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Coronavirus may fundamentally change retail across Asia

The coronavirus is driving many Asian consumers to shop online – and it could mark the early stages of a long-term fundamental shift in the region’s retail industry. 

As the virus continues to spread, especially in Mainland China, physical retailers are being forced to shutter stores – either by local-government decree or due to a lack of available staff or customers to make trading viable.  

But as the crisis nears entering its second month, consumers still need supplies and many are going online. 

Hong Kong online portal HKTV Mall, has revealed the average number of daily orders on its site last month was 22,400 – up 64.7 per cent on January last year and nearly 20 per cent on December. 

HKTV Mall’s average daily gross merchandise volume last month was $10.9 million, up 49.3 per cent on the same time a year ago, when it was $7.3 million. 

February figures are expected to be higher still with the growth momentum extending into this month and the fact the virus really only began to impact retailers during the second half of January. 

‘Long-lasting effects’

Pascal Martin and Veronica Wang, partners at OC&C believe the coronavirus outbreak may have long-lasting effects on the retail industry, especially on the mainland. 

“By forcing many consumers to try grocery shopping online for the first time and to experience the convenience of it, is accelerating the adoption of this channel – providing a structural boost to the growth outlook of new retail grocers like Alibaba supermarket, Hema and JD’s 7Fresh – and at the same time accelerating the relative decline of traditional players,” the pair said in an email to Inside Retail Asia.

“And once grocery-shopping shifts to online, the entire retail sector may move online at an even faster pace than before, because grocery is the category that requires the most frequent shopping transactions and therefore fundamentally shapes consumer behaviour.”

Their predictions are supported by S&P Global Ratings in a research note issued this week which likened the current shift online to the similar Sars outbreak back in 2003 which was widely credited with kickstarting China’s e-commerce market. S&P said coronavirus would “further the long-term structural shift” to an online economy, according to an AFP report.  

The move to online is not only affecting purchases of essential supplies. Gift Flowers HK, an online florist, has reported Valentine’s Day orders are up by 20 per cent this year. 

“Hong Kong has always been slow in shopping online and the events in the past eight months has really shifted people away from brick and mortar stores to online,” said founder Justin Chung.

Since June, conventional florists have suffered declining sales due to the social unrest, a situation made far worse by the arrival of coronavirus. 

Logistics challenge

The challenge for online players is delivering products at a time when many people are effectively self quarantining at home to avoid catching the virus. Logistics has become a major headache along with sourcing of some goods given border restrictions between Mainland China and other territories. 

As of yesterday, HKTV Mall raised the delivery threshold for orders until the end of the month from HK$350 for VIP members and $500 for general members to $800. A delivery fee of $80 (previously $40) will be charged if the total bill fails to fulfill the free-delivery threshold. 

“In addition to this, we are working with our merchant partners to have their stores become our order pick-up points,” said Jessie Cheng, a spokesperson for HKTV mall. 

“As for issues getting products into stock from across the border, we do encounter this issue and the operations of some factories and warehouses are suspended at the moment.”

There is a broader challenge evident for regional trade, with an increasing number of reports of export orders being cancelled due to cross-border logistical challenges and falling sales in restaurants and physical retail stores. New Zealanders were told this week they may expect lower beef and lamb prices in supermarkets as export orders were cancelled or cut back. And in the north of Vietnam, there are reports of fresh produce shipments unable to be shipped across the border into China, resulting in appeals for local consumers to buy produce to support struggling local growers.

Restaurant impact

The impact of coronavirus is clearly being felt across Asia, not just in Greater China. In Singapore yesterday, the Restaurant Association of Singapore said it had written to 24 major retail landlords in the city state seeking temporary rent reductions for food-and-beverage outlets. 

Some restaurateurs are fearing a reduction in sales of as much as 80 per cent during the next three months due to a downturn in inbound tourism (especially from Mainland China) and a teend by locals to reduce going out. 

“Looking at the situation right now, we are hoping at least 50-per-cent rental rebate for the first three months,” RAS president Vincent Tan was quoted by Channel News Asia.

Tan, MD of foodservice company Select Group, says with rent and wages comprising more than half a typical Singapore restaurant operator’s costs, relief is urgently needed, especially when margins were as tight as 1.7 per cent before the virus broke out.

“If your sales drop by 50 per cent and your margin is about 1.7 per cent, you just imagine how difficult we are at this moment,” he said.

In Thailand, inbound tourism arrivals are expected to decline by between 50 and 60 per cent during the next three months as outbound tour groups are banned from leaving Mainland China and most international airlines have cancelled or curtailed services to almost all mainland airports. 

HKTV Mall to boost resources

Meanwhile, HKTV Mall is introducing changes behind the scenes to smooth the ordering and delivery process after customers experienced long loading times and difficulties in checking-out during peak times last month. 

The company will launch a separate “purchase by invitation” platform to direct the heavy user traffic flow on popular products, such as personal health items, away from the main HKTV Mall platform. Customers will need to pre-register for each popular product offered at this new platform and based on the available stock level, a unique code will be allocated on a random basis for inputting to HKTV Mall for purchase.

The group is working on adding staff and work shifts, strengthening the partnership with existing merchants and recruiting new ones. 

It will also partner with retail chain stores to expand its order pick-up network so as to increase the geographic convenience and available pick-up time slots for customers. At the moment, the Group has already added seven pick-up points from Foodwise, one of its existing merchant partners. 

HKTV Mall will also expand its delivery fleet capacity by increasing outsourced logistics resources, including third party logistics companies and individuals, to increase the door-to-door fulfilment capacity and thus reduce delivery lead times.

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