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China’s authorities are taking extreme precautions against Covid outbreaks as the Lunar New Year holiday approaches.
Qilai Shen/Bloomberg

Chinese retailers are facing another tough holiday sales season, with the country on edge more than at any time since the coronavirus emerged and the Beijing Winter Olympics just two weeks away.

China’s biggest holiday—Spring Festival, or Lunar New Year—begins Feb. 1, and the Olympics opening ceremony kicks off three days later.

Yet the country is facing sporadic Covid-19 outbreaks, including in the capital. The daily case numbers are low by international standards—peaking at 200 last week—but Beijing is notoriously skittish, even in normal times. Now, authorities are taking extreme precautions.

Last year, coronavirus controls seemed to expedite the long-running shift from offline to online retail sales, with e-commerce platforms performing well while physical stores suffered.

But a kink has been added recently. Beijing city officials this week began asking people to stop ordering items from overseas, after repeatedly asserting that Covid-19 may have been spread into the area through a shipped package—a means of transmission not currently supported by scientific evidence.

Domestic shipments are also experiencing disruptions. Instead of a blanket ban on certain products or delivery locations, authorities have delegated responsibility to companies themselves, an approach they have previously taken with airlines. The major courier companies—such as S.F. Holding (002352.China), ZTO Express (ZTO), and STO Express (002468.China)—are each posting constantly updated rules on what and where items can be shipped.

The delivery restrictions are as specific as banning some individual city blocks from sending or receiving parcels. A few Beijing locales were on the couriers’ lists but the brunt of the restrictions have hit Henan province, which encircles the capital and has seen numerous Covid-19 cases this month.

“I have never had my deliveries come as slow as they are this month,” said Li Yun, a 27-year-old graduate student in the western city of Chengdu, told Barron’s. When I write to customer service, they say it’s only the holiday affecting the slowdown, but I assume the virus controls aren’t helping matters.”

The Olympics, too, normally a boon for tourism and retail sales, have been restricted as well. Athletes were required to be vaccinated before arrival in Beijing or underwent a 21-day “hard” quarantine. They are tested daily for Covid-19, and live inside what the government has called a “closed-loop biosecurity bubble”—meaning their living and travel conditions essentially remove them from the rest of society.

On Monday, China announced that it would not be selling Olympics tickets to the general public, but rather inviting select citizens and personnel to serve as audiences.

This wave of Covid-19 economic repercussions began as cases spiked in December. Supply chains disruptions, factory closures, port shutdowns, and worker shortages are the main issues, The Wall Street Journal recently reported.

Last week, Goldman Sachs Group cut China’s 2022 economic growth forecast to 4.3% from 4.8% because of the disruptions.

But many eyes are on retail sales, and how much sellers have learned from the two years of a pandemic-plagued commerce environment. Some experts were optimistic.

“Consumers are still likely to spend, and shower their families with gifts, but the location of that spending and gift giving is likely to shift,” said Mark Tanner, managing director of Shanghai-based marketing research firm China Skinny.

But “the uncertainty around Covid, particularly with Omicron now in China—and Beijing, where they have been particularly vigilant with the imminent Olympics—will knock the confidence of Chinese consumers, which will likely see them spend a little less this festival as they wait to see how Covid pans out against the strict measures,” he told Barron’s.

Leading e-commerce giants have ramped up promotions, among other strategies. A yearslong trend for China’s e-commerce businesses has been to begin holiday sales promotions long before the actual holidays begin. The massive sales festival Singles Day now begins nearly a month before the actual date.

Alibaba Group Holding’ s (BABA) Taobao and Tmall have both been offering holiday-related promotions on their platforms for weeks. A spokesperson for Alibaba’s main competition, JD.com (JD), told Barron’s they began their promotion on Jan. 9, a full 24 days before Spring Festival starts.

“In the first week of the sales, the number of remote orders increased 30% year-over-year,” JD said by email.

As for how much firms have learned under these unprecedented conditions, analysts were also hopeful.

“Businesses are much better prepared than this time two years ago. There has been a significant move toward digitization. Small traditional businesses, who were laggards digitally, have created online channels,” Tanner said.

“For example, the number of active WeChat Mini Programs soared 41% last year, with 90% of them SMEs [small and medium enterprises]. Industries hit hardest by the pandemic, such as catering, tourism, and retail industries were very active with Mini Programs.”

Jennifer Ye, PwC China consumer markets leader, told Barron’s that “brands and retailers who survive the postpandemic environment will be those with a robust online presence and relevant physical setups that revolve around experience”—referring to the need for bricks-and-mortar stores to offer more than merely products to draw in consumers.

Write to editors@barrons.com

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