Traditional retailers feel pinch from online rivals
Traditional retailers no longer are content to sit and watch potential customers getting lured away by online rivals.
The huge e-commerce sales revenue tallied on Nov 11 last year served as a wake-up call for traditional brick-and-mortar retailers, spurring them to launch preemptive strikes days in advance.
Nationwide, physical stores, including home improvement retailers, department stores and supermarkets, are now taking part in online promotions.
But dozens of home decoration and furniture department stores boycotted retail site Tmall’s promotional activities on Nov 11.
Che Jianxin, chairman of Macalline Co Ltd, a leading decoration and furniture chain in China, reportedly initiated the boycott, forbidding online retailers’ efforts from transforming the traditional stores into offline promotional venues.
Tmall reportedly suspended previous agreements offering online services to the offline home decoration unit.
In 2012, online retail deals reached 1.32 trillion yuan ($216 billion), up 64.7 percent, according to China e-Business Research Center. That figure is expected to reach 1.82 trillion yuan, a growth of 40 percent, in 2013.
It is hard for physical stores to catch up to such rapid increases in revenue. Wangfujing Department Store Co Ltd’s 2012 sales were 18.36 billion yuan, topping those of the e-commerce unit of Suning Commerce Group Co, the country’s largest electronics retailer.
But by the third quarter of 2013, Wangfujing’s revenue totaled only 14.53 billion yuan, while Suning.com’s rose to 16.17 billion yuan.
Mao Ajing, analyst from Analysys International, said Tmall’s 19.1 billion yuan sales on Nov 11 last year greatly affected retail stores and department stores, pushing them to act.
Guo Geping, chairwoman of the China Chain Store and Franchise Association, said that this year, growth in the retail industry has suffered a continued slowdown, with only a 7.6 percent increase in sales among Chinese department stores and 6.5 percent among specialized retailers.
The association’s report indicated that conflicts between online and offline distribution channels, logistics costs for delivery and lack of Internet technology have created challenges for traditional retailers that are launching services online.
To turn the situation around, Wangfujing Department Store hosted a three-day shopping carnival Nov 8-10.
And Wal-Mart Stores Inc has offered sales on electronic appliances in many regions, including Guangdong province and Liaoning province, with major discounts to attract more customers.
Suning Commerce Group Co, which has its own e-commerce platform, Suning.com, launched a strategy in June offering the same price for items purchased online or in physical stores.
Some analysts said traditional stores’ efforts online are mainly to divest inventory or special items but that their main sales still come from physical stores.
Retail analyst Mo Daiqing said traditional stores’ online promotion will earn attention from Internet shoppers while the offline stores serve as a channel for customers to try out and experience the items.
Easyhome, a moderately upscale home furniture and decoration department store, launched its own website Nov 5, offering uniform prices between products purchased online or in physical stores. Customers shopping either way enjoy a 10 percent discount.