ChinaMarket Insights

Unexpected Chinese Market Trends Emerging from the Coronavirus Outbreak

By 21 February, 2020June 30th, 2023No Comments

Hongqiao railway station, Shanghai

The new virus outbreak in China conjured a sense of déja vu for those who remember the SARS outbreak that started in November 2002. Since then, China’s role in the global economy has grown exponentially.

From 2003 until today, China’s part of the global economy has grown from 4% to 16%. The new outbreak has affected businesses in various sectors. Travel agencies taking a huge hit due to the travel restrictions and small to large retail firms have witnessed a huge loss in domestic retail sales. The country is now facing a nationwide economic stagnation. However, the crisis situation has also caused new, unexpected, market trends to emerge within multiple industries.

Emerging Technology Caused by Travel Restrictions

The coronavirus outbreak hit China with critical timing, only weeks before the Chinese New Year. The big celebration accounts for the largest travel holiday in the world, as hundreds of millions of Chinese people travel both domestic and international. Due to the virus, dozens of airlines have suspended flights from entering and leaving China, and domestic traveling has also been heavily restricted, in an attempt to contain the spread of the virus. The travel industry saw a similar chock during the SARS-outbreak in 2003, but fully recovered within nine months from the outbreak.

Due to the situation, a tremendous number of Chinese people had to cancel their Chinese New Year-trips, causing great losses for the travel industry. There were still a high number of travelers during the holiday, but these might now be facing trouble getting back to their home city. As of right now (February 2020), there is still around 200 million people unable to travel back to the big cities (visualized in the table below) due to the nationwide travel restrictions, causing massive problems in all industries.

Graph showing return rate of people leaving big Chinese cities

An unexpected effect emerging from the travel restrictions has been a further development and spread of Virtual Reality-technology. Using the advanced equipment, travel agencies have started to offer people virtual travel tours from the safety of their homes. The new technology lets people discover new places, both inside and outside of China, without the risks connected to the coronavirus. Though this particular market has a long way to go before it can be compared as a serious substitute to real traveling, an effect of this has been that more Chinese people have tried Virtual Reality for the first time, spreading the knowledge of the still new technology further in China and increasing future opportunities for companies offering Virtual Reality-services. The Virtual Reality market in China is expected to grow, not only affecting consumer markets, but also help develop education, health care, manufacturing and the military.

Digital development in the retail sector

During the SARS outbreak in 2003, the retail sector was one of the worst affected. Now, the retail sector is taking another hit as both the consumer demand and consumer confidence are dropping. Products like snacks, alcohol and other commodities are seeing a major decrease in sales, while necessities like drinking water and personal care remains at their usual levels. The outbreak has forced small and mid-sized retailers to close its stores, putting big pressure on the business owners.

Graph showing SARS virus effect on retail sales growth

Businesses with developed online-platforms are among the few who have been beneficial in this situation. Therefore, the epidemic will probably force retailers to accelerate their e-commerce development more, to stay relevant and competitive in the long run. This is pushing the already fast changing retail environment further and making the importance of a well-established online-channel even more obvious. An additional effect of the virus has been a rise in consumers acceptance of unmanned services, highlighting the opportunities of further developed technology driven, employee-free, retail stores.

In summary, the coronavirus outbreak will have a huge negative impacting on a large number of industries. However, it will also create new market trends and possibilities for those in the forefront who grab the opportunities. The travel industry has been heavily affected by both domestic travel restrictions and international airlines suspension flights to and from China. A sizeable portion of Chinese travelers had to cancel their New Year-trips, both in and out of the country, and those who managed to get away are now facing problems getting back. However, the situation has caused travel agencies to introduce a new high tech-driven service to the market, VR-traveling, spreading the developing technology amongst Chinese consumers. Further, the retail industry is also taking a major hit due to the virus outbreak, but the crisis has shed some light at the importance of having a well-established e-commerce site, accelerating the development of online channels. The opportunities of running employee-free, technology-driven, retail stores have also been brought up to the surface.

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