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‘Revenge spending’ seen going for simple pleasures

/ 05:40 AM June 02, 2022
 A worker cleans the facade of a Chanel store. STORY:

RETAIL REOPENING A worker cleans the facade of a Chanel store on a shopping street in Shanghai, China, where a two-month lockdown to curb the COVID-19 outbreak in the city of 25 million was lifted on June 1. —REUTERS

SHANGHAI — Mother-of-two Yang Zengdong, 40, is ready to take her family for a long-awaited outing to mark Shanghai’s grand reopening from COVID-19 lockdown on Wednesday.

Her ambitions — head to a mall, see what is open, and maybe buy a drink or some small toys for her young daughters — are modest, but even those simple pleasures have been impossible during the grueling two-month lockdown.

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Unfortunately for retailers desperate for a quick, “vengeful” return of shoppers of the sort seen in 2020 when China enjoyed a “V-shaped” recovery from its initial battle with COVID-19, the excitement that is palpable on newly bustling city streets is tempered by wariness about the future.

Shanghai’s lockdown may be over, but China is sticking to its zero-COVID elimination strategy, fueling worry in the city of 25 million that it could all happen again.

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“A lot of my friends, people with families and kids, their idea is to buy a bigger fridge, or food—they aren’t interested in buying unnecessary stuff right now,” said Yang, who works as a teacher.

The focus on necessities echoes e-commerce giant Alibaba Group CEO Daniel Zhang’s remarks last week.

“In all those different tiers of consumers, demand for essentials has gone up and there’s been less price sensitivity. Whereas with respect to nonessential purchases, there has been more price sensitivity,” Zhang told analysts, adding consumers were also stocking up to prepare for future uncertainty.

F&B recovery

Though Shanghai will inevitably see retail bounce-back, it will be coming off a low baseline, with retail spending in April plummeting 48.3 percent year-on-year.

Shopping is unlikely to be boosted by stimulus payments to consumers, as seen in other countries. China prefers to target such spending toward infrastructure and businesses, rather than consumers who are prone to saving.

Jason Yu, Greater China managing director of market research firm Kantar Worldpanel, predicts an initial spending recovery at food and beverage outlets suited to pickup and delivery, with coffee, bubble tea, cakes and other “categories related to pleasure” set to come back strongly.

Beauty is also poised to benefit from a return to public life, Yu said, adding that the upcoming “618” shopping festival—in which all major Chinese e-commerce platforms and many major brands participate—could provide a sales boost.

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“There will be some pent-up demand for skin care and beauty categories, especially if premium brands are marketing themselves more aggressively with discounts,” he said.

Luxury retail

As China’s largest and wealthiest city, Shanghai has long been a magnet for luxury retail and is home to 12 percent of luxury brand stores on the mainland.

The reopening of high-end mall Plaza 66 last weekend saw lines snaking outside a Hermes store — a heartening sight for luxury brand executives in Paris and Milan banking on a return to form from Chinese consumers.

“Many shops are offering incentives to bring shoppers back, including tripling the points they can earn in their loyalty programs,” said Amrita Banta, managing director of luxury consultancy Agility Research and Strategy.

Still, she isn’t betting on business-as-usual for Shanghai luxury spending.

“I would expect the initial few days of the opening up to see a lot of crowds, but this will also have the effect of keeping other people at home who do not want to risk being in busy areas,” she said.

Teacher Yang said life in Shanghai remains tinged with a sense of risk.

“I’m not afraid of getting the virus, but I am afraid of a positive test result and centralized quarantine,” she said.

“I think for most people, this is a time to enjoy being outside but also to protect yourself and protect your money. This is not the time to spend and be wasteful.”

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