Sam Yazdani outlines the current shape of the Retail & Consumer market in Hong Kong and the impacts of Covid-19.

Retailers  

• Most retailers have reopened stores, c. 85%
• Consumers are moving significantly to digital, especially in categories such as grocery and personal care which were seen as mainly offline pror to CV19; Nike report 30% increase in year on year digital sales (but increase in digital sales is partly due to e-commerce having started to penetrate Tier 3/4 cities before CV19)
• Consumers initially hesitant to spend (wary about shopping malls, job security, personal finances part to blame), a gradual re-opening seen by some retailers as a more cost effective approach 
• Mixed recovery: some big market players such as H&M seeing slower recovery with sales down 79%, but others reporting immediate, strong gains such as Hermes (reported to have secured huge sales on the first reopening day of its flagship store in Guangzhou)
• Smaller domestic chains face a greater battle to recover – bigger/multinational chains having greater brand presence, visibility, existing goodwill, A&P budget etc
• Demand for clothing has fallen due to "work at home policy", particularly luxury items being replaced by comfort; yet there are early signs of "revenge spending" with growing consumer confidence tracking the fall in CV19 cases across China (Hermes hopefully being the first of many success stories)
• Innovative customer engagement is helping, eg Lululemon announcing sales increases through effective We Chat engagement strategy
• Immediate gains for "flash sale" companies as retailers try and clear seasonal stock
• Fresh momentum for cross-border e-commerce exports with China to set up 46 new integrated pilot zones

Supply Chain  

• Reduction in exports "not as bad" as predicted, only a 6.6% fall from last March rather than a 14% fall as predicted by Reuters
• Broader trend moving supply from PRC to South-East Asia, ignited by the US-PRC trade war, accelerated by CV19

What next?

• Global supply chain reconfiguration -  there are concerns in PRC that over-reliance on PRC in global supply chains will be addressed, with multinationals seeking a more diverse and resilient supply base (although existing scale, value, innovation and the huge domestic market will continue to be powerful drivers for the Chinese supply base)
• International brands entering China is currently on hold, but China may become the new testing ground: Louis Vuitton and Burberry have begun live streaming their SS20 collections across popular Chinese social e-commerce platforms (early consumer engagement results are very promising) 
• Retailers considering increased investment in their own D2C online presence, reducing reliance on third party platforms.