Chinese businesses expect gradual recovery in Lunar New Year sales amid a moderate pick up in consumption

The Sungang Toys and Stationery Wholesale Market, the largest of its kind in the city with 10,000 square metres of space in Shenzhen’s central Futian district, has been flush with buyers on weekends. Business owners and sales people, however, pointed out that the departure of some people for their hometowns for the holiday was offsetting sales. Millions of Chinese are finally able to head home after travel and quarantine restrictions were lifted late last year.

In Beijing, Indigo Mall launched a gift redemption campaign on January 9 to attract more shoppers. Spending as much as 10,000 yuan earns shoppers enough points to redeem rabbit pins.

“There’s an obvious uptick in the number of shoppers. The past weekend, we had a full house. And the same goes for other restaurants here,” said Tracy Chen, the manager of Hulu, a restaurant in the mall. “People are coming out again.”

For some businesses, however, the increased footfall has not immediately translated into stronger sales. “Sales were actually better last year, as many people have Covid-19 this year,” said a florist surnamed Ren who sells Lunar New Year flower baskets in Xidan Joy City, in Beijing’s Xicheng district. His shop had sold only a handful of baskets on the weekend before the holiday began.

“The Spring Festival holiday consumption market will see a decent rebound, but it may not recover to pre-pandemic levels,” said Fu Yifu, a senior researcher at Star Atlas Institute of Finance with a focus on consumption analysis. “It may be a moderate rebound, instead of ‘revenge’ or better-than-expected consumption.”

Lower confidence in the economy among consumers remains a stumbling block to business growth.

A full recovery in shopping activity will not be seen during the long holiday, as most of Shanghai’s 25 million residents are still wary of the coronavirus despite Beijing exiting its zero-Covid strategy on January 8, said Zhou Shiyu, a senior official with Shanghai Join Buy, one of the city’s biggest commercial property operators.

“The lockdown measures [last year] had a devastating impact on retail businesses and severely hurt consumer confidence,” said Christine Peng, a UBS analyst. “This is a grim reality that everyone has to face now.”

Businesses are, however, looking forward to growth through the year. Companies such as Hong Kong-listed sportswear brand Anta, food producer Zhou Hei Ya International Holdings and snacks company Three Squirrels told the South China Morning Post that they are positive about the outlook for the consumer market and are rolling out promotions, online and offline interactions, Lunar New Year specials, as well as non-stop sales running during the whole holiday period.

“The gradual removal of pandemic restrictions serves as an important facilitator for consumption recovery and for boosting the economy,” said Lydia Zhu, Anta’s chief marketing officer. “We are in general optimistic [about the market outlook during Lunar New Year and for the whole of 2023].”

Anta’s Lunar New Year promotions, buoyed by both online and offline marketing and interactions, engaged more than 6 million individuals and doubled sales compared with the same period last year, Zhu said.

Wuhan-based Zhou Hei Ya, which focuses on producing duck-based snacks and food, said its shops are seeing marginal improvements, although it was expecting a relatively slow recovery in the overall market. An improvement in sentiment and growth in incomes is “key to the recovery of consumption capability and willingness”, the company said, adding that it still plans to open more shops.

Jinlongyu, which mainly sells cooking oil, said it recorded an obvious consumption recovery in cities where Covid-19 infections had peaked. The firm expected its sales would recover further especially through online channels during the holiday as people consume more food and send gifts to families and friends during Lunar New Year.