The world outside China hardly realizes how fast e-commerce is changing the country. “Brick-and-mortar is basically dead, unless you have something special to offer,” says Shanghai-based business analyst Shaun Rein , author of The End of Copycat China in the South China Morning Post. The rest of the world will follow.
The South China Morning Post:
Consolidation is raising barriers to entry in China’s highly competitive and rapidly growing online-to-offline (O2O) sector, where cab-hailing mobile application Uber and other firms try to draw customers to physical services via the internet. That means new entrants better have deep pockets and a smart business plan.
Unless you have something special to offer, “a bricks and mortar strategy is basically dead in China”, said Shaun Rein, the Shanghai-based founder of China Market Research Group. And even then, O2O companies were still in cash-burning mode, “building market share but not generating revenues”, by subsidising services like a restaurant meal or cinema ticket to attract hits, Rein said…
The speed at which China’s e-commerce market has grown has not surprised onlookers who say consumers savour the convenience of online shopping and home delivery rather than having to deal with gridlocked streets and polluted air.
Chinese consumers bought 12.4 per cent of their retail products online last year. That number should rise to 33.6 per cent in 2019, forecasts eMarketer, and Rein predicts it may hit 50 per cent by 2022. By comparison, online retails sales in the United States, where retail space per capita is four times higher than in China, are expected to total just 9.8 per cent of total sales by 2019, barely budging from 6.5 per cent last year, eMarketer data shows…
Challenges still exist for established retailers wanting to make the switch.
“A lot of executives used to bricks and mortar can’t make the transition,” Rein said.
Understanding the product range and service level expected by digital consumers was tough for people used to doing business in a different way, he said.
“The competition is fierce and a lot will go out of business,” Rein said.
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