Chinese authorities lifted the months-long COVID-19 induced lockdowns in Beijing and Shanghai just in time for the 618 online shopping festival, taking place from 1 June to 18 June 2022. With retail sales being the bellwether for consumer spending, the success or failure of the 618 shopping festival will dictate the fortunes of the retail sector. The economic and social fallout of the latest lockdowns will weigh down the outlook for China’s e-commerce industry through 2022 and 2023, according to GlobalData, a leading data and analytics company.
Bobby Verghese, Consumer Analyst at GlobalData, comments: “The stringent Omicron lockdowns in Beijing and Shanghai had a debilitating impact on consumer livelihoods and the economy. Bereft of workers, factories and businesses came to a standstill. With people confined to their homes, the customer footfall in physical retail stores waned, while online retailers were unable to make deliveries due to supply chain disruptions. Subsequently, e-commerce giants Alibaba Group and JD Retail reported heavy losses in Q1 2022 and the following two months, with international luxury brands, including Bulgari, Zara, Lancôme, and Uniqlo taking the biggest hit.”
Manufacturers and retailers are counting on the 618 shopping festival to unleash pent-up demand and reinvigorate the flailing retail sector. However, coming out of the lockdown, consumers are rationalizing their spending on non-essentials, fearing a recurrence of COVID-19 outbreaks and lockdowns.
Verghese concludes: “The supply chain instability and liquidity crunch can profoundly impact consumer and business sentiment. Consequently, GlobalData projects that after its stellar run in 2020 and 2021, China’s retail channel will lose steam in 2022, with a spill over effect in 2023*. The home retail category will bear the brunt of the consumer fiscal austerity*.
“With China transitioning into a consumption-oriented economy, online retail can play a pivotal role in the post-COVID-19 recovery of the economy. However, the e-commerce industry, which is reeling from the government’s crackdown on technology giants since late 2020, can ill afford the stringent pandemic control measures of the government’s ‘Zero COVID’ policy.”
*GlobalData Retail Intelligence Center–Market Analyzers, accessed in June 2022
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