For years, China’s economy and the China ecommerce landscape have been booming. Seemingly without an end in sight. Last year alone, the Middle Kingdom’s retail ecommerce sales increased by a third to 1.9 trillion USD.
Now, does the recent outbreak of the Coronavirus in Wuhan (central China) in December 2019 threaten not only the health and well-being of people in China and around the world but also China’s buzzing economy?
Let’s find out in this week’s blog article by Tenba Group. Read up on the impact of the Coronavirus on China’s ecommerce market, and the implications for your business.
The China Ecommerce Landscape
With three times the size of the US market, the ecommerce sector in China is the largest in the world. The Middle Kingdom’s near 1.4 billion population, its traditional and innovative products together with the government’s censorship have created a prospering economy – online and offline.
In 2020, the global ecommerce growth rate is predicted to be 16% with the total volume surpassing 4.2 trillion USD. Of course, China is no exception with an ecommerce market share of 35% of the country’s total retail sales. The gigantic investments in China’s Belt and Road Initiative (BRI) project fuel this trend – by linking Central Asia, the Middle East, and Europe offline, more online businesses will follow.
Online networks and social commerce on buzzing apps like WeChat, TikTok, and Sina Weibo have long become an integral part of China’s everyday life. In fact, Chinese consumers spend nearly five hours per day on their mobile devices (smartphones, tablets). They stay in touch, pay, shop, book trips and more with these popular apps. By the way, the global average is three hours per day on handheld devices.
A new era of marketing
With the high usage rate we’ve learned above, social commerce on social media is flourishing. Besides, Chinese buyers trust their peers more than official brands or government messages. Influencer marketing with KOLs (Key Opinion Leaders), KOCs (Key Opinion Consumers), and Wanghong is the latest trend.
The growth seems endless. No one can imagine that consumers voluntarily renounce themselves from technology, innovation, and convenience. And despite the recent trade war with the US, China’s market economy is growing and the general economic environment is stable.
Now, can a virological outbreak like the Coronavirus threaten the China ecommerce landscape and beyond? Or does it even amplify online commerce, because people are homebound and distrust physical interaction?
The Coronavirus (2019-nCoV)
The outbreak of the Wuhan virus in December 2019 links to the Huanan Seafood Wholesale Market, where shoppers can purchase live wild animals. In January 2020, amidst the Chinese New Year, the virus spread to other Chinese provinces. By now the virus has been carried to countries around the world by international travelers and as of mid-February 2020 has infected more than 17,000 people.
The symptoms are similar to pneumonia, and reign between mild and severe. The disease is transmitted through respiratory droplets by sneezing and coughing. However, the estimated death rate is only 2% at the moment.
Impact of the Coronavirus
In 2002, when SARS (Severe Acute Respiratory Syndrome), a likewise pneumonia virus, broke out in China, the country was mostly supplying the world with low-cost goods like t-shirts and sneakers. Today, China is one of the key commerce players in the global economy.
During SARS, China’s trade suffered significantly and stock markets fell up to 15%. However, the recovery was quick and markets became stronger than ever.
Today, fear of the virus also means people tend to avoid activities that expose them to the risk of infection. For example, going to restaurants, the movies or shopping, using public transport and public services.
Although there is general anxiety associated with the pandemic, which could negatively impact sales, in today’s online world, certain sectors are actually benefiting. So, let’s take a closer look at the impact of the Coronavirus on the China ecommerce landscape:
The city, where the virus originated, has been locked down since 23 January 2020. Public life, including public transport, flights and trains have come to a stop.
Wuhan’s 11 million residents order food and other items of daily life online. But even delivery comes with a certain risk. For example, food deliverer Meituan – which is owned by Tencent, the tech giant behind WeChat and Alibaba Group rival – has adapted its food delivery app with lightning speed. Now, customers and delivery drivers don’t have to meet face-to-face. The food can be dropped off at the doorstep, reception or nearby as per the buyers’ request. And with a mobile payment rate of 95% in China, there’s no cash involved.
Recently, instead of readymade delivery food, Wuhan residents have started to order fresh foods, which they cook safely themselves.
Meanwhile, the lockdown has been extended to other parts of Hubei province. Business-travel and the movement of goods and workers are severely restricted. Yet, the mass quarantine of Wuhan and Hubei didn’t stop the spread of the Coronavirus, but slowed it down significantly. Fortunately, there are no shortages of food and supplies so far.
Since the beginning of February 2020, casinos in China’s top gambling destination have been shut down. This brought life on the peninsula to a halt. More than 37 billion USD alone are generated every year in the casinos of Macau. The lockdown has been limited to two weeks for now.
Other parts of China
Apple, Starbucks, and Ikea have closed their stores in China for the time being. Shopping malls, restaurants, and public places are basically empty. International airlines, including American, Delta, United, Lufthansa, and British Airways, have suspended flights to mainland China.
All of this severely impacts the offline economy, but actually favors online services for shopping, in particular items for daily use.
Besides, China is an important supplier for the global motor industry and the electronics sector. Some factories have stopped their production for the time being, which can lead to bottlenecks internationally in these sectors.
Around the World
These days, some buyers may be more reluctant to buy items from China. Generally speaking, the analysis firm Oxford Economics estimates that the global market is expected to grow slightly less – by 0.2% – than it would have done otherwise.
Demand for crude oil went down 16% in price since China identified the Coronavirus. China is not only the world’s biggest oil importer but the locked-down city Wuhan is also one of the Middle Kingdom’s key oil and gas hubs. However, shortages are not expected as of now, because general production in China, as well as consumption outside of Chinese consumers, has decreased to halted.
As a result of being homebound, Chinese consumers spend more time than ever on their smartphones and online. People who were still purchasing goods offline now prefer to buy on online shops. And not only for daily needs items. A more detailed impact of Covid-19 on Chinese consumer behavior can be found in this article.
Online retailers for fashion, accessories, and cosmetics didn’t even experience a decrease in sales. For example, the BESTSELLER Fashion Group (Only, Vero Moda, Jack & Jones, etc.) launched a WeChat Mini-program, which exceeded its offline sales in only two weeks.
Turning Around the Negative Impact of the Coronavirus
So, how can the China ecommerce market respond to some of the negative impacts of this ongoing pandemic? Search engines like China’s own Baidu are running hot these days with users searching for “face masks” and “hygiene masks”. In fact, masks are no longer available in parts of China. The health sector and high-quality items for daily need stand out when it comes to business opportunities, in particular for foreign companies.
You can export pharmaceutical/medical products like masks, (organic) food or baby products via cross-border ecommerce to satisfy China’s need for healthy and high-quality household products and luxury goods. These sectors generally contain products, which Chinese internet users love to buy from abroad, as they associate stricter quality controls, value and an exotic flair with it. The most popular cross border commerce platforms are Tmall Global, JD Worldwide, Kaola, VipShop, RED, and Pinduoduo. Whereas cross-border logistics remain complicated as a lot of checkpoints have been closed in Hong Kong, authorities are working on normalizing the process. At the same time, there are still warehouses and logistics providers still operating as usual.
In this regard, it is noteworthy that the Chinese Drug Administration Law became effective on 1 December 2019. With this so-called “New Law”, it is now easier to import medical and pharmaceutical items via cross-border commerce into China. Several licenses, which were necessary in the past, are not anymore. And authorities tolerate importing only a small amount of drugs by entities or individuals without an importation certificate.
The China ecommerce market is growing steadily, leading the world in this online millennium. The Coronavirus impacts daily life factory production. Chinese consumers avoid physical shopping due to fear of infection and shift to buying household items like food and medicine online.
As they stay home for health reasons, Chinese consumers also shop online for their favorite foreign fashion, accessory and beauty products. Paired with the popular cross-border ecommerce shopping and with fewer restrictions in the medical sector, this opens opportunities for your business to import goods to China and expand your market.
Are you thinking about entering the Chinese market despite or because of the recent Coronavirus outbreak? You can start by creating a website for your Chinese audience, online and social media marketing targeting Chinese around the world, or launching an app in China.
Do you want a helping hand? The experienced team of your favorite China marketing agency Tenba Group is at your service! Request a FREE Consultation to get to know us and our services.