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China: A window into a post-pandemic world

There is a lot of discussion about retail reopening in Australia, and of course we are paying close attention to China right now, as we witness the reaction of the market and their stores begin to welcome customers back post-pandemic.

What can Australia learn from China as we watch events unfold in the rear-view mirror? The re-emergence of retail in China has been a hot topic of discussion among the retail community and one of close review from other countries as they’re looking to the future.

As much as we can learn from the superpower that is China, we need to consider the cultural differences that impact consumer behaviours, particularly right now in this unusual circumstance. What defines success in a post-COVID retail landscape is wholly dependent on how the consumer feels and consequently behaves, so this part of the equation cannot be underestimated.

There has been some new data publicised recently that supports the sentiment that the Chinese consumer is moving with caution back into this “new normal”. H&M China’s latest results reveal a significant struggle in sales; despite 89 per cent of their stores being open, they have witnessed a 79 per cent drop in sales.   

What used to be commonplace behaviour – using public transport, visiting shopping centres and eating out – has shown a very slow return so far in China. Whether we will see a similar behaviour pattern from the Australian public when restaurants and entertainment spaces reopen is unknown as yet, but it may be useful to draw on psychology for some insight.

 It takes approximately two months of repetitive behaviour to shift an individual’s habits, which could be why restaurants in Shanghai as an example are witnessing a very slow uptake post-pandemic. If people are still choosing to eat-in versus dine-out, this could be indicative of both hesitancy around health matters, and caution on spend after a long period with reduced or no income. I think in respect of this, we will see a divide in behaviours, as many Australians will have been financially impacted by COVID-19, we must assume this will filter through to a decline in some categories, including entertainment, dining out and retail.

 The flipside of the doom-and-gloom coin on discretionary retail was the recent news on Hermès in China reopening to sales of $4.24 million in one day. However, we know that this does not reflect the bigger picture and we cannot get too giddy on this news as luxury retail moves in different ways to the rest. While many non-essential retailers have been shut down for a few weeks, we haven’t experienced the extremities of this terrible virus in the same way as the people of China. So, I wonder if Australians will resurface with as much caution?

 Non-essential stores reopening is obviously a good sign, and one that promotes normal social activity; however, will it really matter if people aren’t in a position to spend? We know Australian consumers’ propensity to spend prior to the pandemic cannot be relied upon as any kind of steer to the future.

 After weeks, potentially months, of reduced income, delayed payments and frugality, one wonders what frame of mind our consumer will be in.

 Christmas, of course, will be a very interesting test. At a time that is central to gifting, sharing and indulging, will we see the same rush of shopper excitement, or will it be impacted by this unprecedented shock to many Australians’ financial status?

 This leads to another line of questioning which is, will our consumer be inclined to shop value brand or luxury? It really could go either way, as we may be inclined to rethink our values on consumption and the requirement for all this “stuff”. We may find that our consumer is now more inclined to buy fewer quality items and turn their head to repair and restoration which could drive them to higher priced “quality” product.

Or, we may witness a trend driven by the result of financial hardship, a significant downturn in consumption overall, leading our wary consumer to purchase product and produce as cheaply as possible.

Jemma Caprioli is chief customer officer at print company Dashing Group.

This story first ran in Inside Retail Weekly. Given the current crisis, we have decided to unlock all premium content related to COVID-19.

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