Eastern Promise: eCommerce Lessons Learnt from China and South Korea

Stuart Elmes

 

As the COVID-19 crisis continues to ravage North America and Europe, governments, brands, retailers and economists are struggling to get a clear picture of the recession and recovery that most sane analysts assume is around the corner. But with the massive Asian markets of China and South Korea emerging from lockdown, we can get a glimpse into the future of consumer behaviour. Let’s take a look at what is happening in these regions as they move beyond lockdown and into the new normal.

Are Customers running back to Stores in China?

Nielsen has dubbed China’s new reality as “the homebody economy”, a brave new world in which citizens work, study, shop, and seek entertainment options within the walls of their own dwelling. And according to their surveys, this trend is likely to stay entrenched in consumer behaviour even as restrictions are lifted. A whopping 70% of respondents to the survey said they bought fresh products online more than once a week, and over 80% said that they had been shopping online. And 89% of respondents stated that they would be more likely to buy groceries and daily necessities online once the pandemic had run its course.

The massive Nielsen survey also revealed that the public is much more inclined to remain at home than one might have predicted once restrictions on mobility are lifted. Roughly 94% of respondents had either a positive or neutral view of working at home, while 83% claimed it was as efficient as working in an office. These positive views also extended to education, with 93% of Chinese respondents reporting that they had a positive or neutral view of studying online, and many saw it as a daily “source of happiness.”

The data also shows us that even after social-distancing and lockdown measures are lifted, consumers are reluctant to head back to crowded supermarkets and shopping malls. As the Nikkei Asian Review observes, customer traffic in Shanghai area supermarkets is “around half of the usual levels” with Chinese Wal-Marts reporting that “sales are not growing at all” despite online delivery options being offered. Electronics retailers and upscale shops are also reporting that foot traffic and sales are hovering around half of the pre-pandemic volume. 

In fact, Nikkei reports that approximately “60% of operators of large malls see sales dropping around 30% to 70% on the year for the first quarter of 2020, with virtually no members expecting growth”. Meanwhile, roughly the same percentage of online retailers see sales holding steady or growing. Trends in the Chinese recovery suggest that brick and mortar will likely face a gauntlet of challenges as it looks to get back on track in the aftermath of the virus.

News from South Korea

 

South Korea’s response to COVID-19 has been widely praised by health experts, and the country has seen its efforts dramatically reduce the spread of the virus. However, the economy has struggled as exports are limited and social distancing guidelines create barriers to success in certain industries. The overall economy contracted in the first quarter of 2020, for the first time since the 2008 financial crisis, and 195,000 jobs were lost according to Yonhap News, the most in a single quarter since 2009. 

South Korea has been the first developed economy to roll back restrictions on mobility and encourage stores to re-open. Despite seeing its first infection on the same date as the USA, and experiencing a flood of cases initially, the country has successfully used cell-phone data and mass testing in its efforts to combat the virus, and has seen daily totals of new infections drop to single digits. However, the economic impact has proven more difficult to control.

On the third weekend of April, “parks teemed with sunbathers” according to Bloomberg News, and the streets were crowded with mask-wearing pedestrians, yet retailers were reportedly still struggling to tally sales, with footfall at 10% or normal pre-virus levels. With this in mind, it seems clear that the psychological impact of the pandemic will linger long after the virus subsides, with consumers avoiding crowded spaces and face-to-face contact where possible. The manager of a cosmetics store in the popular Garo-su gil shopping district reported that traffic was at just 10% of normal levels. 

Trends to Follow

 

While online shopping had achieved greater sophistication, ubiquity, and market penetration in Korea and China prior to the current crisis, it’s not a stretch to assume that European and North American shoppers will emerge from isolation as committed users of digital shopping platforms. And the new normal in Asia seems to suggest that we should not expect consumers to flood brick and mortar retailers when restrictions are lifted. The world was already moving towards online shopping, and COVID-19 has rudely shoved it much further along the road to a digital economy. Online is about to grow exponentially, largely at the expense of brick and mortar stores. 

Another few trends to note are that consumers are likely to invest heavily in health and lifestyle-related products for the foreseeable future. 75% of Chinese consumers told Nielsen that they would spend more time and money on exercise in the future, and 60% claimed they would invest more heavily in medical products and check-ups. 90% reported plans to buy air purifiers and 93% said they’d buy water purifiers. And sales of vitamins, hygienic products, and fresh fruit and vegetables have been skyrocketing. With economic concerns at the top of everyone’s mind, many retailers are reporting that consumers have become exceedingly value-conscious, with many retailers reporting that only items on sale are selling. And sales of big-ticket items like cars and real-estate have been particularly hard hit. 

It’s impossible to know exactly what our new reality will be like when the virus recedes and we emerge from our shelters, but the trends at work re-shaping Asian economies are likely to manifest themselves in the West. If you’re looking for a marketing partner that is well-versed in online commerce and ready to help your brand adjust to the new normal, get in touch with Adimo today!