Casey Hall

SHANGHAI (Reuters) – Mother-of-two Yang Zengdong, 40, is ready to take her family for a long-awaited outing to mark Shanghai’s grand re-opening 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 gruelling two-month lockdown.  

Retailers looking to recoup their lost customers quickly and efficiently are disappointed.

Although Shanghai may have ended its lockdown, China continues to implement its zero COVID elimination strategy. This has caused concern in Shanghai, home of 25 million people, that this could happen again.

“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. 

E-commerce is echoed by the focus on essentials Alibaba (NYSE:) Group CEO Daniel Zhang’s remarks last week. 

“Across all the different levels of consumers, there has been a rise in demand for essentials but less price sensitive. Zhang explained that there was more price sensitivity for non-essential items, while the demand for essentials has gone up. Zhang also said analysts that consumers are stocking up in preparation to face future uncertainties.

Although Shanghai is certain to see a retail rebound, the city will still be at a low base, with April’s retail spending dropping 48.3% annually.

As seen in other countries, stimulus payments to consumers will not boost the shopping experience. China is more inclined to spend this money towards infrastructure and business than it is consumers who tend to save.  

Jason Yu, Greater China managing director of market research firm Kantar Worldpanel, predicts an initial spending recovery at food and beverage outlets suited to pick-up 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.  

“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 HUB

Shanghai is China’s richest and most populous city. It hosts 12% luxury store outlets on the mainland.

The re-opening 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 programmes,” 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 expect to see large crowds in the opening days, but it will also result in people staying at home to avoid being inconvenienced by the chaos,” she stated.

According to Teacher Yang, Shanghai life is still fraught with risk. 

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