IS NOW THE TIME TO INVEST IN CHINA?
In her latest article published on Jing Daily, Ruonan Zheng talks us through how the pandemic has accelerated certain trading difficulties, including rising tariff costs that already exist with foreign direct investment in China. As a result foreign brands are facing the sky-high cost of digital spending and shifting market platform regulations which have become barriers that are affecting their ability to operate in China.
- Shanghai-based consultant Hervé Roland Rogazy stated that a lot of brands are thinking about relocating their production from China to Eastern Europe.
- The impacts of social distancing on retail traffic is making the future of brands without a long-term investment in the Chinese market uncertain due to their lack of competitive advantage, which has forced them to withdraw from the market or seek local strategic partnerships to maintain their presence.
- Space NK have closed their eight outlets and Tmall store in China, which, according to Ecommerce agency Azoya, is due to a lack of product range and poor quality digital promotional activity.
- Esprit has formed a joint venture with Mulsanne Group, a menswear manufacturer and will close its existing retail outlets.
- The Chinese fashion retail market has become saturated, with Chinese brands moving up the value chain – thus pushing weaker international brands out.
- Domestic retailers are taking advantage of low production costs on vacated production lines from international brands, who have moved their production to countries like Vietnam and Bangladesh that are able to offer more competitive prices.
- The barriers to entry for smaller retailers have increased, as they are not able to tailor their products to local design, sizing and colour. As a result, tech (rather than apparel) companies are now seeing greater success in China.
- Brands need to differentiate themselves to survive. Louis Vuitton has survived through its robust omnichannel integration. Similarly, Prada’s aggressive online and offline strategies and the set-up of a pop up shop at Beijing’s SKP-S have aided early recovery from the pandemic.
- What should brands do to survive?
- Evidence their sustainability propositions and awareness of health-consciousness trends.
- Streamline costs, enhance competitiveness and strengthen customer relationships through increased communication to drive greater engagement.
To sum up, China is no longer the low hanging fruit to gain a new revenue stream. Companies with a greater chance of survival post-pandemic will need to have gained a strong foothold in the market and show evidence of embracing new consumption trends and relationships – both online and offline.
FIVE CHARTS: HOW CORONAVIRUS HAS IMPACTED DIGITAL GROCERY
In his article on how coronavirus has impacted digital grocery, Blake Droesch outlines the increasing acceptance US consumers have for shopping online in the context of the digital grocery sector:
- The volume of respondents in a CivicScience survey purchasing their grocery essentials online increased by 23% from the first to the fourth week of March rising from 11% to 37%.
- In April, only a small proportion of respondents to an IRI survey purchased their grocery products digitally, due to products being unavailable in store. This indicates that people have become more accustomed to looking online to make essential purchases, rather than using digital channels as a secondary resource to fulfil requirements that cannot be met in store.
- A recent Red Points survey shows a huge increase in a move to purchase products online (as opposed to in store) across a range of categories, with cosmetics and personal care with the highest rise of 64.6%.
The pandemic has created a healthier competitive environment, where Amazon currently holds the largest market share. Looking at the digital grocery example, Walmart has seen an all-time high in app downloads and used its brick and mortar footprint to drive online shopping through offering click and collect, while Amazon has been forced to create waiting lists to fulfil an influx in demand.
- The role of digital in the consumer journey has continued to grow in importance as we have traversed through the pandemic, resulting in a change in the digital competitor landscape to reduce the dominance of top online market places, as they have reached their capacity to fulfil demand and create more options for consumers to shop digitally.
Read the full article in Click Through.