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With the IGA China headquarters located at the Coronavirus epicenter in Wuhan and 1,000 IGA stores throughout China, IGA has insider knowledge about what it’s like to face the Coronavirus outbreak.
IGA CEO John Ross and representatives from IGA's global wholesalers recently spoke with Zhe Zeng, deputy representative to China, about his experience, how it impacted retailers, suppliers, associates, and shoppers, and what they would have done in the early stages of the virus had they known what was coming. See his answers for how to prepare, and visit IGA ALERTfor updated information and resources on the virus.
Note from the editor: The Centers for Disease Control (CDC) does not currently recommend that store employees wear masks or protective clothing to serve shoppers in the U.S. IGA USA is closely monitoring CDC guidelines and will share new information as it becomes available.
Once quarantines and lockdowns began, we saw frequent absenteeism—30 percent was not uncommon. For contractor positions, such as loader and sanitation workers, the rate could be as high as 80 percent. As a result, many of our associates worked long and unpredictable shifts and logged a lot of overtime.
In China, indiscriminate lockdowns seriously disrupted the supply chain, creating a widespread labor and material shortage.
For us, there were three phases in the progression of the virus, and each has had a significant impact on our ability to serve shoppers.
We created community group deals for heavily quarantined communities, such as those in Wuhan and Beijing. As residents are forbidden from leaving their homes, they have three ways to know what is available at the nearby store and to place their orders:
The limited number of available choices are decided by the retailers according to their stock level and bundled into sets (think fast food meal deals). The orders are then consolidated and sent to the store or fulfillment center, which will deliver to the community gate or checkpoint where those reps will receive, sort, and repack the orders according to households.
One important thing stores learned when exploring business via social network apps was to be cautious on price-setting in order to prevent drastic differences between locations and groups. Some stores in Wuhan were criticized for such practices, leaving customers feeling like they were treated unfairly and the stores suffering reputation damage.
Based on information from a typical IGA China retailer with 60 stores and $300M in annual sales that is not in the 'hot' Hubei Province, we have these statistics:
In January and February, year over year sales increased, but the margin rate only slightly increased.
By department, the produce department increased sales by nearly a third but the margin rate dropped slightly. The food department saw slight sales gains and a very small increase in margin. The general merchandise department sales declined slightly but maintained a small margin increase.
In the past two months across China, most local grocery sales happened online via the online portals operated by physical retailers, national and regional alike. Walmart’s online orders increased six times and its biggest labor cost item has been the order selectors, packers, and riders who fulfill online orders.
Twice during the outbreak, I traveled to Wuhan. I took precautionary measures to keep myself safe from the virus so that I would not become infected, and had a plan in case I did become infected. These are the tips that worked for me:
From my observation, Wuhan's outbreak was made worse by the following:
As people returned home from Wuhan for the Chinese New Year or fled from the rumored plague, they spread the virus across China and along the public transportation system, allowing the cycle to repeat itself again in a new city.
Information transparency, medical readiness, and a sensible deliberation on quarantine policies will ultimately determine the nationwide situation in the U.S. and other countries. But for individuals, the first line of defense is by far the most effective one. Again, avoid crowds, change clothes when returning home, and wash your hands properly.
I predict the virus will force the Chinese physical retailers to compete more on accessing customers online, focus more on community-level stores and outlets, leaner and more effective SKU combinations, and more social responsibility, logistics, and cold-chain delivery.