Commentary: How the coronavirus outbreak will make China’s tech titans stronger than ever

The unprecedented spread of COVID19 – the disease caused by the novel coronavirus identified last year in Wuhan, China – presents a major opportunity for Chinese tech companies to accelerate the market adoption of digital services by consumers and businesses, enabling their shares to outperform non-tech industries in the coming years. As such, the current crisis will actually benefit China’s tech companies in the long term.

With much of China in lockdown to contain the outbreak, consumers who are staying indoors as a precaution will increasingly turn to online marketplaces and digital services for their daily needs.

This could expand online retail sales in China to over 50% of all retail sales by the end of 2021, making it larger than offline sales for the first time in history. This effect is likely to even become permanent since online retail penetration in the country was already expanding rapidly prior to the crisis.

Larger than offline – permanently

In fact, ecommerce players have already experienced a substantial increase in demand. For instance, JD.com has reported that online sales of fresh food jumped over 215% in recent weeks compared to a year earlier. In particular, demand for fresh vegetables has skyrocketed a whopping 450%.

Though fresh food has been available online for many years, it has taken time for consumers to get used to ordering it online. The current outbreak, however, may trigger a shift in consumer preferences as they realize during this crisis that ordering fresh foods online is pretty convenient. With this paradigm, China’s tech titans should outperform their non-tech company peers in the coming years.

Source: Zero One (01.co) 

Indeed, history could repeat itself. The SARS epidemic in 2003 catalyzed mass adoption of ecommerce services as people stayed home. As Duncan Clarke describes in his book Alibaba: The House That Jack Ma Built:

“Although it sickened thousands and killed almost 800 people, the outbreak had a curiously beneficial impact on the Chinese internet sector, including Alibaba. SARS validated digital mobile telephony and the Internet, and so came to represent the turning point when the Internet emerged as a truly mass medium in China.”

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