China is not the first country to develop the e-commerce industry, but it is undeniable that the scale of e-commerce in China is now the largest in the world. The emergence of e-commerce can even be said to have directly changed the shopping patterns of Chinese consumers. A visual data can show that in the last year , according to the data said that China wrote off 3.1 million individual and self-employed to business users.
A Wave Of Store Closures At China Physical Stores
This is equivalent to 3.1 million brick-and-mortar stores in China announced their closure last year, and how many of these store owners are in debt because of the closure of their stores? While many of last year’s store closures had a lot to do with the epidemic, since long ago, ever since e-commerce started to become popular in China, one after another, brick-and-mortar stores have been announcing their withdrawal from the competition.
Even Wal-Mart, a Fortune 500 company and department store giant, has now closed a number of stores in China and is still downsizing. China Resources (China’s supermarket chain) is no exception, and RT-Mart (China’s supermarket chain) was sold to Alibaba early on to do new retail. Last year’s epidemic for most stores just accelerated the progress bar of failure. From the time e-commerce stood on the same playing field as them, some stores were inevitably failing to come.
We’ve all seen or heard more or less online, around us, or China physical store owners complain that business is bad now. But across the line like a mountain, many people do not think so, after all, the e-commerce industry and a courier time disadvantage, how much pressure can be brought to the physical store?
The truth is that this pressure is really high. According to reports of relevant data, as early as 2017, the compound closure rate of physical stores in China’s first-tier cities is as high as 100%. What is the compound closure rate?It is the probability that a brick-and-mortar store will close within six months after opening.It is the probability that a brick-and-mortar store will close within six months after opening. This figure means that half of the stores will close within half a year.
Even after persisting for half a year, less than 20% can still persist after the past year. Less than 5% can persist for two years without closing down, and less than 1% can even persist for three years. From the data can now be seen from the physical store is difficult.
The Development Of E-Commerce Affects China Physical Stores
The performance of e-commerce stores is very different. Pindo now has more than 800 million active buyers per year, and Pindo is just one of the three largest e-commerce platforms in China. Taobao, the longest-held e-commerce platform in China, has derived average consumption data based on its portrait of users, which equates to an average annual consumption of more than 10,000 yuan per person. Thinking about the huge user system Taobao has, Taobao’s annual sales amount is undoubtedly very huge.
Therefore, many physical store owners are blaming the decline of physical stores to the e-commerce platform.The emergence of e-commerce platforms has made the price of goods more transparent, especially some factory-direct products, which directly put the lowest price that physical stores cannot provide online, and consumers are certainly not willing to spend more money in physical stores.
Strangely enough, the e-commerce industry has advantages in other countries as well, but other than China, the e-commerce industry in other countries basically will not cause such a big blow to the brick and mortar industry.
The main reason is that China’s population is too large. With a large population, society needs to provide more jobs, and the labor hours in China are longer. Therefore China also has more express hours compared to other countries, and the e-commerce industry creates more jobs.With a culture of overtime, employees do not have the time to shop, and the emergence of e-commerce has met the needs of most people.
The last “sacrifice” is the brick-and-mortar stores. In contrast, the labor, rent and utilities of physical stores are fixed expenses, plus the geographical location of physical stores are more fixed, selling a wider variety of products, often selling products not the same factory, so there may be intermediaries in the purchase of goods, the price can not be suppressed.
On the other hand, China’s housing prices have changed dramatically compared to 10 years ago, and in this case, rents have been rising as well. The purchase cost of stores is getting higher and higher, so the rents of stores around will only get higher, and many landlords will only raise their rents above the average level around, hence the vicious circle.
Now many Internet giants have joined the “community group purchase”, integrating local resources and solving the shortcomings of the slow delivery time. For the local brick-and-mortar stores, it is ushered in the “head of the drink”. But as the saying goes: “but to join them”, the physical store is not the only way to close down.
After all, the advantages of physical stores still exist, and the future will only be “online + offline” of the new retail world. Instead of waiting for those online stores to get bigger and then come offline to open a store and compete for the business of the physical store. Entity stores may want to start first, find ways to maintain offline business at the same time, but also to do a good job on line stores, which is the best solution.
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