On Jan 23rd, China locked down Wuhan City and later Hubei Province to prevent the coronavirus spread. The strict measure successfully reduces the new cases in China to zero in a matter of eight weeks. While China suffered severe short-term economic impact (e.g. retail sales of consumer goods down 20.5% YoY), we've been seeing a gradual economic reboot in the past few weeks, starting from logistics to manufacturing, and more recently to the reopening of offline stores.

During the nation-wide lock-down, Chinese consumers were forced to change their shopping behavior, moving more towards online channels. For example, Nike management commented on its FQ3' 20 earning call this week that its digital business in China grew more than 30% during the virus outbreak, and accelerated further over the past month, even as physical stores reopened. Lululemon also made a similar comment that the company is applying its learning from China’s omni-channel strategy to its worldwide market.

Unfortunately, the coronavirus outbreak in the US is seemingly much more severe. According to different estimates, there will be at least 2-4 weeks away for the U.S. to see its cases peak, and several months for economic activities to reboot. If an eight-week lock-down already had such an impact on Chinese consumers, we ponder the US consumers' behavior change might be more profound.

In the previous newsletters, we discussed that work collaboration tools might be the most obvious beneficiary of such behavior change. Another one is eCommerce in the US. Putting things into perspective, eCommerce in China accounts for 36% of total retail sales and consumers are still accelerating their purchases online. In 2019, US online sales were only 16% of total retail sales.

We cannot help wondering if 2020 might be the year when leaders who have previously built up their digital capabilities are finally rising up across a broad range of verticals. In this vein, It's worth mentioning that Salesforce is a key enabler for companies to transform digitally. Salesforce COO said in a Jefferies investor meeting that, “Customers who've invested in digital service experiences, they can do service from home. The companies that are digitally equipped right now are doing much better and much more agile than the ones that aren't.” The Information also reported that AWS has seen a surge in sales inquiries for a cloud-based call center service, Connect. In retrospect, Salesforce and AWS expanding their partnership to bring Amazon Connect to Service Cloud last year was a strategically wise and timely move.