JD JD com Inc

By Julie Wernau 

Two months into the coronavirus epidemic in China, tens of millions of people are still under quarantine and much of the economy remains in a deep freeze.

Yet China has largely succeeded in keeping its stores filled with food and other essentials -- even in hard-hit places like the city of Wuhan -- a crucial factor in maintaining public order throughout the crisis.

To do that, China relied on mandates from central authorities against hoarding and profiteering. Private companies, including JD.com Inc. and Walmart Inc., rerouted trucks and located supplies that otherwise might not have made it to market.

After Beijing called for an increase in face mask production, manufacturers canceled holidays for workers and jacked up wages to increase production of basic medical supplies. When Beijing issued orders against price gouging, companies looked for sudden price spikes and cut off guilty shopkeepers, or found ways to make more products available.

Shopping app Pinduoduo Inc. got more farmers to use their online marketplaces, enabling them to sell more widely. By targeting soon-to-expire foods that might ordinarily have been thrown away by suppliers, Walmart was able to locate a massive batch of cucumbers in Yunnan province. Staff members worked through the night at a distribution center to test and sort the cucumbers for delivery to stores the next morning.

"The only element of physical commerce that really stayed close to normal is the supermarket," said Michael Norris, a Shanghai-based research and strategy manager at Agency China, a market research firm. "The supermarket has really been the lifeblood of the community during this event."

Other countries, including the U.S. and Japan, are grappling with how to keep supplies available as the coronavirus spreads. In the U.S., supermarkets have rationed some items and are considering cutting operating hours and tapping volunteers to deliver food.

It isn't clear if other countries will want to go as far as China, whose central government intervenes often in commerce. China has also had problems of its own making to deal with -- including navigating the rigid quarantine restrictions enacted by Beijing.

Panic buying did appear in some parts of the country and some products have remained in short supply. There was also some luck in the epidemic's timing, since many households were stocked up for the Lunar New Year holiday.

Food inflation countrywide rose 21.9% in February from a year earlier. But much of the increase was due to pork prices, which have been battered by African swine fever.

It could have been worse. Lu Jie, who runs a small shop in Beijing selling everything from Twix bars to dried fruits, said she initially had to rely on supplies left over from the prior season. Many products couldn't get into Beijing because of quarantine restrictions.

This week, she said, more of her old suppliers were reappearing, as trucks found more ways to get through roadblocks. With business still slow, she said she already had most of what she needed.

A few weeks earlier, it seemed likely that China would endure crippling goods shortages.

So many people in rural areas were forbidden to enter and exit their communities that vegetables couldn't be shipped out. Some places disallowed harvesting of certain foods outright, including green onions and cauliflower, citing a need to contain the epidemic.

Roads became nearly impassable due to government blockades. Many truck drivers were forced into quarantine because they had been in exposed areas. Food shipments dropped dramatically at ports, with international deliveries canceled.

In response, China's government released more than 300,000 tons of pork from central and local strategic reserves, adding more meat to the market.

Relying on a Ministry of Commerce emergency commodity database, authorities reached out to hundreds of businesses to gather information about supplies of rice, vegetables and other products, and began connecting buyers with available sellers.

To make sure goods got through roadblocks, the government established a "green channel" system that allowed truck drivers to travel between cities with special passes. Some local governments hired truck drivers to keep supplies flowing.

The city of Chongqing, in central China, hired a local trucking firm called Circle Logistics Co. that normally serves factories operated by Foxconn Technology Group and Corning Inc. to deliver vegetables, drugs and face masks, said Robin Zheng, its owner.

"Moving vegetables isn't our usual work," said Mr. Zheng. "But this is the job right now: delivering food."

To ensure buyers didn't hoard and store owners didn't engage in price-gouging, Beijing announced strict prohibitions on such activities, while some local governments punished outlets that jacked up prices. Costco Wholesale Corp. and other grocery chains agreed to limit the number of customers allowed into stores and to stop selling some popular products to lower store visits.

Jingkelong Supermarket in Beijing set up lines for customers to enter, with each person standing one meter apart. Customers were given cards to return upon exit, allowing another person to enter.

Pinduoduo, which is especially popular among consumers in smaller cities, promoted a recently-created platform that helps farmers find alternative buyers. Ning Qiang, a 32-year-old businessman from Sichuan province, used the service after figs he sourced from farms -- which can only survive for 10 days after they are picked -- went unsold during the Lunar New Year. He eventually found buyers.

JD.com said when inventories in its warehouses for products like rice, flour and oil started getting tight, it was able to source additional supplies from offline businesses -- including mom and pop stores -- that were open and closest to customers. In many cases, an order on JD.com was supplied by a courier coming directly from the customer's local convenience store.

Alibaba Group Holding Ltd. said its various food-delivery platforms hired thousands of people who were unable to return to their usual jobs and put them to work delivering supplies to people. At one point when all roads were blocked in an area where a father who was desperate for baby formula lived, sorting station manager Ning Yang carried the baby formula herself, walking more than two kilometers to deliver it to the buyer's door.

--Xiao Xiao and Trefor Moss contributed to this article.

Write to Julie Wernau at Julie.Wernau@wsj.com

(END) Dow Jones Newswires

March 13, 2020 05:45 ET (09:45 GMT)

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