Page 248 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
integrate their platforms, inventories and customer incorporating big data and artificial intelligence. Alibaba
resources in China. Chinese shoppers are now able to has also acquired an 18 percent stake in Bailian’s Lianhua
purchase U.S. made products fromWal-Mart stores directly division—some 3,600 supermarkets and chain stores
from JD’s online platform. JD.com is offering customers spread across the country, including the well-known
over 1,700 of the U.S. firm’s most popular items from its Hualian brand. By enlisting big data, Alibaba aspires to
retail stores in China, reports said. According to JD.com do nothing less than reinvent retail—where the notion
International President Winston Cheng, the strategic of e-commerce versus brick-and-mortar seems irrelevant
partnership is bringing about significant benefits to both (Liu, Bai, Jia, and Wang).
the companies. “We bring, clearly, the online traffic to
Wal-Mart,” said Cheng. Furthermore, Wal-Mart is “offering The adoption of mobile devices is a major factor in
space in their stores for our inventory ... so we have “New Retail”. By the end of 2016, mobile commerce
expanded our fulfillment capabilities as a result of that as accounted for 55.5 percent of all retail e-commerce in
well,”he said, adding that the company also looks forward China. Sales via mobile commerce will likely reach $1.5
to selling “a tremendous number of quality imported trillion in 2019, representing a quarter of the country’s
products not previously widely available in China through overall retail market. China has overtaken the United
Wal-Mart and Sam’s Club.” According to Cheng, JD.com’s States to become the largest mobile payments country,
success in reaching consumers can be attributed in part partly thanks to its late-mover advantage. Compared
to China’s highly developed e-commerce market (Yuen). with other developed countries, China does not have an
entrenched credit culture and has no problem jumping
Global consultancy McKinsey & Co says seamless from cash to mobile payments. As brick-and-mortar
integration of online and offline channels holds the key retailers seek to turn their physical stores into an asset
for Mainland China’s retailers to meet the demands of instead of a liability to compete against online retailers,
increasingly discriminating consumers as e-commerce they need to heed the demands of today’s increasingly
growth slows. Another reason for the expected slowdown mobile phone-dependent consumers, said Andria
in domestic e-commerce is that the crowded mainland Cheng, an analyst at eMarketer. The International Council
market is nearly reaching maturation after brands of Shopping Centers said in a March 2017 report that
scampered to set up their business-to-consumer shops more than three fifths of 1,200 surveyed consumers said
on major online platforms. “Our latest research findings that by 2020 they actually prefer to be left alone to do
show that Chinese shoppers have come to expect their own thing while in stores, instead of engaging with
that their offline and online shopping activities will be a salesperson, as long as the store provides easy access to
integrated into seamless omnichannel journeys,” said products and navigable online tools (He).
Lambert Bu, a McKinsey partner in Shanghai. For instance,
most consumers are happy to embrace omnichannel Driven by the wide adoption of healthier lifestyles,
experiences, yet few have taken advantage of options product diversification, and customer habits, fresh food
such as shopping online and collecting the items at brick- is expected to become the next big thing in e-commerce.
and-mortar stores (Zhang). The problems this industry has had entering e-commerce
is basically logistics. Fresh food requires a shorter delivery
Alibaba’s Jack Ma encouraged the concept of “New time and cold-chain logistics to ensure product quality.
Retail” in 2016, “the integration of online, offline, logistics However, in 2016 the industry recorded strong growth
and data across a single value chain.” The company is with trading volume soaring 80 percent from the previous
already moving on the idea quickly. In little over a year, year to 91.3 billion yuan. This figure is expected to be 150
Alibaba has gone from opening its first physical store to billion yuan in 2017. Still, the market remains relatively
acquiring a major department store chain, Intime Retail, untapped compared to previous e-commerce booms
for $2.6 billion. In February 2017, Alibaba announced a for a reason. The high cost of building end-to-end cold
strategic alliance with Bailian Group, the state-owned chain logistics, reducing waste, and increasing margins,
supermarket, mall and department store chain, which have all raised the barrier to entry (Lee). Even those who
boasts massive amounts of underused retail space in manage to build their cold-chain logistics systems will
Shanghai and on the eastern seaboard. The new partners still face profitability problems: Margins in the sector
will share offline retail branches, merchandising capability, are very low not only due to expensive sourcing and
logistics and technology. They are already designing new logistic costs but also due to low retail prices as more
retail outlets together and developing retail technologies players enter and can only compete on price. About 88
248
integrate their platforms, inventories and customer incorporating big data and artificial intelligence. Alibaba
resources in China. Chinese shoppers are now able to has also acquired an 18 percent stake in Bailian’s Lianhua
purchase U.S. made products fromWal-Mart stores directly division—some 3,600 supermarkets and chain stores
from JD’s online platform. JD.com is offering customers spread across the country, including the well-known
over 1,700 of the U.S. firm’s most popular items from its Hualian brand. By enlisting big data, Alibaba aspires to
retail stores in China, reports said. According to JD.com do nothing less than reinvent retail—where the notion
International President Winston Cheng, the strategic of e-commerce versus brick-and-mortar seems irrelevant
partnership is bringing about significant benefits to both (Liu, Bai, Jia, and Wang).
the companies. “We bring, clearly, the online traffic to
Wal-Mart,” said Cheng. Furthermore, Wal-Mart is “offering The adoption of mobile devices is a major factor in
space in their stores for our inventory ... so we have “New Retail”. By the end of 2016, mobile commerce
expanded our fulfillment capabilities as a result of that as accounted for 55.5 percent of all retail e-commerce in
well,”he said, adding that the company also looks forward China. Sales via mobile commerce will likely reach $1.5
to selling “a tremendous number of quality imported trillion in 2019, representing a quarter of the country’s
products not previously widely available in China through overall retail market. China has overtaken the United
Wal-Mart and Sam’s Club.” According to Cheng, JD.com’s States to become the largest mobile payments country,
success in reaching consumers can be attributed in part partly thanks to its late-mover advantage. Compared
to China’s highly developed e-commerce market (Yuen). with other developed countries, China does not have an
entrenched credit culture and has no problem jumping
Global consultancy McKinsey & Co says seamless from cash to mobile payments. As brick-and-mortar
integration of online and offline channels holds the key retailers seek to turn their physical stores into an asset
for Mainland China’s retailers to meet the demands of instead of a liability to compete against online retailers,
increasingly discriminating consumers as e-commerce they need to heed the demands of today’s increasingly
growth slows. Another reason for the expected slowdown mobile phone-dependent consumers, said Andria
in domestic e-commerce is that the crowded mainland Cheng, an analyst at eMarketer. The International Council
market is nearly reaching maturation after brands of Shopping Centers said in a March 2017 report that
scampered to set up their business-to-consumer shops more than three fifths of 1,200 surveyed consumers said
on major online platforms. “Our latest research findings that by 2020 they actually prefer to be left alone to do
show that Chinese shoppers have come to expect their own thing while in stores, instead of engaging with
that their offline and online shopping activities will be a salesperson, as long as the store provides easy access to
integrated into seamless omnichannel journeys,” said products and navigable online tools (He).
Lambert Bu, a McKinsey partner in Shanghai. For instance,
most consumers are happy to embrace omnichannel Driven by the wide adoption of healthier lifestyles,
experiences, yet few have taken advantage of options product diversification, and customer habits, fresh food
such as shopping online and collecting the items at brick- is expected to become the next big thing in e-commerce.
and-mortar stores (Zhang). The problems this industry has had entering e-commerce
is basically logistics. Fresh food requires a shorter delivery
Alibaba’s Jack Ma encouraged the concept of “New time and cold-chain logistics to ensure product quality.
Retail” in 2016, “the integration of online, offline, logistics However, in 2016 the industry recorded strong growth
and data across a single value chain.” The company is with trading volume soaring 80 percent from the previous
already moving on the idea quickly. In little over a year, year to 91.3 billion yuan. This figure is expected to be 150
Alibaba has gone from opening its first physical store to billion yuan in 2017. Still, the market remains relatively
acquiring a major department store chain, Intime Retail, untapped compared to previous e-commerce booms
for $2.6 billion. In February 2017, Alibaba announced a for a reason. The high cost of building end-to-end cold
strategic alliance with Bailian Group, the state-owned chain logistics, reducing waste, and increasing margins,
supermarket, mall and department store chain, which have all raised the barrier to entry (Lee). Even those who
boasts massive amounts of underused retail space in manage to build their cold-chain logistics systems will
Shanghai and on the eastern seaboard. The new partners still face profitability problems: Margins in the sector
will share offline retail branches, merchandising capability, are very low not only due to expensive sourcing and
logistics and technology. They are already designing new logistic costs but also due to low retail prices as more
retail outlets together and developing retail technologies players enter and can only compete on price. About 88
248
