The headquarters of Alibaba Group Holdings Ltd. will be lit at night ahead of the annual November 11 Singles’ Day online shopping event in Hangzhou, China, on Sunday, November 10, 2019.
Qilai Shen | Bloomberg | Getty Images
The post-coronavirus retail industry will benefit greatly from the online shopping trends already seen in China, said analysts at consulting firm Bain in a report released Thursday.
Asia Pacific generates about three-quarters of global retail growth, and about two-thirds of online growth, according to the Bain report, entitled “The Future of Retail in Asia-Pacific: How to Thrive on High Speed.”
Riding on that growth are three Chinese retailers – Alibaba, JD.com and Pinduoduo – which along with Japan’s Seven & I are now among the top 10 retailers worldwide, according to Bain analysis. The company notes that about a decade ago, only one or two retailers on Asia-Pacific made the top 10 list.
“What is happening in China today will happen in other markets to a greater or lesser degree, depending on the market,” Kanaiya Parekh, Hong Kong-based business partner at Bain, said in a telephone interview. “People need to look to China, especially when it comes to the future of retail.”
Covid-19, which originated late last year in the Chinese city of Wuhan, has since infected more than 22 million people worldwide and killed more than 786,000 people. In an effort to curb the spread of the viruses, local governments have announced stay-at-home announcements and restrictions on social gatherings, which have accelerated the pressure on already struggling malls and brick-and-mortar stores.
Even in China, where the outbreak of coronavirus stopped in the first quarter, total retail sales in July fell 1.1% from a year ago. However, the share of physical consumer goods sold online rose from about 19% last year to 25%, as a quarter, of retail sales this year, according to official data accessible through the Wind Information database.
One of the trends that has taken off in China this year is livestreaming-driven online shopping. Anyone from farmers to professional internet personalities – known as a “key opinion leader” or COPD – can sell thousands of yuan in just a few minutes through interactive streaming sessions on platforms like ByteDance’s Taibao Live, Aluaaba, Kuaishou and Douyin.
Parekh estimates that livestreaming was about 7% of China’s online sales prior to the coronavirus pandemic, and could more than double this year. The report cited a Bain survey of 4,700 consumers in China in the spring, which found that respondents were now more likely to use livestreams and short videos to make online purchases than prior to the outbreak.
Other analysts have estimated a lower share in online sales, saying it is less clear if livestreaming will be more of a market marketing tool versus a direct driver of what can often be impulse purchases.
Livestreaming is just one example of the digital shopping ecosystem that has developed in China due in part to high penetration of smartphone and broadband internet access. A broad logistics network and back-end technology have also helped cut delivery times and costs, making one-hour delivery of goods, such as fresh groceries, what consumers in China now expect.
If you are looking for similar growth opportunities in other countries, retailers will need to consider unique aspects of local infrastructure and consumer behavior. The Bain report pointed out that even in the Asia-Pacific, there are 48 countries that include mature markets such as Japan, and fast-developing countries such as India and Indonesia, which can follow more closely in the footsteps of retail trade in China. .
However, the coronavirus has shown all retailers that they need better information about their supply chains and changes in consumer demand, Parekh said. “In the future, we may find that a retail organization may have more engineers and data scientists than buyers.”
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