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Coronavirus a boon for China’s tech-savvy supermarkets as homebound customers switch to online grocery orders

Products such as fresh food that were previously sold overwhelmingly offline have seen huge rise in online orders during the health crisis.

The deadly coronavirus outbreak has dealt a heavy blow to shops across China, as hundreds of millions of people stay home amid efforts to contain the epidemic.

But savvy supermarket chains that have been actively improving their e-commerce services have reaped the rewards as more customers opt to order their groceries online for home delivery.

Sun Art Retail Group, China’s largest hypermarket operator by market share, is a case in point. Its online sales almost quadrupled during the Lunar New Year holiday from the same period last year, according to chief executive Peter Huang.

“The outbreak is a crisis, but opportunities also abound in it. We are seeing a rapid growth in online orders, which proved that our digital transformation that started two years ago was the right decision,” said Huang during a post-earnings press conference on Friday.

While nearly 80% of the 486 hypermarkets run by Sun Art were shut at the height of the epidemic on February 4, their revenue remained steady, he said, as residents switched to ordering fresh food and groceries deliveries online.

Sales via online channels are expected to make up a fifth of overall the group’s sales in 2020, up from 15% last year, Huang said.

The Covid-19 outbreak has claimed over 2,240 lives and infected more than 76,710 people since it erupted in January. While the Chinese government allowed some companies to return to work last week after a prolonged holiday, many have asked employees to work from home to avoid infection.

Sun Art began a massive digital transformation two years ago, after e-commerce giant Alibaba Group – which also owns the South China Morning Post – bought a 36% stake in the firm in November 2017.

It now offers a one-hour home delivery service that allows customers living within a five-kilometre radius of their shops to place orders through a mobile app. Revenue generated from such services soared by 150% last year from 2018, company officials said.

The public health crisis, which led to an extension of the national Lunar New Year holiday and the virtual lockdown of villages and cities, could be a long-term growth catalyst for supermarket chains that have integrated online and offline channels.

“The outbreak has led to a sharp rise in popularity of online groceries and fresh food … We expect this to bode well for online supermarkets as they will acquire a lot of new users, and online consumption habits will be formed for those who like the experience,” said Chelsey Tam, equities analyst at investment research firm Morningstar Investment Management Asia.

Product categories including household cleaning supplies, pre-packaged and fresh food, and other types of groceries such as cooking oil and grains saw the fastest growth in online orders during the Lunar New Year, according to a report by consulting firm Bain & Company published on Wednesday, citing data from e-commerce site Tmall.

Traditionally, the overwhelming majority of consumers have bought these products at physical stores, the report shows.

This article first appeared in the South China Morning Post