Coronavirus and Its Impact to the Retail Industry | Balmer Agency

Coronavirus and Its Impact to the Retail Industry

It goes without saying, Coronavirus has sent shockwaves around the world. Although cities at the epicentre of the outbreak, in China’s Hubei province, have been on lockdown since late January this year, the virus has managed to take over 2,900 lives within mainland China, and spread across global borders. In the past couple of weeks there have been reports of new cases and fatalities across Asia, Iran, Canada, Europe and the UK. 

While Australia has managed to stay relatively unscathed with 41 confirmed cases (21 fully recovered), the broader impacts of the virus on the economy are starting to take hold. With supply and demand already taking a hit, retailers will be among the first to experience the far reaching economic consequences of Coronavirus. From stock shortages to a decline in foot traffic, here’s where retailers are going to be most affected.


1. Empty Factories, Empty Shelves

Empty shelves at a Woolworths in Sydney
(Empty shelves at a Woolworths in Sydney)

 In an effort to curb the spread of the virus, businesses across China have been forced to close their doors. Though many firms are able to stay afloat due to employees working remotely from home, factories have no other choice but to cease operations. As factories in China remain closed, retailers from around the world have been left reeling from global supply chain delays. Industry experts have warned that both retailers and consumers should expect shortages across a range of products including clothing, household goods, cars and building supplies.

Here in Australia, electronics retailers are beginning to feel the burn, as electronics are one of our largest imports from China. Wuhan, the city at the heart of the outbreak, is a major tech centre and home to factories that produce crucial components in TVs, computers and phones. While major retailers (with high volume orders) like JB-HIFI can rest assured they will be first in line once production is revived, smaller retailers may have to brace themselves for the worst as there is no line of sight for production and dispatch of goods.

The electronics sector is one of many to be impacted. While Coles has seen a delay in crucial technology like refrigeration and automation equipment, the availability of non-food products like hand sanitiser, anti-bacterial handwash, stationery and clothing, has also been affected. A recent wave of panic buying has further exacerbated product shortages, leaving supermarket shelves bare as consumers stock-pile essentials (like toilet paper) in preparation for the worst. Coles has released a statement, saying that they are working with suppliers to restock. Other supermarket retailers like Woolworths have sought to combat panic buying by setting purchase limits on products like toilet paper and hand sanitiser. Supermarkets have also had to redirect goods usually sold to the Chinese market, towards other Asian markets, as Chinese ports are unable to receive goods due to a shut-down of transportation networks.

More generally, smaller retailers across all sectors are feeling the post Christmas pinch with no stock deliveries in the foreseeable future. Without stock the livelihood of these businesses is instantly crippled – as they no longer have anything to sell. 


2. No Tourists = No Spending

Empty seats at an airport

Since February, the Australian Government announced travel restrictions on inbound travellers from mainland China. Aftershocks of the travel ban are having a major impact on Chinese tourism, the largest source of Australia’s international visitors. Last year saw 1.3 million Chinese touch down in Australia, contributing a whopping $12.2 million to our economy.

While the tourism industry was already suffering from the bushfires, the addition of the Coronavirus rendered February a very quiet one comparative to previous years where it was the most popular month for inbound Chinese tourists. With inbound tourism slowing, we can also expect Australia’s luxury market, which is largely driven by tourism, to be heavily affected. Some luxury goods experts say that the impacts of Coronavirus could mean a disastrous year ahead  for luxury brands as Chinese consumers make up at least one third of global luxury spend.


3. The Fear Factor

Melbourne restaurant Shark Fin Inn during better times before it was forced to shut amid Coronavirus fears
(Melbourne restaurant Shark Fin Inn during better times before it was forced to shut amid Coronavirus fears)

Chinese businesses have been particularly affected by the Coronavirus outbreak due to widespread panic across the country. While there is  no evidence that people should avoid Chinatown, or other Chinese populated areas, retailers in neighbourhoods with a high Chinese population, such as Sydney’s Burwood, Hurstville and Chatswood suburbs, are trading down by 50-90%. In Melbourne, beloved Chinatown restaurant, Shark Fin House made headlines after being forced to shut in mid February after an 80% drop in customers. We can only assume that there is a lot more of this to come.


4. What can we do now?

With no signs of the outbreak slowing down, retailers may soon find themselves with nothing to sell and no one to sell to. And even if we do see the end of this virus, it will take some time for both retailers and consumers to regain the confidence to resume business as usual. Based on models of past pandemics and observations from the 2003 SARS outbreak, economists predict a global recession is on the cards, with the Australian GDP falling by up to 8% in the worst case scenario. Businesses that are already feeling the effects of Coronavirus, or are concerned about the future should seek financial advice and begin planning for a variety of outcomes and crisis situations.

For retailers experiencing a disruption in their supply chain, it might be worth directing customers towards products that are manufactured elsewhere outside of China. Raise awareness of alternative products through thoughtful marketing campaigns across a variety of channels.

Retailers who rely on inbound Chinese tourists as a source of profit, may want to focus their attention on the Chinese population here in Australia. Consider targeting the domestic Chinese market through traditional and Chinese social media platforms.

 For the rest of us, it’s time to stop listening to exaggerated claims and fears. While stocking up on essentials like prescribed medication is advised, experts warn that panic buying is unhelpful and unnecessary. It is also up to us to continue supporting local businesses, starting by visiting one of the businesses listed on the Dine With Them Instagram Page


At Balmer Agency we connect Australian businesses with Chinese communities both overseas and here in Australia, through our comprehensive range of Chinese Social Media and Digital Development services. If you would like more information on marketing to a Chinese audience, or further insights into the Chinese market, feel free to get in touch.