Lessons of e-commerce explosion in China
- By Dan Steinbock
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E-mail China.org.cn, December 16, 2015
These Internet-based industries fuel the government's 13th five-year plan that was officially outlined a month ago. Until recently, Chinese growth relied on investment and net exports, but that era ended with the global financial crisis. The new objective is to rebalance the Chinese economy toward consumption.
Short-term data suggests that the writing is already on the wall. According to the third-quarter data, fixed-asset investment expanded only 10 percent year-on-year and net exports barely 1.8 percent; the slowest since 2000. In contrast, consumption accounted for more than 58 percent of growth in GDP in the first three quarters.
The medium-term trend is even clearer. Last year, consumption was still 38 percent of the GDP; more than before but still lower in comparison to other emerging economies. Given the current transition, consumption has the potential to double by 2030, which could lift its relative role in the economy to 50 percent.
In this massive shift from net exports and investment to consumption and innovation, a central catalyst role belongs to e-commerce in particular and the information and communication technology (ICT) sector in general.
Threat to brick-and-mortar retailers
Not everybody has benefited from Chinese e-commerce explosion, however. As the record sales on Single's Day showed, online retailing poses an increasing threat to those brick-and-mortar retailers that continue to stay mainly offline.
According to industry estimates, online retailing still accounts for some 12 percent of total retail sales in China. While it has soared explosively from barely 1.1 percent in 2008, it is still a small part of the total.
Nevertheless, as online retailing is exploding but Chinese consumers remain highly cost-conscious, some entrenched brick-and-mortar retailers have not yet been able to capitalize on the current trends.
For the leading department store operators in China, online retailing remains limited and sales growth is weak. While Intime Retail may be best positioned to benefit from online retailing - not least because of its strategic cooperation with Alibaba - several other companies, including Golden Eagle Retail, Parkson Retail and Maoye International Holdings are only getting into the game.
In turn, Golden Eagle and Maoye have collaborated with Tencent through the WeChat social platform, whereas Parkson has introduced an online shopping site.
