to 24 years, according to the India Brand Equity Foundation. With schools and colleges closed, education technology startups are using the opportunity to reach more students by offering free access to apps and courses. BYJU’S – The Learning App, the brand name for educational technology and online tutoring firm , is offering free access to its app and some learning programs for students in grades 1 to 12 until the end of April. Platforms Toppr and Vendantu have also made some classes temporarily free.
6. Gyms offer membership extensions and free online classes: Health and fitness startup CureFit is enabling customers to pause their memberships for 14 days for free and is offering free access to classes online. Similarly, Cult.fit has moved some of its classes online for existing members, and Fitternity (a Mumbai-based gyms, pools and fitness studios aggregator) is also working with experts to launch live workout classes.
7. Remote medical consultations: Health startup Mfine is offering remote video medical consultations, and it has released a video to help educate and inform people about the symptoms of the coronavirus.
8. Insurance: Insurance tech startup Digit Insurance is offering a fixed-benefit insurance policy for people up to the age of 75. The policy covers screening and treatment, even for patients whose results are negative. ICICI Lombard, a health insurance firm, is offering cover for those that test positive for the virus, as well as providing virtual health consultations and help with calling an ambulance, if necessary.
9. Repurposing real estate and manufacturing plants: Mahindra Group, a conglomerate that operates in 11 sectors including aerospace, automotive and hospitality, has offered up its resorts to be used as temporary hospitals. The company has also announced that its plants will be used to manufacture ventilators. Reliance Industries, another conglomerate with interests in oil, healthcare, telecom, retail and other sectors, is offering free fuel for emergency-service vehicles and has set up a dedicated 100-bed facility at Seven Hills Hospital in Mumbai for coronavirus patients. With alcohol being a key component in hand sanitizers, the Indian subsidiary of British alcoholic beverage firm Diageo will use its facilities to produce 300,000 liters of hand sanitizer.
10. Special funds and hackathons: Digital payments firm Paytm has announced funds of ₹5 crore (around $660,000) to help researchers and innovators find solutions to mitigate the expected shortage in clinical ventilators and other medical equipment necessary for those diagnosed with the coronavirus. Elsewhere, some 70 startups have worked together to develop an app that enables the government to track people that have tested positive for the virus and those on self-quarantine. Software firm Wingify has announced an online hackathon for innovators to develop health technologies to combat the pandemic. The firm said that 63 people have joined the hackathon, and one of the projects includes developing an app that tracks the availability of hospital resources to treat the virus, including beds.

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:

1. Over-communicate with customers and employees. Across all available channels, keep customers and staff informed, show empathy and be as responsive as demand allows.
2. Figure out innovative approaches to product delivery. Online demand for groceries and other essentials is surging, and retailers can serve this with curbside pickup, pre-selected product bundles (e.g., of groceries) or other innovations.
3. Rethink shipping/returns. In the immediate term, many online retailers are prioritizing staples over discretionary items and informing customers of potential delivery delays on discretionary items. Extend return periods until the crisis is over.
4. Where employees are at risk, look at co-employing with other retailers and restaurants. In China, we saw staff from the foodservice industry redeployed to grocery retailers under partnerships between firms in these sectors.
5. Renegotiate store leases to cut expenses. We expect stores to remain closed for several weeks—possibly months. For many impacted retailers, slashing fixed costs will be essential for survival.
6. Think gross margin dollars not gross margin percentage: You count dollars and take them to the bank; you don’t take basis points to the bank. For discretionary products experiencing reduced interest, lower prices to move inventory and improve liquidity.
7. Use the time as an opportunity to rethink marketing messages and channels. Retailers can segment and personalize messages, and test and learn digitally.
8. Communicate (more) and sell via social media. Particularly for retailers whose stores are shuttered, social commerce offers opportunities to re-engage shoppers and maximize sales retention rates online.
9. Livestream to drive sales online—this is particularly important for those retailers impacted by store closures. In China, we saw livestreaming become a more important sales channel during the shutdown. In the US, multichannel retailers must grasp opportunities such as this, so they are not left behind by digital-first rivals.
10. Reconsider promotions and think about limited-time or limited-quantity offers to drive excitement and impulse sales.
11. Focus on liquidity: Nobody yet knows how long this shutdown will last.
12. Cut open orders and look at what really sells. Retailers must also remember the 80/20 rule, where 20% of SKUs can account for 80% (or at least a disproportionate share) of sales.
13. Figure out how to capitalize on calendar events online, with Easter coming up in April and Mother’s Day in May (in the US). In China, we saw retailers leverage International Women’s Day on March 8 to increase their exposure and drive sales, with some beauty retailers experiencing sales growth of 200%.
14. Flex your tech muscle: Integrate tech throughout your organization, to help action the items noted above.
15. Finally: Be positive!  Collaborate!