With e-commerce taking over the marketplace, retailers are forgoing physical stores in China.
In America, Costco is known for their low prices and big-box stores. In China, they’ll still have the low prices. They’re just skipping the part about having a physical store.
In the last five years, e-commerce has grown from 3% to 15.4% of the total retail sales in China. For brands looking to enter the country for the first time, e-commerce provides a low-risk, high-reward scenario that is nearly impossible for retailers to pass up.
Take for example, British fashion retailer Topshop. The brand recently debuted in China, hosting a launch event where guests tried on outfits, or took pictures with London’s famous red phone booths. However, this physical, offline event was anything but. No cashiers were present to “ring up” customers’ orders. Want to buy what you just tried on? Scan it into your smartphone and simply walk away.
China’s combination of exploding rent prices and tough competition for good locations is somewhat unique. For example, Best Buy recently closed all of its brick-and-mortar stores in China. The company was simply unable to engage in competitive pricing while still maintaining physical locations.
While brick-and-mortar retail stores everywhere face stiff challenges from e-commerce, don’t expect major retailers elsewhere to follow the example in China just yet. In America, the Wal-Marts and Targets of the world can still affordably set up shop on a frontage road in the suburbs. (Obviously, under either model, the ‘mom and pop’ retailer is totally screwed.)
However, talk to me in 2025 and I bet I’ll have a different story to tell. E-commerce is the future everywhere. That future is simply arriving faster in some countries than in others.
Howard Davidson Arlington Massachusetts