Services, goods firms bullish on demand rejuvenation in H2

Retailers and service industry companies are optimistic about business prospects for the second half of this year, despite the ongoing novel coronavirus outbreak, industry experts said.

The comments came after a meeting of the Standing Committee of the Political Bureau of the CPC Central Committee advocated on Wednesday the need to stimulate consumer demand and to continue to expand the opening-up.

Measures must also be adopted to sustain and increase the consumption of goods and services, said a statement issued after the meeting.

China's economic resilience has stemmed from the sustained demand for services and goods, despite the rapid economic growth in recent years. The epidemic won't change these dynamics given China's nascent consumption boom, said Patrick Tsang, CEO of Deloitte China.

The government has issued a number of policy measures to help retailers and service providers resume work, resolve difficulties for foreign companies and stimulate domestic consumption to put economic growth on a firm footing.

Stan Zurkiewicz, executive vice-president of the Stuttgart-based DEKRA Group, one of the world's largest testing, certification and inspection companies with more than 45,800 employees worldwide, said China has responded to various crises in the past by accelerating market reforms and further opening up to the outside world.

"We believe that after the immediate priority of containing the epidemic has been accomplished, China will embark on another wave of market reforms, further improving the investment environment in the country," he said.

"The testing, certification and inspection industry is the fundamental backbone which allows trade and commerce to occur both domestically and internationally," said Zurkiewicz. "We believe in the enormous long-term potential of the Chinese market, and DEKRA will continue to invest in the country."

Chen Miaoqiang, CEO of Hangzhou-headquartered New Century Hotels and Resorts, which manages more than 450 hotels across the Chinese mainland, said:"Due to the seasonal characteristics of the industry, the hotel business is expected to rebound as early as the upcoming summer."

He said that accommodation demand for business travelers will recover first after the epidemic, followed by individual and group travelers. This will help in the occupancy rate rebound after the unexpected demand suppression.

Even though the outbreak has cut many service businesses' sales revenue, "we believe the long-term healthy development of the industry will continue," Chen said.

Bian Nong, vice-president of the fast-moving consumer goods business unit of Suning Holdings Group, China's largest omnichannel retailer by sales revenue, said though offline retail has been impacted by the epidemic, a number of businesses have seen explosive growth in their online retail operations.

Bian believes that consumers may experience a series of changes in their lifestyles and habits after the epidemic. For example, they may pay more attention to domestic hygiene management, home lifestyle, food nutrition and health. The outbreak to a certain extent has created an opportunity for many industries, including retail and logistics, to further integrate and upgrade, he said.

Suning has partnered with over 2,000 factories throughout the world to supply 3 billion yuan ($432 million) worth of materials and goods for epidemic control and prevention since late January. It has deployed 5,800 vehicles and 12,000 employees to enhance its logistics operation in the home market.

Businesses from the retail sector should improve user retention and maximize consumer value, said Sherri He, managing director for China at Kearney, the US-based management consulting firm.

For retailers in segments such as fresh food e-commerce and online-to-offline or O2O supermarket business, distance learning and office works which have achieved significant breakthroughs in consumption or services recently, the epidemic has changed the market and attracted new customers, said He.

However, she stressed that the boon will become a long-term benefit only if the businesses can retain new customers, improve per-user contribution to revenue, and promote user traction.

For instance, top-performing e-commerce retailers look for repeat purchases after a sale instead of simply a spike in single purchases during promotions, she said.

"The outbreak has interrupted the normalcy of China's economic operations, but as the nation has achieved interim progress in the optimization of its economic structure, its resilience is sufficient to endure the short-term hardship," said Chen Wenling, chief economist at Beijing-based China Center for International Economic Exchanges.

While ensuring the country's general policy direction, the government will roll out more targeted support measures for the real economy, particularly for small-and medium-sized enterprises that bear the brunt of the blow, she said, adding more measures are expected to promote consumption, which accounts for an increasing proportion of overall economic growth.