SHANGHAI: Almost a month after Shanghai lifted its strict COVID-19 lockdowns, fashion retailers are stuck with heaps of unsold goods as cautious shoppers stay away from the mall’s glitzy shopping districts .
Curbs to stop the virus in Shanghai, China’s fashion capital, brought the city of 25 million to a standstill in April and May, leaving clothing and beauty product displays in stores and clothing containers untouched imports blocked at the port.
The city’s reopening this month saw a flood of goods shipped from warehouses to store shelves already laden with unsold goods from two months of lockdown. Normally, about one-fifth of all imported goods entering China pass through the port of Shanghai.
Days after COVID-19 restrictions were eased, large “sales” signs were set up across Shanghai, with retailers from Lululemon to Victoria’s Secret offering discounts to entice shoppers.
Even online retailers have struggled to eliminate a glut caused by lockdowns and supply interruptions.
“It really meant a lot to us,” said Josh Gardner, founder and managing director of Chinese market e-commerce partner Kung Fu Data, which manages online stores for 10 fashion brands, including G-Star Raw.
“In April, May on the platforms (main e-commerce in China), there was no t-shirt to find, we were out of summer stock, and everyone else, there was no just no product,” he said. “Now everyone is bleeding and stuck with a lot of inventory they can’t move.”
China is a major market for personal luxury goods companies with sales reaching $74.4 billion in 2021, according to Bain.
A consultancy estimated that sales during “618” – a major trade event in China from May 31 to June 20 – on major e-commerce sites, such as Tmall and JD.com, were flat year on year. the other.
In the opening week of the event, data from Tmall showed menswear sales fell 22% and womenswear 4%, although sportswear sales fell. increased by 26%, possibly due to an increased focus on fitness during the lockdown.
For now, some retailers are hoarding inventory and ordering less for the fourth quarter, when they will try to clear existing stock until November’s Singles Day.
“For the clothing category, due to the epidemic and slow consumption, there is a high level of inventory backlog of spring collections,” said JD.com general manager Lei. Xu, following the online retailer’s first quarter results. “As a result, many factories are considering skipping their…summer collections.”
Flash sale specialists OnTheList, which sell luxury goods for brands such as Versace, Jimmy Choo and Lanvin at discounts of 70% or more, reopened their physical showroom in Shanghai last weekend with a sale of Salvatore Ferragamo.
The high-end Italian fashion brand and almost all other retailers in Shanghai closed their stores in April and May. Salvatore Ferragamo declined to comment.
Jean Liang, general manager of OnTheList China, said luxury brands are now more open to online sales, as well as offline sales, while cosmetics brands are proactively seeking to maintain sales to eliminate excess inventory.
“Before, it was always us asking them what their plans were and now they approach us, which means they have inventory that they have to clean up to have a healthy inventory situation,” she said. . OnTheList’s flash sale schedule, which runs every few days, is already booked through September.
Sending products overseas for distribution in Europe or America is another solution, but it’s currently complicated by skyrocketing shipping and air freight costs, said Benny Wong, director of supply chain. of the online wholesale market, Peeba.
“Now the main hurdle is transportation…which creates a big problem for the inventory owner,” he said. “Inventory can kill (and) some product categories have a huge inventory to move.”
A few weeks after the reopening, retail sentiment is depressed, with Shanghai consumers yet to return to malls in significant numbers and footfall around half its usual level at major downtown malls. city, according to retail staff.
Shanghai residents are reluctant to return to indoor public spaces, largely for fear of being locked down again, as China’s stubborn zero COVID policies demand it whenever new infections emerge.
A continued ban on eating out in restaurants also means malls are left without their usual food and drink attractions.
Across China, retail sales fell 6.7% in May from a year earlier, extending the previous month’s 11.1% decline as a slowdown in the world’s second-largest economy discouraged spending on consumption.
“In terms of inventory clearance, there really isn’t a good solution in China,” Kung Fu Data’s Gardner said. “I mean, what are you going to do that’s not going to destroy your brand?”