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The outbreak of SARS has hit China and Hong Kong particularly hard. Forced quarantine, combined with the fear of catching the virus, has led to a large proportion of the population deciding to limit the time they spend outside the relative comfort of their own home, especially in crowded places such as markets.

This has undoubtedly affected consumers’ behaviour. In Hong Kong, Convenience Retail Asia (operator of the Circle K c-store chain) announced that since the outbreak of SARS, most Hong Kong retailers have seen a drop in sales of between 20% and 60%. Convenience Retail Asia added that its own c-stores were less affected, witnessing a relatively low sales decline of 5% during the month of April. Ironically, Circle K is witnessing a rapid increase in sales of cigarettes, while sales of citrus fruits are also booming as shoppers stock up in the belief that vitamin C will help ward off SARS.

Many retailers are also suffering in certain parts of China. This month the city government of Shenzhen, Guangdong Province, has lowered levies on hotels, restaurants, retailers, and tourism facilities that have been badly hit by SARS. During the May Day holidays, the Beijing municipal administration for industry and commerce announced that 20 local department stores and supermarkets were unable to keep up with the demand for liquid disinfectant, face masks and clinical thermometers.

These are exceptional circumstances in China and Hong Kong and one of those instances where retailers can do little more than sit back, cross their fingers and wait for the worst to blow over. The outbreak comes at a particularly bad time for those retailers in Hong Kong, which were already suffering from deflation and falling retail sales before SARS hit.

However, could there be a silver lining to this cloud? CP Group, operator of the Lotus hypermarkets in China, has announced that sales volumes have risen by between 7% and 12% at every branch since the SARS outbreak. It seems as if some Chinese consumers are shifting their shopping habits away from the crowded wet markets and to the more spacious and what are perceived as hygienic modern retail stores. Lotus, for example, has launched several preventative measures including disinfecting the air and trolleys in its stores, sending home any staff found to have a high temperature, and requiring all cashiers and staff in the fresh produce section to wear face masks.

Such measures are ensuring that it is probably the traditional small retail stores and the wet markets that are suffering the hardest. In addition, the outbreak could help to actually accelerate the change in shopping habits towards larger, modern retail outlets. For many Chinese consumers, they may be visiting a modern grocery store regularly for the first time, and perhaps realising it is not as expensive or as daunting as they previously thought. The question is, once the outbreak has died down will these consumers return to their traditional shopping behaviour?
KC's View: