China’s retail sector is undergoing a major shift as a result of rapidly changing consumer behavior, adoption of technology, the emergence of local competitors and the surge of ecommerce.
eMarketer projects retail ecommerce sales in China will reach $1.26 billion in 2017, an increase of 36.1%. Growth is expected to continue in the healthy double digits over the next three years. By 2020, retail ecommerce is expected to make up more than 37% of total retail sales in the country.
Shopping mall operators in China may be feeling the impact of retail upheaval most intensely. According to a study published in September 2016 by the Chinese Academy of Social Sciences (CASS), many of China’s 4,000 shopping centers lack the ability to compete with digital retailers and are quickly losing their appeal among consumers. As a result, CASS estimates that up to one-third of malls could be destined for closure within the next five years.
A recent survey by PricewaterhouseCoopers (PwC) attempted to measure the impact of online shopping in China on physical stores.
About one-quarter (24%) of digital buyers in China said the presence of Alibaba’s business-to-consumer (B2C) platform Tmall had led them to shop at physical stores less often. However, only 3% of respondents stopped shopping at retail stores completely as a result of Tmall’s influence.
Paradoxically, while many shopping malls are closing down, another 7,000 are still planned for construction.
Chalk it up to a not so liberalized economy.
The shopping mall building boom is partly the result of the government’s grand vision to transform the country’s economy into one driven by consumption. And the unchecked shopping mall building spree has been encouraged by regional governments, helping to create the oversupply of shopping centers in the first place.