Store Closures and Supply Chain Slowdowns Persist Amid Lockdowns in Shanghai and Across China

Extended lockdowns in China’s most populated city are once again placing the global supply chain network in flux and threatening retailers in the region.

Chinese authorities on Tuesday announced that it would extend lockdowns in Shanghai across the city’s 26 million people, Reuters reported. These measures, which are part China’s strict “zero-Covid” policy to combat outbreaks of COVID-19, came shortly after asymptomatic positive cases surged to more than 13,000.

“The city will continue to implement seal and control management and strictly implement ‘staying at home’, except for medical treatment,” Shanghai’s government said on its official WeChat account, Reuters reported.

While there is some footwear production based in Shanghai, the city for the most part is not a “hotbed of footwear production,” explained Matt Priest, president and CEO of the Footwear Distributors and Retailers of America (FDRA). However, he added that China’s “zero-Covid” approach is cause for alarm for American footwear companies that rely on different regions across China for production, design and samples.

The lockdown in Shanghai began on March 28, initially in the cities eastern districts, and has expanded to include the whole city. These moves have already had a material impact on shipping and ports. Eastern Shanghai includes the Pudong New Area, where the Lujiazui Central Business District is located. This bustling city is filled office and residential buildings as well as high-end shopping malls with various retail and flagship stores which are being impacted by falling traffic and temporary store closures due to lockdowns.

Some retailers have been forced to close their stores temporarily to align with local guidance. Adidas confirmed to FN that its more than 60 stores in Shanghai are closed temporarily. According to Nike’s 10-Q form filed with the SEC on Tuesday, the recent COVID-19 resurgence in Greater China has made the company experience “a higher level of temporary store closures, with some operating on reduced hours, as well as lower physical traffic versus pre-pandemic periods.”

The lockdowns are also contributing to back-ups in Shanghai ports. Maersk, one of the largest shipping container companies, in a brief last week that “local lockdowns and other quarantine measures in response to coronavirus outbreaks in Shenzhen, Shanghai, Qingdao and other cities are creating transport and supply chain bottlenecks even as ports and terminals remain operational.”

The restrictive lockdowns are the latest example of a series of strict quarantines utilized by China to stamp out any outbreaks across the country.

In January, the spread of the Omicron variant in China prompted lockdowns of at least 20 million people, mostly in the city of Xi’an in western China and in north-central China. And late last month, China imposed widespread lockdowns across Changchun, Jilin City, Shenzhen, Dongguan and Langfang to deal with its worst Covid-19 outbreak in two years. Those regions, especially Dongguan, represented strong areas of footwear production and sourcing.

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