Learnings from China for UK retail recovery

What does the start of the recovery in China mean for UK retailers?

We’ve already seen non-food retailers in the UK respond in a variety of different ways to the COVID-19 pandemic: some have focused more online (or at least as much as possible), some have diversified their offerings, and others have temporarily shut up shop. But there’s one thing that many agree on: it’s uncertain how long this pandemic will affect the industry. While there are widely different views on how long this impact will last, there’s talk of significant impact for at least 12 weeks, with others suggesting the effect might be seen for a year or longer.

Regardless of the length of the UK lockdown, retailers need to be prepared for what happens afterwards. With China returning to some sort of normality as cases decline, we look at their trends to see what might lie ahead. 

China’s rapid response to the pandemic allowed citizens to return to work (and normality) relatively rapidly. While the UK’s lockdown is likely to last longer, consumer surveys coming out of China give some reasons for cautious optimism. One survey showed that almost half of Chinese consumers expect the economy to rebound quickly and their routines to return to normal within the next two to three months. 

A slower bounce-back than many would like?

While some consumer trends may mirror those seen in China after the SARS outbreak - such as a decline in those items that were previously ‘panic buys’ - there will be differences. The main one likely being recovery time. With the SARS outbreak, we saw a rapid bounce-back - something which many businesses will cling to. However, early indications suggest that we will see a slower recovery this time around. 

There’s lots of discussion around a ‘U-shaped’ recovery starting in the second quarter, which will see a lingering effect in the next month or two and then a gradual return to normal trading levels.

As retailers begin to look at their forecasting and scenario planning, they should take into account a slower recovery phase than they ordinarily might. It’s prudent to be particularly cautious about recovery forecasting, particularly because we are entering an unknown stage that may see significant bumps in the road - for example, unplanned or immediate additional lockdowns or overly cautious spending by consumers.

One reason is an expected drop-off in travel - especially in the medium term. Even as things return, there will still be travel restrictions, as well as a reluctance to move around as frequently. Those cities that rely on tourism may take longer to recover.

In terms of identifying consumers looking to spend, retailers in China are using WeChat to communicate directly with consumers. Social media is an increasingly effective way to speak to consumers and most retailers appear to have upped their usage in recent weeks. Combining this with utilising existing customer data successfully to target the right audience has to be a winning approach.