{"id":74999,"date":"2019-07-12T14:18:09","date_gmt":"2019-07-12T14:18:09","guid":{"rendered":"https:\/\/essays.homeworkacetutors.com\/economic-impact-of-online-shopping-on-stores-chinas-retail-industry\/"},"modified":"2019-07-12T14:18:09","modified_gmt":"2019-07-12T14:18:09","slug":"economic-impact-of-online-shopping-on-stores-chinas-retail-industry","status":"publish","type":"post","link":"https:\/\/www.colapapers.com\/us\/economic-impact-of-online-shopping-on-stores-chinas-retail-industry\/","title":{"rendered":"Economic Impact of Online Shopping on Stores | China\u2019s Retail Industry"},"content":{"rendered":"
\n

What are the economic impacts of online shopping on physical store on China\u2019s retail industry?<\/h4>\n

Introduction <\/h2>\n

China has created miracle in economic development over the past three decade. As the biggest consuming market in the world, it has acquired the leading position in the e-commerce market. In 2014, 33.5% of total retail growth in China was contributed from online sales<\/a> with the amount of US$458 billion according to Kantar Retail. It was addressed No.1 in the world and higher than the second USA (US$297 billion) by US$161 billion. In the first two months of 2017, China\u2019s online sales dramatically reached US$124.39 billion according to National Bureau of Statistics of China, which approximately accounted for 14% of total retail sales US$840.3 billion (CIW, 2017). \u00a0 <\/p>\n

In general, e-commerce is
\nused to be defined with 3 fundamental models, B2B (business-to-business), B2C (business-to-consumer),
\nC2C (consumer-to-consumer), they will be realized from online shopping. China\u2019s
\ne-commerce market emerged in 1990s and experienced rapid growth after 2008.
\nAlibaba can be taken as the leading representative enterprise. It founds Taobao
\nin 2003, the biggest online shopping platform, and separated Tmall to strengthen
\nB2C in 2012 (E-Commerce in China, 2016). In
\nterms of B2C model, Jingdong, Suning, Dangdang were successively emerging and
\nextremely boosted online shopping development. They currently have dominated
\nalmost 80% market share of China online shopping platform. <\/p>\n

\"\"
(Source from www.chinainternetwatch.com)<\/figcaption><\/img><\/figure>\n

Factors boosting online shopping in China<\/h2>\n

Some
\nkey factors play the crucial roles in booming online shopping market in China.
\nFirst of all, it is contributed from the development of internet and mobile
\nnetwork, as well as smart phone penetration. Chinese consumer can visit online shopping website whenever or
\nwherever they are. \u201cIn the first half of 2014, on
\naverage, 26% of China\u2019s online purchases were made via its 780 million active
\nmobile devices\u201d. (Morgan Stanley, 2015) In addition, urbanization
\nis expanding at an unprecedented
\nscale along with economic growth in China. The majority of consumers are
\ndwelling in cities. Fast-paced life style gradually influences their shopping
\nbehavior. They incline to convenient shopping even with delivery service to
\nhome rather than traditional store visit in the crowd. On the other side,
\ntraditional business model constraint physical store spreading as consumer\u2019s
\nexpectation especially in rural or remote areas. Consequently, a certain
\npercentage of e-shopper or e-retailer from such areas can be benefited from B2C
\nor C2C platform. <\/p>\n

Features of online shopping in China<\/h3>\n

Compared with traditional
\nphysical store, the online shopping is advantaged of convenience, lower price,
\nand more choices for consumer. Chinese online shopping also has some unique
\nfeatures. Firstly, the online retailers are entirely online-only retailers
\nrather than multi-channel retailers with both online and offline presence, such
\nas Alibaba, its business model initiated from C2C with well-known platform Taobao
\nand then strengthened B2C with separated brand Tmall. Secondly, Chinese online
\nshoppers are mostly price sensitive users. To some degree, price difference
\nwith physical store is still the key driver for their purchasing motivation. The
\nrepresentative example is from Double 11 shopping day launched by Alibaba. \u201cRetailers
\non Alibaba\u2019s platforms had recorded $17.8 billion worth of gross merchandise
\nvolume in 2016 \u201c(Ming<\/a>, C.2016). Furthermore, Chinese online shopping is entering
\ninto a stage implemented with mobile especially smart-phone and promoted by
\ndiverse social medias, which is due to faster and cheaper 4G network penetration.
\nAccording to Morgan Stanley report, \u201cIn the first half of 2014, on
\naverage, 26% of China\u2019s online purchases were made via its 780 million active
\nmobile devices.\u201d <\/p>\n

Economic impacts on physical store <\/h3>\n

The online shopping has definitely become unique booster for economic
\ngrowth in China. Meanwhile, the hot debate of its disadvantages to
\ntraditional retail industry is significantly increasing. As pointed out by
\nresearch firm Euromonito International, the worldwide store-based retailers
\nfaced in 2015 the challenge of the increasing competition from
\nonline retailing and the decrease in consumer confidence. Consequently, a large number of physical
\nstores in various channels closed. \u201cAccording to the China National
\nBusiness Information Centre, in the first nine months of the year, the top 50
\ndomestic retailers saw sales fall 1.9 per cent, representing a slowdown in
\ngrowth of 2.6 per cent compared to the same period of 2015.\u201d(Zheng, S. 2016)<\/p>\n

The main causes for physical store collapsing can be theoretically illustrated
\nin terms of microeconomics model. According to supply-and-demand model, no
\nmatter the quantity of a good that consumers demand, or the quantity of a good
\nthat firms supply, essentially depend on price as well as other factors such as
\nincome and cost of inputs. Consumers usually demand less of a good with higher
\nprice and more when the price is low. Oppositely, firms supply more of a good
\nwith higher price and less when the price is low. Compared with traditional
\nretail stores, online shopping in China can precisely provide consumers more
\ngoods with lower price, which is due to following reasons. <\/p>\n

Firstly, it is caused
\nby lower operational cost from online retailer, such as no rent for physical
\nstore, which is mainly composed of Internet maintenance, inventory, logistic,
\nlabor. Compared with online retailers, the store rent has been an inevitable obstacle
\nto reducing the cost of input for the traditional retailers, especially during
\nthe period of soaring house price in China. In addition, the increasing Chinese
\nlabor wages give rise to higher fixed operation cost. As a result, it is almost
\nimpossible for the physical store to drop the commodity price to be same with
\nonline shop. Otherwise, the physical store won\u2019t survive once the profit will
\nbe eventually damaged. Furthermore, more competitors and more options online
\ncan cause more price competition even the elimination of price monopoly, which finally
\ncontribute to price advantages.<\/p>\n

Secondly, the weak increase of Chinese economy
\nsince 2013 had negative effects both
\non the GDP and export growth. \u201cThe slowdown trends can be identified within the
\nwholesale market, manufacturing industries and commodities markets.\u201d (KYKLO, 2016).
\nThe economic slowdown results in decrease in consuming confidence. Shoppers are
\nincreasing their favor on online commodities with lower prices than ever. <\/p>\n

\nChinese Producer Price Index (PPI) below in blue shows<\/strong>\u00a0<\/strong><\/p>\n

\"\"<\/figure>\n

In conclusion, the factors of e-commerce revolution,
\ntogether with rising operation cost from rental and labor, economic slowdown,
\nare leading to physical stores closure. <\/p>\n

Outlook<\/h2>\n

\u201cThe e-commerce revolution has also
\nbecome a dynamic engine of China\u2019s long-awaited shift from a heavy-industry,
\nexport-oriented, semi-command economy into a consumer- and service-driven
\nmarket, where private companies large and small have direct access to domestic
\nconsumers\u201d (Morgan Stanley, 2015). Any technical changes will usually lead to mutual
\ninfluence on existing practices all along. Whether or not the challenge,
\nadvantage outweighing disadvantage and vice versa, will depend on changing idea
\nand strategy. Therefore, the attitude taken towards booming e-commerce
\ndevelopment is very crucial for the traditional industry. To some degree, the
\nonline shopping will destroy the physical store expansion. On the other hand, it
\nis also providing the new business model O2O (online-to-offline) to utilize. The
\nfurther exploration on maximizing advantages of physical store and optimizing
\nO2O platform are better solution for traditional retailer to get rid of
\ndilemma. After all, there are aspects of shopping experience beyond simply
\nobtaining goods. \u201cA notable finding of the research was that wealthy Chinese consumers
\nhave a much lower inclination to online shopping\u201d(Lynch, D. 2014). Such as
\nphysically touching merchandise, gorgeous and bright in-store d\u00e9cor, relaxing
\natmosphere and entertainment, emotional bond between buyer and seller,
\ncustomized service for wealthy consumers. All of these are irreplaceable
\nadvantages of physical store. \u00a0<\/p>\n

Reference List<\/h2>\n