How shared resources enabled China’s retailers to manage a surge in demand
Since the outbreak of COVID-19 three months ago, China has sacrificed its economy in a desperate push to contain the severity of this epidemic. Although a vast majority of business sectors suffered from the economic constraints, the online fresh product market experienced a huge surge in business. To meet demand, the sector had to overcome new and unexpected challenges. How leading players have done this may suggest a future best practice in grocery and fresh food distribution.
Surge in business
With city lock down escalated to national level, shopping online for fresh food and groceries became a basic necessity. The online fresh product market therefore faced a surge in demand.
According to Walmart’s data, by the last week of January – right before the Chinese New Year and the beginning of the crisis – the volume of supply for vegetables exceeded 10,000 tons and for meat 2,000 tons. Just three weeks later, the demand had grown by 1.5 times. And it has been growing ever since.
The lockdown made online shopping a basic necessity
As one of the leading players in home delivery, JD reported that the total order volume on meat increased by over 700% during this Chinese New Year compared to the same period last year while the order volume of fruits and vegetables grew by 400%.
Overall, a sharp demand increase for fresh products benefited all major players and boosted the three key indicators of their online grocery business:
- The number of online orders
- The overall new users of the online platform, (especially senior age groups)
- The average transaction value, which increased as well.
Introducing new flexibility into human resources
Despite the abundance of fresh products, insufficient capacity prevented businesses from meeting the surge in demand. But more than product availability, the most important constraint was the lack of manpower to handle logistics and serve online customers, as the ability to mobilize human resources was greatly compromised by city lockdowns.
Already recognized for its innovations in retail, Alibaba introduced a “resource leasing model” designed to share manpower. For their grocery chain Hema, which faced a massive increase in demand, Alibaba started with ad-hoc resource sharing to fill the gap in manpower and serve online orders. In fact, while Hema was challenged with a shortage of staff, traditional restaurant chains whose outlets were closed struggled with excessive cost spent on under-utilized employees. Hema therefore partnered with these chains to share their human resources: A win-win solution.
Partnering to create a win-win situation
Having introduced this resource leasing model during the crisis, Alibaba is now preparing to digitize and industrialize it further. In April, they will introduce a digital platform to manage shared manpower and integrate the resource leasing model into their ongoing operations. According to Hema, data analytics will be applied to categorize employee profiles such as years of experience, specialization, and matching roles.
The shared economy of resources may drive further employment flexibility in China, where it is currently lower than in Japan or Europe. But this is not the only benefit to be expected from this new approach to resource management.
Firstly, a digital approach to the flexible sharing of resources will clarify employers’ responsibilities when pooling employees, and resolve questions about legal accountability and insurance.
Secondly, the real-time flexibility it provides will accommodate variations in the speed of recovery, helping match resources to demand. It may even be considered for other peak events in China’s digital commerce, such as or the Chinese New Year.
Overall, the new resource sharing approach empowered by digital tools could transform the landscape of employment by unlocking more potential and flexibility. We will continue to share business insights from China’s recovery in future Perspectives from China posts.
Executive Vice-President & Managing Director | Global Head of Consumer Products, Retail & Distribution