Re­tail: Busi­nesses reel from dwin­dling stocks and fewer cus­tomers

China Daily (Canada) - - ONE WEEK FREE SMART EDI­TION -

trib­ute up to 22 per­cent of the na­tion’s pro­duc­tiv­ity growth by 2025 and make up be­tween 7 per­cent and 22 per­cent of the to­tal in­crease in gross do­mes­tic prod­uct from 2013 to 2025, McKin­sey found. By 2025, that could trans­late into as much as 14 tril­lion yuan ($2.2 tril­lion) in an­nual GDP.

That’s no con­so­la­tion for Li Feng, who has a store on the fourth floor of Ke­mao Elec­tron­ics City, just across the street fromHai­long Elec­tron­ics City.

“The mar­ket was packed with peo­ple­whenit first opened in 2004,” said Li, look­ing up from the TV drama he was watch­ing, for want of cus­tomers.

“Busi­ness has gone from bad to worse in the past five years. The im­pact from on­line sales is huge.”

Li has shut down the re­tail side of his busi­ness and now tries to eke out a liv­ing pro­vid­ing IT ser­vices to ex­ist­ing cor­po­rate cus­tomers, he said, as fel­low shop­keep­ers played poker in the oth­er­wise empty stall next door.

JD’s Liu started rent­ing a stall in Zhong­guan­cun in 1998 with an ini­tial in­vest­ment of 20,000 yuan.

Back then, China had 2.1 mil­lion users con­nected to the Web via 747,000 com­put­ers, ac­cord­ing to the China In­ter­netNet­work In­for­ma­tion Cen­ter, the gov­ern­ment body tasked with man­ag­ing on­line re­sources.

By the end of June 2014, the num­ber of users had jumped to 632 mil­lion, with 83.4per­cent ofthemable to ac­cess the In­ter­net via smart­phones.

Liu is now worth an es­ti­mated $7.3 bil­lion, ac­cord­ing to Bloomberg Bil­lion­aires.

“Tra­di­tional re­tail net­works in the US are strong, but Chi­nese con­sumers long faced an ar­chaic, in­ef­fi­cient brick-and-mor­tar net­work,” said Josh Gart­ner, a Bei­jing-based spokesman for JD. “Con­sumers flock to su­pe­rior ser­vice.”

Alibaba has cre­ated 14 mil­lion jobs di­rectly and in­di­rectly, Ma said at the World Eco­nomic Fo­rum in Davos, Switzer­land, last month. Ma is one of China’s wealth­i­est men and the world’s 13th rich­est per­son with an es­ti­mated $35 bil­lion for­tune.

Ex­plain­ing his com­pany’s sales growth ver­sus tra­di­tional re­tail­ers, Ma said: “If you want to have 10,000 new cus­tomers, you have to build a new ware­house, this and that. For me, two servers.” He’s aim­ing for 2 bil­lion cus­tomers around the world.

The in­dus­try has made it eas­ier and cheaper for mer­chants to reach con­sumers and has sup­ported the de­vel­op­ment of lo­gis­tics in­fra­struc­ture, ac­cord­ing to a Hong Kong­based Alibaba spokes­woman.

“With an un­der-de­vel­oped and frag­mented re­tail sec­tor, more con­sumers are go­ing on­line to find what they need and at the same time stim­u­lat­ing con­sump­tion in­China’s econ­omy,” she said.

Premier Li Ke­qiang is cheer­ing the new econ­omy. On Jan 4, he pressed the en­ter key on a key­board for WeBank, a pri­vate on­line bank funded by Ten­cent Hold­ings Ltd, grant­ing a 35,000 yuan loan to a lo­cal truck driver.

Without the cost of bul­let-proof glass, uni­formed tell­ers and branch out­lets, ser­vices such as WeBank’s “may­bethe­fu­ture”, saidCao. Ma’s Alibaba also has ap­proval to set up an on­line lender.

The ex­pan­sion of In­ter­net-re­lated busi­nesses is “where our hope lies”, said Ma Jiantang, the head of the Na­tional Bureau of Statis­tics, at a news con­fer­ence in Bei­jing on Jan 20 af­ter re­leas­ingGDP­data that showed the slow­est ex­pan­sion since 1990.

Prop­erty de­vel­oper Dalian Wanda Group Co Ltd, owned by China’s sec­ond-rich­est manWang Jian­lin, plans to close 10 malls across the coun­try and re­design an­other 25 to cut re­tail space, China Busi­nessNews re­ported last month.

ZongQinghou, China’s fifth-rich­est man with a bev­er­age and chain-store con­glom­er­ate, said in Au­gust that on­line busi­nesses are “af­fect­ing China’sec­o­nomic­se­cu­rity” by­suf­fo­cat­ing stores that have to pay rents.

Li Ning Co, the Chi­nese sportscloth­ing maker, is ex­pected to post losses for the third con­sec­u­tive year and has closed more than 1,000 re­tail out­lets since 2012.

Anta Sports Prod­ucts Ltd, a maker of shoes, has also been shut­ting­down stores partly due to­com­pe­ti­tion from on­line shop­ping.

At least 300 whole­sale mar­kets in Guangzhou are tee­ter­ing on the edge of sur­vival, es­pe­cially cloth and gar­ment mar­kets, the Guangzhou Daily re­ported in De­cem­ber. The big­gest of those can house hun­dreds of out­lets and thou­sands of staff.

“On­line shops are vir­tual, and if they kill all the real econ­omy, what busi­ness can they do? What prod­ucts can they sell?” Zong said in com­ments pub­lished on the Peo­ple’s Daily’s web­site in Au­gust. He said the gov­ern­ment should en­hance su­per­vi­sion on vir­tual shops.

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