The recent outbreak of COVID-19 is forcing China’s retail properties and brands to accelerate their adoption of integrated online and offline sales channels. The integration trend has its roots in the country’s booming e-commerce market. Online brands have tried to convert online traffic to offline sales while brick-and-mortar retailers strived to enhance their online presence to maintain competitiveness. Now, physical retail shops are under strong pressure as China’s wary consumer is avoiding crowded places like shopping malls and department stores. Hence, physical retailers and mall operators have even greater incentive to cultivate online channels that can compensate for losses at physical stores.
Amid the outbreak, we observed several brands and landlords expanding online channels through e-commerce platforms, WeChat ecosystem and live streaming:
- Although China’s e-commerce platforms have already matured, the outbreak has created new opportunities. More retailers and landlords realized their online sales channels could go beyond simply complementing offline retail to also serve as contingency plans in extreme circumstances. Increasing numbers of retailers – F&B brands in particular – have started to collaborate with online delivery platforms. Malls have also begun creating their own online platforms through apps and official websites, besides collaborating with existing online platforms to sell their tenants’ products via home delivery.
- Retailers and landlords are using the WeChat ecosystem to build communities, enhance sales and retain customers. Brands and malls have created chat groups on China’s ubiquitous WeChat app, where they share information on products and promotions. With exclusive sale offers and extra membership points, they motivate customers to shop directly on the group or through other WeChat functions, such as mini programmes and official accounts. This allows brands and malls to generate sales, maintain direct interactions with customers, as well as collect valuable data on consumer sentiments. Such groups also enable malls to enhance customer loyalty by cultivating communities of like-minded shoppers.
- Commercial live streaming was already emerging as a major online trend in China before the outbreak (see Figure 1) but gained more popularity amid COVID-19. More landlords and brands including Joy City, MixC and Nike have launched live-streaming selling to promote products, attract customers at home and interact with them via video streams. Live streaming also gives retailers innovative means to engage with shoppers stuck in their homes, for example, live-streamed training classes offered by gyms and activewear brands.
COVID-19 outbreak has dealt a blow to China’s retail market, but these strategies show that savvy players are seizing opportunities amid challenges. With Chinese customers actively embracing these new trends, mall operators are continuing to explore new online channels for customer engagement and sales to compensate for losses from physical stores, contributing to the development of online communities and more sales channels. This gives them a better source of customer data, as well as improved capabilities to track sales and compete in an online space that has been dominated by e-commerce firms. Although the impact of COVID-19 will fade over time, online/offline integration strategies adopted today are likely to continue influencing China’s retail market going forward.
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