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China to Become The World’s Largest Retail Market, Even With A Slowdown

Qilai Shen/Bloomberg© 2017 BLOOMBERG FINANCE LP

According to the research firm eMarketer, Retail sales in China will reach more than $5.6 trillion this year, about $100 billion more than in the United States. This will happen despite the trade war and slowing Chinese economy that is starting to dampen retail growth.

With nearly 1.4 billion people, which is roughly four times the size of the US population, the news that China would become the largest retail market in the world was more or less inevitable. The growing middle class, booming economic growth and rapid technology adaptation has created a colossal retail market and opportunity for companies who want to seize on this growth.

What is unique is the way that the Chinese retail market will take shape. I had the opportunity to speak to the O2O transformation that is occurring in China at the most recent Private Label Manufacturers Association (PLMA) convention in Chicago. What’s notable about what’s happening in China is as follows:

Justin Chin/Bloomberg© 2018 BLOOMBERG FINANCE LP

  • Greenfield approach. China is moving much faster than anywhere in the world because the Western retail model is built on legacy systems. China’s model is intentionally disruptive because it can be. China does not have the legacy of malls, supermarkets and big-box stores. China has no traditional retail model to defend. This is leading to freer thinking around what they refer to as “New Retail” that is experience driven and builds upon digital tools.
  • Mobile led. In the same manner, China is leapfrogging the rest of the world in its use of mobile tools. Consider that Alibaba alone has 617 million active users. Nearly 80% of e-commerce transactions are mobile led and over 55% of Chinese consumers have made a mobile payment vs only 19% of the U.S.  Mobile transactions in China will total over $9 trillion. This makes ideas like a cashier-less store a reality.
  • O2O innovation. O2O refers to the relationship between online shopping and offline shopping as it intersects at the retail store. While China will realize more than 25% of its transactions on-line (double that of the U.S.), it is also still innovating in its retail stores. Online marketplace giant Alibaba has been leading the charge with its Hema stores, which utilize mobile tools for product information and payment while also doubling as a local on-line distribution center, offering delivery to the home in less than an hour.

China’s market will continue to grow and innovate. Its ascension offers clues to the future of retail everywhere in the world.

By Neil Stern

Neil Stern for Forbes


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