Businesses say that China’s slowing economic growth is the main culprit for slower sales growth in China. Some companies, such as shampoo and laundry detergent giant Unilever PLC, have reported declines in the country, citing slowdown.
That may be one reason, industry insiders say. But have Chinese consumers stopped washing their hair and their laundry amid the slowdown?
Not likely, says Richard McKenzie, Partner at OC&C Strategy Consultants. Consumer spending is still robust, but companies are looking in the wrong places for it, said Mr. McKenzie. “Lower consumer spending tends to come where businesses over-exposed to offline only channels, when growth is moving substantially online,” he said.
The biggest lesson companies are learning right now is that China is a tough place if you aren’t successful online, Mr. McKenzie said.
Comparing online retail sales and top 100 retailers’ sales as a percentage of total consumer sales shows where the growth is going, said Andrew Ness, director and head of research at the Greater China research arm of DTZ, a commercial real-estate-services firm.
Mr. Ness said online sales hit retailers hard last year, as 23 of the top 100 retail chains in China closed more stores than they opened. The number of persons employed by China’s top 100 retail chains recorded its first negative growth, dropping by 0.3% in 2014, down from a year earlier, Mr. Ness said.
The bulk of spending is still at physical stores, with online retail sales accounting for 11% of the 26.23 trillion RMB in total retail sales last year, according to OC&C. But that percentage is growing quickly, up from 5.7% in 2012, OC&C says.
Read more at The Wall Street Journal.