What to Expect from China’s Retail Market

on January 7 2014 | in Retail Trends | by | with No Comments

Hong Kong Shopping Mall

China’s retail landscape is evolving. While there remains plenty of growth from this market, market dynamics have changed and retailers need to find ways to adapt to a landscape rapidly changed by rising affluence and new technology.

What can we expect from China’s retail market? A study of the retail market from Fung Business Intelligence offers some guidance to marketers as China moves towards a consumer-driven economy.

Less stores, better stores
As we noted in our post on China Luxury Trends for 2014, many brands have shifted from a strategy of rapid store expansion to improved store productivity through significant R&D investments, the launch of long-term branding campaigns, and the creation of retail concepts. The greatest pitfall of opening many stores in quick succession was the overstock of unwanted inventory that often followed, particularly for domestic sportswear and fashion retailers.

Mobile, a highly significant sales channel
According to iResearch, in 2Q13 the transaction value of mobile shopping reached 37.52 billion yuan, up 181 percent year-on-year. Mobile payment services are fasting-growing and winning the confidence of consumers. Tencent’s new mobile payment program, which bundles bank accounts with WeChat accounts, has been particularly popular. China Unicom has also hopped on the trend: the mobile operator joined forces with Agricultural Bank of China to provide its mobile banking and payment services. Alipay also allows for offline payments at points of sale by using bar codes and QR codes to complete payment transactions. HTC (Beijing) has just cut a deal with China Merchants Bank to offer is “Mobile Wallet” feature to HTC users in China.

The rise of private labels
Some retailers have begun experimenting with creating private labels or proprietary brands as a way to offer something unique and stand out in a fiercely competitive environment. Private labels should be on the radar, but we believe the time for private label has not arrived yet as the majority of affluent Chinese consumers are still infatuated with branded products.

The Fung Group has found that – while private labels have the potential to increase profits and customer loyalty – penetration remains low. According to Rabobank, private labels only account for about 3 percent of sales in China. This number is expected to rise: private label sales will be between 25 percent and 30 percent by 2030 as more department stores develop private brands.

At the moment, private labels are considered low revenue generators; they are not yet popular among consumers. Implementing private labels also presents a host of new challenges, and requires a very different set of management skills. Many local department store operators have said they do not have the experience needed to buy appropriate products for a line. Private labels also demand a huge capital investment and represents serious risk.

The power of digital marketing and customer relationship management
PricewaterhouseCoopers found that 57 percent of Chinese shoppers follow brands or retailers on social media, compared to just 38 percent in the global sample. WeChat – with 400 million registered users – has become an important tool for retailers to communicate with their customers. Many retailers are trying to use the databases of websites like Sina Weibo (500 million registered users) to promote products and increase profits. Department stores are launching mobile apps, and QR codes make handy, web-friendly coupons possible for the digital savvy.

Retail membership programs have long been popular in China, but now branches are starting to combine their databases for ease of data analysis and customer management, allowing one rewards card to be used at multiple store locations or multiple sister shopping outlets.

The emergence of the omni-channel
The perfectly integrated “omni-channel” approach to customer experience remains elusive in China, but it’s the goal many retailers have in mind.  Whoever can harness brick-and-mortar stores, social media, and online stores together into successful multi- and cross-channel promotions will emerge as a leader in China.



image credit: chris

 

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

« »

Get Your Copy of the June 2015 China Consumer & Retail Monthly

Follow Us

Daily Updates By Email



Latest Posts

Scroll to top
x