As luxury retailers rush to open new stores in China, are these branded stores becoming showrooms for online purchases?
With the Chinese middle class not much more than a decade old, Chinese consumerism is developing in the age of the Internet—and is developing in a different way than Western consumers might expect.
“Many Shanghai consumers consider branded shops to be showrooms rather than places to purchase,” according to Sam Mulligan, director of market research company DDMA.
Mulligan’s firm researches online consumer activity in Shanghai, China’s most advanced consumer market. DDMA thinks that the habits of Shanghai consumers will predict behavior of consumers across the country.
Based on this research, DDMA has identified several factors driving Chinese consumers to buy online. The most significant of these include location, poor sales staff, and perceived reliability of products.
As Chinese cities grow, retailers have been unable to keep up with urban sprawl. Many young Chinese families are locating in “dormitory suburbs”—areas with lots of affordable housing but few retail outlets. And not only do long commutes into town make online shopping attractive to consumers—online orders often include a delivery speed that seems “instant” to Western shoppers.
“I shop online for almost everything except groceries,” said Qian Hu, a town planner who lives in the Chinese suburbs. “I live so far out, it could take me two to three hours to go into town to shop. If I buy online, it comes the same day. That’s how quick delivery is.”
Even if consumers decide to brave the journey to a shopping center, their efforts are not always rewarded. Poorly-trained sales staff, many of whom are young, rural migrant workers, do not connect well with their clientele, and are rarely well-informed about the products they sell. Chinese consumers, especially those purchasing electronics or other technology, have found that they need to research products online regardless of whether they buy online or in-store.
“We found that often one person in a group of friends would go to a store to check out a new phone model or tablet computer,” Mulligan said. “They’ll discuss it with their friends using social media. Then the friends can buy. Not everyone needs to go to the store.”
DDMA’s third factor that contributes to high online sales in China is consumers’ perception of reliability. While Westerners are more likely to trust a brick-and-mortar business than online shops for authenticity, the Chinese have a distinctly different perspective. With knockoffs on sale throughout Chinese cities, Chinese consumers feel more comfortable purchasing items from manufacturers’ websites.
Last year, online sales in China nearly doubled, accounting for ten percent of overall retail sales. This increase, and the difference in Chinese consumer attitudes, shows the beginnings of a Chinese consumer model that is far different than that of the West.
photo credit: china apparel