Risks and Opportunities in Smart Retail Amid the New Coronavirus Epidemic

The sudden outbreak of the novel coronavirus has disrupted everything over the past month. Traditionally, the Chinese New Year is a prime time for marketing; this year, sadly, relevant marketing campaigns hurriedly lined up to take a bow before launch amid the new coronavirus crisis. It is business unusual, and huge challenges and uncertainties are overshadowing the retail growth outlook for 2020, posing daunting problems for marketers and advertisers.

Epidemics fan e-commerce and O2O demand

The sharp decline in customer flows and the temporary closure of retail stores are dampening retail activity in Q1 2020. Instead of the traditional fresh market, consumers buy food items online. The epidemic therefore is increasing the demand for e-commerce as well as online to offline (O2O) delivery services, and the uptrends are particularly apparent for fresh foods.

Analysis of relevant data before and after the 2003 SARS outbreak underlines major epidemics do change consumer purchasing habits; notably, outbreaks of epidemic diseases will usher in colossal growth opportunities for sectors engaged in health care, health and convenience products and services. Meanwhile, data as of June 2019 shows China has more than 800 million Internet users, with an Internet penetration rate of over 60%. In China, the Internet is part of life. Given that omni-channel is now the norm in the consumer and retail industry, e-commerce and O2O services are playing a key role in people’s life in the new coronavirus epidemic.

Digital transformation, differentiated competition and integration among giants

Look at hypermarkets (i.e. superstores that combine a department store and a grocery supermarket). The reduction in customer flows subsequent to the virus outbreak is within projections. Their large scales of operations mean they are in a favorable position to adopt more flexible business models and multi-channel development strategy to find new growth opportunities via active digital transformation.

To new consumer communities such as Hema Fresh, differentiated competition gives them an edge in customer acquisition. Hema Fresh is Alibaba’s online and offline hybrid grocery stores, a data and technology-driven new retail platform. It stands out with high-speed, high-hygiene refrigerated transport logistics capabilities for its online fresh food purchases, promoting home delivery within 30 minutes. Drawing in new consumers and attracting customers to put more in their shopping baskets are vital to the growth of brick-and-mortar retailers while O2O services are evolving into standard practice in the retail sector. Yet, their response during the new coronavirus epidemic has been quick by rolling out shopping and delivery methods that require no physical contact and other innovative services to meet customers’ expectations.

Will rebound from rock bottom mean “retaliatory” consumption and new opportunities?

The diagram above indicates during the SARS epidemic in 2003, total retail sales of social consumer goods fell sharply in the short term, followed by a fierce subsequent rise. As the epidemic faded out, the value of retail FMCG (fast-moving consumer goods) purchases shot up beginning from June that year after free fall in April and May. Hence, the current retail downturn should be just darkness before dawn. The Chinese government is implementing unprecedented containment and health measures to combat the new coronavirus. It is expected that the worst will be over in one to two months, after which enterprises will be presented with bright prospects—this is a get-set-go moment. In the medium and long-term horizons, this new coronavirus epidemic is forecast to drive daily necessities and apparel retailers to shift to high gear in their e-business and omni-channel development, which will speed up their transformation to smart retailing.

E-commerce and smart retail development accelerating

E-commerce business development now tops the agenda. Enterprises are upping their digital advertising investments to compete for online market shares. The increased online activities and more intensive promotional efforts are predicted to stimulate online sales growth. All this will result in a virtuous cycle. It is forecast that smart retail development will be strategized at a faster pace as strategic cooperation and resource replacement with major e-commerce platforms deepens. 

Epidemic situations put enterprises’ crisis response ability to the test. The current new coronavirus epidemic is highlighting the revenue role of e-commerce and O2O for retailers. There are digital marketing solution providers ready to assist and facilitate enterprises to implement successful e-commerce and O2O strategy. As the leading omni-channel marketing technology company specialized in the China market, iClick offers multi-channel network (MCN) end-to-end marketing solutions covering dominant social platforms and over 1,700 mid and top tier key opinion leaders (KOLs) in China to help global advertisers make the most of social commerce and smart retailing in order that they can sell to target Chinese audiences. Above all, enterprises must look to smart retailing and digitization to ensure uninterrupted operations and business growth in the interests of both themselves and the society.