Retail: Businesses reel from dwindling stocks and fewer customers
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.