The performance of foreign retailers in China has shown a reversed U shape since their market entry in the 1990s. By the destruction of digitalisation, large retail giants continue to reduce both the number and the size of their stores, protecting bigger loss but worsening their sales too. They launched omnichannel retail after China’s online sales had started to soar in 2010 and introduced the experience-based retail ecosystem mostly in collaboration with local companies. However, their long-term performance will largely rely on the local consumption demands and institutional environment.
China has become the world’s largest e-commerce market, accounting for 40% of the value of worldwide e-commerce transaction by 2017, up from less than 1% ten years ago. China’s online retail market has also become the world’s largest, with a 38% annual growth rate of US$830 billion by 2017, compared to 14% in the U.S. In 2016, China’s internet users reached to 731 million, overtaking the combined number of the European Union and the U.S.; 20% of the internet users rely on mobile only, compared with 5% in the U.S., and China’s mobile payment has 11 times the transaction value of the U.S. The online competition has boosted customer-centred and experienced-based innovation in a physical shopping environment, represented by Life Mall (e.g., Parkson from Malaysia) and themed department store – Fashion Gallery (e.g., the New World from HK). Most of the foreign retailers have also started to emphasise private labels or owned brands, such as Carrefour’s Quality Line and French Touch brands. For foreign retailers or brands to succeed, it is important to understand the key development stages of China’s retail sector and what foreign retailers have experienced in the market in order to set up potential effective strategies they may implement in the future.
1995 – 2005 market development
China opened its retail market in the mid-1990s, when foreign retailers started to enter by introducing retail formats that were new to Chinese consumers, such as supermarkets and hypermarkets. They were obliged to adapt to the local environment such as laws and regulations after entry and used adaptation strategies to penetrate the market. China retail sector fully opened in 2004 following the World Trade Organisation agreement, when foreign retailers obtained all freedom to expand in the country. Until then, they have cultivated the shopping habits of Chinese consumers who switched their shopping from merely local open market to sometimes supermarkets, especially the middle class enjoyed more shopping in modern retail format. During this period, price was the key competitive factor.
About The Author
Lisa Qixun Siebers is Associate Professor of International Business at Nottingham Trent University, UK. She obtained her first degree in economics in China and MBA and Ph.D. degrees in the UK. She has been investigating foreign retailers’ expansion in China from the 1990s to date and has disseminated her work in books, journals, news articles, and online resources. Her monograph entitled Retail Internationalisation in China: Expansion of Foreign Retailers was published in 2011.