As Stores Reopen in China, U.S. Retailers Look to the Country for Answers

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Key insights:

As businesses begin to reopen in China and life slowly returns to its streets, the retail industry in the U.S. may look to the country for guidance on what the post-pandemic world looks like and how to adapt to the new reality.

That’s because the pattern of Chinese consumers’ purchasing habits in response to Covid-19 is now being mirrored in other countries as the contagion spreads, according to market analytics and ratings agency Nielsen.

“China was the first place on the planet to emerge and is a quite compelling early indicator for the rest of the world,” said Scott McKenzie, head of Nielsen’s global intelligence group.

On the other hand, China’s experience may not be a perfect blueprint for what the U.S. is set to experience in the coming months. The two nations find themselves under different circumstances, from how each of their governments are handling the crisis to the digital capabilities of their respective retailers.

For one, China’s national government has centralized control over the economy, McKenzie noted. And while China had little time to respond to the highly contagious virus, it was not unfamiliar with the threat of a pandemic, having experienced SARS in the early 2000s, said Deborah Weinswig, CEO and founder of advisory and research firm Coresight.

That past experience resulted in China’s “ability to frame [the crisis] and respond very quickly, with the population also realizing the challenges ahead,” she said.

According a survey conducted by Dentsu Aegis Network China, a majority of marketing directors were aware of the potential impact of the coronavirus precisely due to SARS in 2003.

Despite the differences, there are a number of lessons retailers in the U.S. and beyond can learn from the Chinese experience that helped brands there stay connected to consumers and salvage sales, from a more advanced and accessible broadband network to a highly developed contactless payment system.

China outpaces the world in digital development

In many ways, what SARS was for China, the coronavirus may prove to be for the U.S., altering consumer behavior and exposing gaps in the nation’s digital and technological capabilities, spurring necessary infrastructural improvements, said Iris Chan, a partner at digital marketing agency Digital Luxury Group.

Staff of the Beijing Center for Disease Control man hotline phones, taking calls from the public concerning SARS (severe acute respiratory syndrome).
GOH CHAI HIN/AFP via Getty Images

Importantly, China is more advanced in terms of developing its digital economy and the tools needed to facilitate online and mobile transactions, which in itself holds lessons for the U.S. As McKenzie put it: “Every country would index lower in digital capabilities versus China.”

Infrastructure is at the top of that list, with China rolling out a 5G wireless network that has the bandwidth to support virtual showrooms and livestreaming, capabilities retailers stateside will likely find themselves sorely needing.

In addition, China’s 5G network is both affordable and widely accessible from rural to urban areas, unlike the U.S., said Chan, who has worked with companies such as luxury giant LVMH, cosmetics group Estée Lauder and American apparel brand Ralph Lauren.

Just this past Thursday, China claimed to have built nearly 200,000 5G base stations, reaching some 50 million users who subscribe to the service. The country plans to build a total of 500,000 by this year’s end, as it aims to spend some $170 billion (1.2 trillion yuan) on the effort over the next five years.

In the U.S., Verizon now offers 5G service in parts of 34 cities, including New York, according to its website, while AT&T now provides 5G service in some 100 markets.

T-Mobile, the most aggressive of the three, claims it offers service in some 5,000 cities and towns, covering 200 million people, while spending $30 billion and building some 25,000 towers. The service has been characterized, however, as low-band 5G and only 20% faster than its 4G network, well below the 1 GB/s speeds Verizon offers, according to publications such as CNET.

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