Coronavirus side-effect: Transformation of China’s business models, logistics, and service delivery

By | February 29, 2020

A guest collects food delivered by a robot at a Huazhu Group hotel (source)

Just the way the SARs epidemic kicked off China’s e-commerce revolution back in 2003, the ongoing COVID-19 containment strategies maybe triggering an even larger transformation of the Chinese economic ecosystem. I went looking today for the earliest signals of what might be underway.

Rural China is facing the biggest challenge right now as the spring planting season is critical for a bumper harvest and for ensuring fresh produce supplies later on in the year, as well as regular supplies of fresh veg. There are a few things happening at different stages of the last mile of the farm to fork value chain.

At the planting end, a “shared economy” is emerging on digital platforms that allows farmers to order everything from seeds, fertilizer, and rent agricultural machinery online. Even labour is being ‘shared’ between cooperatives and villages as the impact of quarantines and illness is still being felt.

Yang Zhengguang, a ginger grower in Shandong, punches in every day via an app to ensure that he only works within a certain range to avoid cross-infection. The purchase of fertilizers, machines and seeds can all be done online and delivered to their doorstep.

Agricultural experts also go online to instruct local farmers to take care of their land. “We can receive detailed instructions through a WeChat group every day,” said Wang Cuifen, a farmer in Shandong’s city of Gaomi.

At the other end of the value chain, digital services on the mobile platform are helping farmers sell their harvests directly to buyers through livestreaming,

On Valentine’s Day, Taobao’s first-ever philanthropic cloud concert, featuring 21 celebrities and musicians performing from their homes, attracted 4 million viewers and helped sell 380,000 kg of agricultural produce while also raising RMB570,000 ($81,428) for Wuhan.

while a veritable army of couriers has gone back to work packing fresh food like meat, vegetables, seafood, and fruits for non contact pickup by customers ordering groceries online. All of retail is transforming.

Advanced technology is also being deployed in a variety of innovative ways, with expected impact on future R&D trajectories.

For example, industries that are directly involved in epidemic prevention, including medical care, logistics, robots and security sectors, will likely see a sustained surge in demand for 5G and AI after the epidemic, driving related technologies and industries such as cloud computing, to usher in a new era, Xiang said.

Chinese researchers have developed a comprehensive system in contactless body temperature screening and identification recognition, targeting to facilitate the prevention and control works of the novel coronavirus pneumonia (COVID-19), according to its developer. Huanggang, a coronavirus-hit city in Hubei Province, has launched a telemedicine 5G-based platform capable of facilitating remote consultations, remote imaging, ultrasound and electrocardiogram diagnoses for 14 designated hospitals fighting COVID-19.

The Chi­nese cen­tral bank called for do­mes­tic pay­ments or­gan­i­sa­tions to adopt a range of mea­sures to re­duce the risk of in­fec­tion dur­ing ef­forts to con­tain the dis­ease. In particular, these include curbing the use of facial recognition technology for payment, given the need for facemasks.

A ‘contactless’ economy is said to be emerging. Hotels, travel, hospitality and food service, just about any business with a high degree of face to face contact is facing the need to transform and innovate. Tiny restaurants contemplate overnight business model disruption,

“I’m training my employees online and also learning new business models such as take-out food and non-contact orders. I think these measures will help me resist the damage of the epidemic in the future,” Zhang said.

and the 3rd China International Import Expo (CIIE) will be prepared via noncontact means such as phone calls, video calls and emails in response to the epidemic, according to its organizers. As the Chinese state press states,

The SARS virus that infected thousands in China back in 2003 is widely seen as a catalyst for the country’s fledgling e-commerce industry. Nearly two decades later, as the coronavirus outbreak put dozens of residential communities and areas on lockdown, contactless services backed by 5G technology and Internet of Things are helping people battle the epidemic.

I think the long term effects are going to go beyond just ‘battling the epidemic’ and the status quo itself will have transformed by the time the Year of the Rat is over. Digitalization and its benefits would have proven themselves to rural and urban residents alike, and they’re less likely to go back to the way things were. Logistics, retail, distribution, delivery of both goods and services, even payments and communication are all undergoing a massive redesign at a systemic level.

As the tiniest of enterprises look for new ways of doing business, new operating models, even new product development (here’s a story of an educational robotics maker successfully launching a new line of automated health check units) and receiving financial support both direct and indirect, the nascent seeds of a modern technological society are being planted. Imho, as early as 2025 we’ll look back to this as when China leapfrogged itself into the 4th industrial revolution.

I also think this will have far reaching ripple effects throughout the global supply chains which have China as a critical node in the value web, given the changes already being forced on the domestic value chains from farm to fork.

Krish Raghav, source:

Krish Raghav (@krishraghav aka beijing brown) was the first whose tweets offered me a hint of life under quarantine, which ultimately led to the digging I did today. He would tweet about musicians entertaining shut ins by livestreaming concerts and finally wrote it up in an article. Its not just business or technology that is changing due to the coronavirus. The experience has left its mark on people and society as well. Let us wish them all well, shall we?

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