The lasting impact of Shanghai's lockdown

After two months of a severe lockdown in Shanghai, the city is opening back up. But even after the city opens again, fear and uncertainty look set to remain for Shanghai residents who have had to deal with curbs that are so restrictive they have left people without essentials and groceries. 

Even though the streets are still empty here right now, the rage is palpable and further exacerbated by the fact that those who complain about or even discuss the restrictions on social media are censored, with some even arrested by the police. Shanghainese have also continually been let down by the government’s shifting schedules for the lifting of restrictions throughout this lockdown. Meanwhile workers, from taxi drivers to shop staff, who have been unable to work have not been able to receive subsidies or government support.  

The city’s darkest time was a week into lockdown when people started to panic about not being able to access food supplies. Deliveries were so restricted it became impossible for most people to have food and groceries delivered to their homes. 

Social media platforms, and in particular WeChat, saved Shanghai. Residents had to group together on social media in order continue to get essentials through grassroots systems of group buying and swapping goods on WeChat. Local communities and residents within apartment compounds throughout the city formed group chats to organise the buying of essentials such as eggs, milk and baby formula. 

A person would elect themselves ‘captain’ of an essential food item, such as milk, and then do the ordering for the group. Some of these ‘captains’ were people who could no longer work because of lockdown and used it as a way of making money by charging a fee for their services, while others did it voluntarily. But there were also cases of scamming with people paying for goods that never showed up. Nonetheless, it was an innovative and agile consumer buying system that helped people survive through an incredibly challenging time and will no doubt immediately come back into play in any future lockdowns.

But it wasn’t just food buying that operated over WeChat. Notifications about PCR tests were also broadcast on WeChat and the rumours and information about policy changes around restrictions were disseminated on the platform.

Food and groceries have been understandingly top of mind for everyone in Shanghai. In the early stages, only grocery brands Dingdong and the Walmart-owned membership-based warehouse Sam's Club managed to operate and keep some communities going with deliveries. Their online delivery slots were hard to get, but they functioned. By contrast, grocery brand JD felt the force of a severe backlash after promising customers it would continue to deliver throughout lockdown before being forced to shut down - sparking fury from disappointed consumers on social media. 

In the early days of restrictions, luxury brands including Gucci, Louis Vuitton and Porsche started delivering fresh food and vegetables to their VIP customers. These brands quite possibly got the idea from a meme going round right before lockdown when people were panic buying, in which someone drops a head of lettuce in a supermarket and the lettuce is referred to as a luxury item. As food became inaccessible it was suddenly the most luxurious thing around. Many companies also gifted food parcels to their employees in the first few weeks of lockdown, including my agency We Are Social. 

As restrictions have eased and more deliveries have been able to come through, online grocery apps have achieved an iconic status in Shanghai. Grocery apps like the aforementioned Dingdong, Alibaba’s Hema, and Meituan’s Maicai are keeping the city going. While these grocery platforms were around before lockdown, they suddenly became ubiquitous as getting groceries delivered turned into a city-wide exercise. Also, individuals are using not just one but lots of these apps in the race to get delivery slots. These brands can expect their boost in popularity to continue long after lockdown.

As well as impacting international trade and global supply chains, the Covid restrictions are causing a sharp slowdown in China’s economy. JPMorgan downgraded its full-year China growth forecast and now expects second quarter GDP to contract 5.4%. Most brands based in Shanghai have had to halt their operations altogether, including marketing. Businesses cannot pay suppliers and vendors can’t issue invoices because the financial system in China requires certain tools that can’t be accessed remotely. Cashflow has therefore pretty much stalled. 

The focus for brands has shifted to ecommerce, as bricks and mortar retail has taken a severe blow, with one popular fashion retailer, Selected, closing down all 1800 stores around the country. Health and safety is another priority. At the beginning of lockdown our client Under Armour launched a campaign around the fact that it now  disinfects the packaging on its garments prior to shipping, reassuring anxious customers.

After such a long period of isolation at home, after lockdown we’ll see two types of consumers emerge: those who want to go out and enjoy the city again and those who are fearful and continue to operate their lives from their homes. In both cases, brands will have to demonstrate an understanding of their needs and come up with ways to add value to their lives. In addition, even after lockdown, many restrictions will continue which will slow up the economic recovery. For example, if one person in an apartment compound has Covid, people in the entire compound will also have to isolate at home. There will be test centres all around the city, and so everywhere that people go, from shops to restaurants, they will be required to produce a negative test. The lockdown may be technically coming to an end, but its impact will reverberate throughout Shanghai and China for years to come.

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Pete Lin is North Asia CEO of We Are Social.