• China market rebound from COVID19

• Boost for China’s e-commerce markets

March 23, 2020

COVID-19 broke out in China just before the Chinese New Year holiday in January 2020 and has severely affected businesses, people

and society during Q1. In all cities in China, people took self-imposed home-quarantine for all of February. With the entire country

on lockdown, retail sales dipped 20.5%, industrial output declining by 13.5%, and fixed asset investment by close to 25%.

However, as of mid-March, China seems to be on a path of recovery, and business appears to be bouncing back. Analysts expect pent

up consumption to contribute to 15% GDP growth in Q2. As domestic cases of COVID-19 in China have continuously declined to

ultimately zero new cases, many aspects of life across most cities are returning to normalcy. The number of imported cases appears

to be increasing, which is an increasing threat that requires close monitoring. As China is on a road to recovery, brands are

reactivating their marketing and communications. Online sales and offline store foot traffic are all recovering as consumers have

started to release their pent up consumption of the past two months.

Chinese e-commerce ecosystem seems to be one sector that has held strong and even been grew stronger despite the crisis. Buyers

and sellers have created an agile e-commerce landscape in China where opportunities and new trends always been in the spotlight.

The recent development forced the e-commerce market to develop and adopt even more and customers acceptance and followed.

Economic Index Monitoring

Number of railway loads recovery rate 95%

Coal production capacity recovery rate 76%

Iron and steel enterprises’ rate of resuming work 67.4%

Non-ferrous industrial enterprises’ rate of resuming work 86.3%

National delivery capacity recovery rate >80%

National grain processing enterprises’ rate of resuming work 97.3%

95%-100%

70%-95%

50%-70%

Rework rate of

Industrial enterprises

20%-50%

0%-20%

No data

Mapping of rate of resuming work in China

Emerging signs of economic recovery in China

Last updated: March 13, 2020 / Source: China’s Official Public DataLast updated: February 29, 2020 / Source: China’s Official Public Data

Economic Index and rate of resuming work indicate that Chinese economy begins to rebound.

Sichuan

95.4%

Qinghai

48.5%

Tibet

52.1%

Xinjiang

52.1%

Chongqing

99.8

Yunnan

92.09%

Henan

>90%

Guizhou

100%

Guangxi

99.7%Guangdong

>95%

Hunan

98%

Jiangxi

99.4%Fujian

98.1%

Hainan

87.5%

Taiwan

Zhejiang

99.8%

Anhui

98.1%

Jiangsu

99%Shanghai

97%

Shandong

99.7%

Hebei

96.1%Shanxi

97.6%

Shanxi

about70%

Hubei

Inner Mongolia

65%

Heilongjiang

80.8%

Jilin

87.6%Liaoning

93.4%Gansu

83.5%

Beijing

61.2%

Tianjin

90%Ningxia

58%

China’s domestic consumptions shows signs of strong rebound

Global Consumer Confidence Index (CCI) Feb. 2020

Strong consumer confidence

Source: IPSOS Primary Consumer Sentiment Index Survey

China, shows the strongest purchasing willingness among the 24 countries surveyed Feb 2020

60.7

U.S.

57.0

German

y

53.1

Brazil

38.5

Russia

42.5

Japan

67.7

China

43.2

South

Africa

32.9

Turkey

39.8

France

38.6

Argentina

40.4

South

Korea

52.5

Australia

63.7

Saudi

Arabia

53.8

Canada

58.1

Mexico

58.1

Sweden

48.9

U.K.

44.6

Spain

43.4

Italy

63.4

India

HighLow

CCI

Offline retailers reopening stores

Apple has reopened all of its

mainland China stores

Most H&M stores have

reopened

Gucci has reopened

most stores

Boost for China’s e-commerce market

E-commerce increase market penetration

Since the outbreak of COVID-19, the use of live-streaming, digital

campaigns, and e-commerce have exceeded all expectations in

China. Most brands and retailers have embraced digital channels to

some extent in order to counteract losses in the offline retail

section and capitalize on this growing sector which is willing to

spend.

Rapid Change of Consumer BehaviorConsumption patterns have moved from offline to online and

current analysis is telling us that the past turbulent months caused

a new paradigm shift in consumers buying behavior. E-commerce in

China took a significant bite of the total retail cake, and there are

reasons to believe it will remain.

China Online VS Offline retail Jan-Feb 2020:

• Offline retail, total: -18%

• Online retail, total: +3%

Offline players forced to speed up digitalization

Most offline retailers were forced to close most of

its stores during big parts of February.

IKEA, who has been in China for +20 years and

been waiting until early March to open up its

online retail, a flagship store on Tmall, most likely

accelerated by the outbreak. In only 5 days they

got 900K Tmall followers and impressive sales.

Increase in Live streaming

Already being a popular trend, this coronavirus outbreak

further boosted the popularity of live streaming in China.

Taobao Live has seen rapid growth in February as

businesses across different industries struggled to find

available sales channels during the epidemic.

• +60% increase in live-streaming since the start of

the outbreak.

• Close to 1,000 fashion, beauty and lifestyle brands

live-streamed via WeChat Mini-Programs as part of

International Women’s Day promotions.

• As a consequence, WeChat Mini-Program social

commerce traffic has increased by 83%.

New ways to reach out: Social Content E-commerce

One of the “new” and fastest growing social commerce

platforms in China is Xiaohongshu (Little Red Book); a

social shopping platform.

During the outbreak, brands couldn’t be too

commercial with respect to the situation and they had

also difficulties to kick-off collaboration with traditional

influencers. Instead they engaged various of consumers

on Little Red Book (and WeChat) in order to get more

“organic”/private traffic to its sales channels.

Due to increasing costs for paid traffic, and with the

“Corona boost”, forecasts says this method will only

grow stronger.

Company Business Growth during the Outbreak

Containment

Meiriyouxian 300% growth in its business volume

Jingdongdaojia Increased year-on-year order volumes by 374%

Dingdongmaicai An increase of 220% on the number of orders of the

same period last year

Hema The quantity of order in Lunar New Year's Eve

increased 300% from a month earlier.

Online Education

Online winnersCOVID-19 drives structural changes in some industries and brings potential investment opportunities

Telecommuting SaaS

Fresh Food E-commerce

E-commerce livestreaming

19,7

64,9

150,3

2016 2019 2022e 2022e*Market Size (Billion RMB) Online Penetration Rate (%)

3.6% 8.7%

15.7%15.7+x%

5,8%

72,2%

2019 2020Year-on-year Increase Rate (%)

Under COVID-19

Market Size of Online K12 Education

Sequential Growth of Efficient Office Apps in 2019 & 2020

Business Growth of Major Fresh Food E-commerce Companies

Jan. 2020 Feb. 2020New live steaming stores on Taobao

Increase of Livestreaming Stores during the Outbreak Containment

Jan. 2020 Feb. 2020New live steaming stores on Kuaishou

+719% +0.5millon

• https://www.bloomberg.com/news/articles/2020-03-16/china-manufacturing-and-retail-contract-for-first-time-on-virus

• https://www.cnbc.com/2020/02/26/jpmorgan-china-gdp-up-15percent-in-q2-after-negative-coronavirus-driven-q1.html

• http://www.bjnews.com.cn/finance/2020/03/05/699385.html

• https://www.scmp.com/economy/chinaeconomy/article/3075314/coronavirus-caused-dramatic-collapse-chinaseconomy-warning

• https://www.cnbc.com/2020/03/17/coronavirus-apple-stores-in-us-closed-until-further-notice.html

• https://asia.nikkei.com/Business/Food-Beverage/Starbucks-raises-bet-on-China-despite-coronavirus-blow

• https://www.nytimes.com/2020/03/18/style/coronavirus-clothing-beauty-stores-closed.html

• https://www.bloomberg.com/news/articles/2020-02-26/hermes-maintains-double-digit-earnings-growth-thanks-to-fashion

• https://www.nasdaq.com/articles/burberry-reopens-china-stores.-there-is-light-at-the-end-of-the-tunnel-but-it-will-get

• https://fortune.com/2020/03/12/chinese-luxury-industry-rebounds-coronavirus-revenge-spending/

• https://walkthechat.com/is-chinas-e-commerce-industry-already-bouncing-back-after-coronavirus-epidemic/

• https://mp.weixin.qq.com/s/7-NuUFJPdEknY4YSA9_-hw

• https://www.globaltimes.cn/content/1182528.shtml

• https://mp.weixin.qq.com/s/-twwpNpIVelnnZwgNzq5sw

• https://wwd.com/business-news/technology/the-show-must-go-on-shanghai-fashion-week-unveils-online-schedule-1203541657/

• https://wwd.com/business-news/media/wwd-china-announces-sustainable-digital-fashion-week-summit-1203538756/

• https://www.scmp.com/economy/china-economy/article/3074843/coronavirus-china-push-ahead-canton-fair-despite-pandemic

• https://wwd.com/fashion-news/fashion-features/chinese-fashion-industry-80-percent-on-track-to-recover-1203540674/

• https://www.bain.com/insights/chinas-consumer-industry-prepares-for-the-coronavirus-legacy/

• McKinsey & Company, COVID-19 response strategies in Apparel & Fashion, 2020-03-18

Sources

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