A $16 Million Bet on the Future of Chinese Retail

on January 14 2013 | in Digital Retail Trends | by | with No Comments

Sanlitun Village, Beijing, China, retail,

While America is beginning its Oscar buzz, a lesser-known Chinese award show has garnered plenty of attention of its own: China Central Television recently awarded its ten annual “Economic Figures of the Year.” While the speeches given by the celebrated entrepreneurs and social achievers offered some color, the biggest surprise of the night was an impromptu bet: Wang Jianlin, head of Dalian Wanda Group, wagered Jack Ma, president of e-commerce sensation Alibaba Group, that in ten years online consumption will not surpass 50 percent of total retail volume. He put 100 million RMB – approximately $16 million – on the line.

Though Ma is a staunch believer in the potential of e-commerce for Chinese growth, even he would not take the bet. The differing opinions of two great economic moguls highlights an emerging generational gap in Chinese business ideology: those that believe the Internet is the best way forward, and those who insist brick-and-mortar stores will remain the backbone of retail.

Wang believes that in-person purchases won’t be totally replaced by e-commerce experiences; instead, they will bolster each other. His belief was formed in part by his many years of experience in real estate. Even today he is able to prove that his theories work in practice. His company recently acquired the American movie chain AMC and put it back in the green. As Wang was quick to point out to a self-assured Ma, the top-ten American e-commerce businesses all began as physical retailers.

Ma, called the father of Chinese e-commerce, still remains steadfast in his own opinions. He believes that young people shape the future commerce landscape in China, subverting the traditional economic order with websites like Taobao. Many low-income  and young Chinese see Ma as their spokesperson.

Whatever Ma’s ideas are about the future, Wang reminds him that the future has not yet arrived: e-commerce only comprised 3 percent of China’s total market share between January and November 2012. The landscape, however, seems to be shifting a little more each day: this year Wal-Mart purchased additional shares of the promising Chinese e-commerce startup Yihaodian. Even Wang has been bringing a large number of knowledgeable e-commerce promoters to Wanda.

“Once [online retail] reaches 5 percent of total sales revenue, the industry will [reach a tipping point], leading the retail industry into an entirely new era,” said Jiang Qiping, head of the Information Research Center at the Chinese Academy of Social Sciences. Investors fear a saturated e-commerce market, however, for the price war that is bound to accompany it.

photo credit: charles wiriawan

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