GTrusted

Online shopping has changed the nature of retail forever and China isn't immune from this either. Once high flying Chinese big box retail stores like Gome, Yolo, and Suning are facing a heavy onslaught from online retail giants like JD and Alibaba. Just look at how many people are shopping online on China's Singles Day (November 11) and that means a loss less shoppers visiting physical stores.

What's helping to drive the growth of online commerce in China? In the not so recent past, buying a TV required bring wads of cash and spending a lot of time inspecting the TV you are buying in the store before taking it home. Today, the huge size of China's consumer market drives such high volume that profit margins become razor thin for any hardware maker. This enables products to become so cheap that they are seen almost like a consumable and easily replaced if it doesn't work. Consumer are more willing to buy a 4K TV online without ever seeing it when they think it's a "get it while you can" bargain- Xiaomi has made it such that their products frequently sell out or harder to buy.

Another thing helping to spur online retail is the armies of low cost labor in the cities willing to act as delivery people. As factory jobs move out of the city, left behind are many people who want to stay in the city and willing to perform low paid delivery services. This has enabled an online retailer and consumer's dream where home delivery feel almost instant at no extra cost.

With UnionPay and AliPay being well accepted, it's no wonder why e-commerce is booming here while traditional retail stores are more or less empty.

During a visit to several big box retail stores in Shanghai like Yolo, Gome, and Suning on a weekend during the holiday shopping season, the traffic in the stores were less than impressive. Of course it doesn't help when all the 3 stores are at the same traffic intersection competing for the same customers that are becoming fewer in number.

The Yolo store had a lot of sales people just hanging around and chatting with each other.  Yolo carried most major brands of TV's and smartphones but they weren't exactly flying off the shelf.

Gome was one of the first big successful big box electronic stores in China whose founder became one of the richest people in China but sentenced to prison for stock manipulation.  Their huge store probably had seen better times with few customers inside.

Suning's store wasn't much better and despite a large selection was mostly empty.

Other than online retail another winner in China is also Apple.  Their grandiose stores are nothing like you'd see in the US and always packed with shoppers.

     

Even Walmart is going heavily into the online retail with advertisements everywhere in Shanghai's subway stations after buying out Yihaodian.

It's an exciting time for Chinese online retailers and consumers hungry for all the online deals that everyone is throwing at them.  For traditional physical retailers, they will need to reinvent themselves or face the same fate as a lot of other now defunct physical stores in the US like Circuit City and Radio Shack.