by Anh H. Nguyen
For business owners in Vietnam, the last few months has been indubitably brutal. As May approaches and national lockdowns ease to a close to the apparent relief of both consumers and retailers, a question lingers: when restrictions are lifted, will the market be back to business as usual, or will the transition happen more gradually? Although no one could be absolutely certain, we could look towards our neighbor China for an actual glimpse of what is to come.
China's economy is slowly gaining speed
This year China's economy suffered the worst blow since 1990 due to the shuttering of businesses, citizens' limited movement, and disruption in transportation. Beside the devastating death toll, millions of people in China have descended into poverty. Now thanks to the nation's combined efforts to ramp up testings and treatments, the pandemic has been largely contained and the government has cautiously restarted the economy.
The reopened Hermès store in Guangzhou, the brand's 2nd-largest in China.
For Chinese retailers, the response has been largely positive though incremental. In some cases, the pent-up demand for retail therapy has even resulted in an effect dubbed "revenge shopping" - a term first coined after the infamous Cultural Revolution. Just like then, people have been deprived of shopping and enjoying themselves. Now that access has been restored, people are flocking to shops, both for coveted goods and human interaction. An extreme example: the Hermes store in Guangzhou made a record $2.7 million on the first day they reopened post Covid-19. Online sites are thriving as well: Business of Fashion reports a 50-70% increase in sales over the same period last year at BorderX, an e-commerce platform that allows Chinese consumers to buy from high-end overseas merchants such as Saks Fifth Avenue and Bloomingdales. Other retailers would most likely follow the same trajectory though with less of a boon: this article from Bain elucidates different patterns of recovery for Chinese retail after the Sars and Mers crisis. The "dip and rebound" in particular would apply to retailers in the fashion and personal care sectors.
Of course not everything looks rosy. Severed supply chain, labor shortage, and wage losses all hamper growth. Foreign business confidence dwindles while fear of a second wave of outbreaks remains. And yet, China's headstrong determination to revive the economy provides a partial model for other countries on the cusp of ending Covid-19 like Vietnam.
As eager as Vietnamese retailers to jump start their businesses, however, there are a few caveats to consider.
Vietnamese retailers are facing peculiar problems
- After a long period of being cooped up at home, customers have likely changed their shopping behaviors. Online shopping has become more prevalent, for a start. Income reduction has also forced many to tighten their budget and allocate money to more essential expenses. Yet it does not mean people are opposed to more "frivolous" purchases - people long to feel joy and a modicum of normalcy after such a bleak experience, as long as those splurges do not break the bank. In the aforementioned example about Chinese consumers buying luxury goods, the deep discounts, reportedly better than those on Black Friday, no doubt contributed to the booming sales. This phenomenon is called the "Lipstick effect" - in times of economic hardships, people are still willing to treat themselves, but will favor small indulgences over costlier items. Quite a departure from the previous state of affairs in Vietnam, this new situation will force retailers to reconsider their marketing strategy.
Food for thought: during stressful times, people turn to small luxuries to soothe their feelings
- As the country progresses towards a totally Covid-free state, heavy provisos are still in place. Big crowds are frowned upon, and both staff and consumers need to observe strict, unfamiliar hygiene and social distancing rules. Many retailers also find many of their employees have moved or are unable to continue working due to personal issues. Restaffing and training the new staff quickly may prove challenging and insufficient. For the ones that stay, long stretches of staying home may render them unprepared to welcome the rush post Covid-19. All the above problems could seriously impede customer services and sales.
-Production planning and restocking may be complicated even after the initial lockdowns have passed: transportations between either major cities or small towns are still heavily confined, many workers have lost/changed jobs due to factories closing, and customers' preferences have also likely shifted. Both understocking and overstocking will be disastrous for retailers: one harms customers' satisfaction and loyalty, the other hurts retailers' cash flow and takes up precious space. Since the circumstances now are almost unprecedented and thus unpredictable, it was even more imperative for retailers to get restocking exactly right.
Why Vietnamese retailers should resume AI Analytics as soon as possible
A retail business resembles an ecosystem: nothing exists in isolation - staff, stock, marketing, layout, customers all influence one another. Only the timely reinforcement of AI-powered store analytics could help monitor and improve each component for optimal results, such as to:
- Improve digital marketing results: For retailers looking to catch the first dash of returning customers, focusing on online channels, lowering prices, and coming up with upbeat messages to rally consumers' spirit will most likely benefit their business. But even then, past experiences may prove irrelevant. Without using current data, retailers have no way of assessing which promotions work best or which campaigns most appeal to customers after such a disrupting event. AI analytics could help retailers target their online sale and digital marketing more efficiently so that they could rein back old customers and attract new ones.
- Customize production planning: Similarly, since customers' tastes and habits have likely changed at least for the short term, and the production chain takes some time to be re-established, retailers need prompt feedbacks so they could adjust stock planning. Only next-day analyses like the one Palexy provides could help retailers maximize sales and minimize losses through overproduction.
Video demonstration of Palexy's use cases for retail customers
- Revamp staffing: AI analytics could help retailers monitor staff's performance to make sure they are still up to task, as well as to provide timely encouragement and re-training. In the coming days, people's shopping habits are probably affected by changes in working/schooling schedule as well. By looking at store traffic across different time slots, retailers could arrange staffing to optimize staff payment and reduce risks of overcrowded spaces.
- Facilitate remote working: In the interim before Vietnam declares total safety, Palexy's setup which allows managers to work off-site is especially convenient. Since everything is stored in the cloud, with just a laptop or smartphone, corporate managers can quickly access reports of each store from the day before, evaluate KPIs across multiple channels, and save on the cost/time/hassle of commuting. This benefits both individuals and the society.