China’s eCommerce Striking Down Brick And Mortar

Shoppers in China are passing up the brick and mortar experience and showing a significant shift to online shopping, according to retail trends reported by The Wall Street Journal over the weekend.

Many Western companies who underestimated the eCommerce strength in China may now be feeling the brunt of the move.

Global consumer goods company Unilever saw a drastic drop in its sales last year, which it attributed to a slowing Chinese economy and a pullback by shoppers, WSJ said. Since the company relies on emerging markets for around 60 percent of its revenue, plummeting sales in China contributed to a 2.7 percent drop in global revenue last year, WSJ added.

Retailers worldwide have faced disruption from the uptick in eCommerce, but those still pushing a physical shopping presence in China may be hit hard by the force of shoppers looking for change.

According to a recent report from the China E-Commerce Research Center (CECRC), the country’s eCommerce market increased by 31.4 percent in 2014 to reach $2.2 trillion (13.4 trillion yuan).

“An estimated 461 million Chinese consumers, a third of the population, are now shopping online, up from 46 million in 2007, when eCommerce started gaining momentum,” WSJ confirmed. The exodus of shoppers from stores to online has been especially disruptive in China, partly due to the “speed of smartphone penetration,” WSJ added.

Just last year, China’s cabinet called for more support of the country’s eCommerce industry and the development of related technologies, such as online payment processing and eCommerce logistics.

As eCommerce continues to grow and the role of traditional brick and mortar stores dwindles, now may be the time for retailers to rethink their goals and efforts in China.

While some retailers like Best Buy have sold all of its remaining Chinese stores, others like Walmart are looking to readdress an online strategy in the country.

The drive for global eCommerce growth and the recent introduction of foreign payment networks into the market may close the door on more traditional brick and mortar retailers in the country.

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