China goes online

Published on Author martinirigoyenj17

As the Chinese economy slows down, traditional business are feeling the effects of decreased consumption combined with the staggering growth of online sales.  In what was once the busiest market in the Zhongguancun district (Beijing), referred to by Bloomberg as “the Silicon Valley” of China, electronic retailers are struggling. According to a frustrated entrepreneur, traditional businesses face a serious threat: “There are more sales staff than customers around here. Everyone buys online now.”bloomberg

The shift of Chinese consumption habits to online retailers has the potential to create “46 million new jobs by 2025” (Bloomberg). Nevertheless, given that this transition takes effect, more than 30 million Chinese workers employed by the threatened traditional businesses will lose their job. While the “online revolution” can promote consumption as well as significantly boost productivity, China has to watch unemployment rates closely if it does not want the economy to be overwhelmed by the overhang debt from the former investment-led expansion.



4 Responses to China goes online

  1. The transition period from traditional retailers to online retailers is inevitable and it has already happened in many countries. The question is how China will quickly adapt to the new economy platform to minimize the opportunity cost of the online revolution.

  2. We see this issue in the United States as well. Radio Shack, Walmart, JCPenney and Gamestop are just some of the major retailers in the United States that are struggling right now. Consumers are switching to online companies like Amazon that can sell products for a fraction of the price. Traditional consumer shopping is becoming rare around the world.

  3. In China online shopping is developing simultaneous with bricks-and-mortar. We will have to see whether there is as much displacement. Another feature is that internet access is via cell phone, not traditional computer. That will lead to different strategies.

    How much online shopping is for clothing? In the old days I bought shirts via catalogs a few times, but with trousers sizing is not a good enough guide to fit, and decided that stores were more efficient. Shoes are even worse — for every 10 pairs that I try on, I’m lucky if one pair actually fits. So I’m skeptical that this is the issue for stores such as JCPenny that focus on clothing. Walmart? — but they’re no longer well managed at the store level. Perhaps though electronics was their high-margin area, and online has eroded things there. In any case, to me this begs the question of which segments do well on-line, and which do not. Will online retailers that succeed in China be in the same segments as those do well in the US? And who actually does well in the US? — to my knowledge Amazon doesn’t fare particularly well in profitability.

  4. It will be interesting to see at which level online shopping develops in China. While online shopping in the US has been so successful as to displace traditional shopping, maybe the culture of Chinese consumers will not allow the same to happen in China.