Despite COVID-19 lockdown wiping off US$420bn from China’s retail market, rebounding sentiment will boost H2 spend, says GlobalData

The COVID-19 lockdown and the disruption to retail is expected to wipe off ¥3.0 trillion (US$420bn) from China’s retail market in 2020, causing a 1.8 percent fall in retailer sales in 2020 over 2019. This compares with pre-COVID growth estimates of a former healthy 7.7 percent forecast, says GlobalData, a leading data and analytics company.
China started to ease the lockdown from March 18, 2020 and completely lifted it on April 8, 2020 in Wuhan city, the epicenter of the outbreak. Shopping malls, restaurants and retail stores in the country rushed to reopen to recover from the losses during lockdown. According to the Ministry of China, approximately 80 percent of restaurants and over 90 percent of commercial facilities had resumed operations across the country by April 3.
However, despite easing the restrictions, many consumers remain confined to homes due to the fear of infection, affecting businesses that are fully operational again but now do not have the required traffic to trade profitably. Customer traffic at a Walmart store in Shanghai had registered less than half of usual levels on March 28, 10 days post lockdown, while electronics retailer Suning.com also received half of the usual customer volume at some of its physical stores. H&M recorded a sales decline of 23 percent for the week commencing March 26, 2020 against the same week in 2019 despite 99 percent of its stores being open.
Vijay Bhupathiraju, Retail Analyst at GlobalData, comments: “Despite easing lockdowns, immediate increase in consumer sentiment is unlikely in Q2 2020, particularly for discretionary goods as consumers remain cautious about visiting busy locations such as shopping malls.
“A rebound in consumer sentiment can be expected from H2 2020, which will be translated into a faster sales pick up in the country. In fact, the rebound will be more positive than those we forecast for mature western countries such as Italy, Spain, the UK and the US, where consumer willingness to spend and financial stability will be weaker.
“Indeed in 2021, we forecast retail sales in China will be up 8.3 percent on 2019, highlighting the speed of its recovery.”