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In China, what happened in 2017 and will happen in 2018? (part 2)

by Ralph Qiu, Caracter Company China resultant


As you could read in part 1, it is mainly the development of technologies and changing consumer needs that were driving the changes in retail in 2017. And we are expecting the same going forward in 2018. So what are the key trends for next year?

Traditional retailers continue to retreat

Chinese shoppers are becoming more used to purchase online, as traditional retailers failed to fight back. Given the decreasing traffic and increasing rental and labour costs, many stores will shut down once they need to renew their contract with the landlord. We will be seeing more hypermarkets closing, especially in big cities and new stores will be opening in smaller cities where they are still popular with the lower-income shoppers.

Quite a few regional leaders will emerge in both performance and innovation to fight against e-commerce. But it is not likely to see them aggressively expanding beyond their home region. M&A activities will continue or even accelerate in the new year. (Korean E-mart and Lotte Mart, Lotus are all rumoured to sell their operations. If the leading RT-Mart (acquired by Alibaba) is not even an exception, who else could be any expectations?

Taobao convenience store in rural village

E-commerce retailers experimenting offline

As mentioned earlier, e-commerce companies will continue their adventure in offline business with their own banners or through controlled offline retailers. However, they will soon realize the difficulty in supply chain management and store management, given the poor infrastructure and talent pool, especially if they dare to move into food business. Please ignore their ambitious “1 million” stores slogan mentioned earlier. It was meant for free media exposure.

 

Easy from Carrefour

New formats expected to accelerate

Thanks to their increasing incomes, Chinese shoppers are in ever high needs for convenience, quality and new products. Hypermarkets are failing to meet any of the requirements while convenience stores are doing great. A new format like a neighborhood store selling daily necessities with a wide enough assortment and locations on their way home will certainly see some 20% growth in the new year.

 

 

 

JD delivery robot

Technology drives changes

Technologies from both retailers’ and shoppers are so important that they are changing the retail landscape often and quickly. Retailers are already installing new technologies such as new self-checkouts, electrical shopping guide, personalized social media marketing and etc.

But e-commerce companies are going way faster and more aggressive as they have rich investors backing them up. For example, JD.com are using robots to deliver parcels in one university in Beijing as a test, after the drone idea. I would imagine a robot shopping company should not be too far away.

Check this video with a JD delivery robot.

However, there is a huge gap between retailing and data technology in China. As agreed by many retailers and suppliers, we recognize that those who know about data and technology know little about retailing, while those who know retailing knows little about data and technology. A bridge is needed and that is why JD.com and Alibaba are buying traditional retailers to acquire the knowledge.

I sincerely hope JD.com and Alibaba do not get too confident over their knowledge of retailing, because I see them doing a great job in online mall management but not true retailing. And let us all watch what new surprises the Chinese market will present in 2018!

The first part of my Chinese retail story in 2017 can be found here

 

 

 

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