Page 280 - 2020 White Paper on the Business Environment in China
P. 280
0 White Paper on the Business Environment in China
Ultimately, sales by mid 2019 were in a Chinese electronics chain in 2006 and then
disappointing. The July 2019 pace was the slowest withdrew from China altogether eight years later.
since February 2002. Retail sales growth was also Walmart has been in China since 1996 and made
weaker than expected, increasing 7.6 percent steady progress through brick-and-mortar stores
in July from a year earlier, compared with 9.8 and a partnership with the Chinese e-commerce
percent in June. Analysts surveyed by Reuters platform JD.com (Fifield and Siegal). It opened its
had expected growth of 8.6 percent (CNBC). The second Sam’s Club warehouse store in Shanghai
trade war between the world’s two largest retail earlier in 2019 and will continue the store’s
markets is taking its toll, especially on China. expansion in China to seize the huge opportunity
Coupled with a slowing domestic auto market, of the upgraded consumption demand in the
the trade war is hurting the country’s retail sales. country. Sam’s Club, the Walmart-owned rival
China did not surpass the US in total retail sales wholesaler, has had a presence in the Chinese
in 2019 as expected. That milestone will likely market for more than 20 years. It currently has at
not happen until 2021. Retail sales in China only least 23 locations in country. Costco’s senior vice
grew about 3.5 percent in 2019 to reach US$5.291 president for Asia, Richard Zhang, said that the
trillion. If the current economic climate continues, Chinese consumer’s familiarity with Sam’s Club
retail sales in China will surpass the US in 2021 could help his company. “Chinese consumers are
by about US$93 billion. At the time of this writing, ready to pay for a membership card that grants
China had a 21.1 percent share of the world’s them an exclusive privilege to buy at a warehouse
retail market, while the US has a 21.9 percent store, it’s not a new concept in the country,” he
share. “The US-China trade turmoil is even more said. Still, the ongoing US-China trade war could
of a concern for China now that domestic demand complicate the company’s supply. Zhang told the
impacted one of the country’s largest sectors: wire service that about 50 percent of the products
auto,” eMarketer forecasting director Monica are from overseas and that some fresh produce
Peart said. “Other sectors such as manufacturing items from the US have been replaced with items
and construction still show strong growth. But from Australia (Kennedy).
with two simultaneous market challenges, retail
sales may struggle to achieve the national growth Meanwhile, warehouse stores such as Sam’s
target of 6.0 percent to 6.5 percent for [2019].” Club and Costco are bringing Chinese consumers
“While retail sales won’t grow as much as they did something they have been missing—brands they
in 2017 and 2018, they are still healthy,” eMarketer can trust—and that could change China more
forecasting analyst Cindy Liu said (eMarketer). than the trade war. What will change China’s
controlled form of capitalism is the presence in
Although retail sales in China was relatively the country of American companies like Costco,
weak in 2019, the US base retial giant Costco which promote a modern version of capitalism
Wholesale opened its first brick-and-mortar where the consumer rather than the producer is
store on the Chinese mainland in that year. The at the center of the economic universe; and where
14,000-square-meter store is located in southwest profit is a consequence of pursuing a business
Shanghai, with 3,400 stock-keeping units of 60 rather than the cause of being in business. Most
kinds of goods including household appliances, notably, Costco has set itself apart from other
fresh food, daily necessities and travel accessories US retailers in terms of customer satisfaction. It
(Xinhua, Cosco Opens). The United States and is ranking 83 in customer satisfaction compared
China may be involved in a trade war, but the to 82 for Amazon and 72 for Walmart. That’s
Chinese shoppers at this American wholesaler something China desperately needs, as it makes
were at war with one another in a pitched battle the transition from a producer to a consumer
that forced the warehouse store to close early. society. Chinese shoppers are infamous bargain
If the American retail landscape has created hunters. Their financial habits encourage savings
winners and losers, the rifts are even more starker and discourage ostentatious spending. Costco’s
between companies that make it in China—and bulk buying offerings appeal to that psychology.
those that don’t. Home Depot closed its last On top of that, Costco has clearly prepared well in
stores in 2012. Best Buy bought a majority stake terms of product selection, with the judicious mix
280
Ultimately, sales by mid 2019 were in a Chinese electronics chain in 2006 and then
disappointing. The July 2019 pace was the slowest withdrew from China altogether eight years later.
since February 2002. Retail sales growth was also Walmart has been in China since 1996 and made
weaker than expected, increasing 7.6 percent steady progress through brick-and-mortar stores
in July from a year earlier, compared with 9.8 and a partnership with the Chinese e-commerce
percent in June. Analysts surveyed by Reuters platform JD.com (Fifield and Siegal). It opened its
had expected growth of 8.6 percent (CNBC). The second Sam’s Club warehouse store in Shanghai
trade war between the world’s two largest retail earlier in 2019 and will continue the store’s
markets is taking its toll, especially on China. expansion in China to seize the huge opportunity
Coupled with a slowing domestic auto market, of the upgraded consumption demand in the
the trade war is hurting the country’s retail sales. country. Sam’s Club, the Walmart-owned rival
China did not surpass the US in total retail sales wholesaler, has had a presence in the Chinese
in 2019 as expected. That milestone will likely market for more than 20 years. It currently has at
not happen until 2021. Retail sales in China only least 23 locations in country. Costco’s senior vice
grew about 3.5 percent in 2019 to reach US$5.291 president for Asia, Richard Zhang, said that the
trillion. If the current economic climate continues, Chinese consumer’s familiarity with Sam’s Club
retail sales in China will surpass the US in 2021 could help his company. “Chinese consumers are
by about US$93 billion. At the time of this writing, ready to pay for a membership card that grants
China had a 21.1 percent share of the world’s them an exclusive privilege to buy at a warehouse
retail market, while the US has a 21.9 percent store, it’s not a new concept in the country,” he
share. “The US-China trade turmoil is even more said. Still, the ongoing US-China trade war could
of a concern for China now that domestic demand complicate the company’s supply. Zhang told the
impacted one of the country’s largest sectors: wire service that about 50 percent of the products
auto,” eMarketer forecasting director Monica are from overseas and that some fresh produce
Peart said. “Other sectors such as manufacturing items from the US have been replaced with items
and construction still show strong growth. But from Australia (Kennedy).
with two simultaneous market challenges, retail
sales may struggle to achieve the national growth Meanwhile, warehouse stores such as Sam’s
target of 6.0 percent to 6.5 percent for [2019].” Club and Costco are bringing Chinese consumers
“While retail sales won’t grow as much as they did something they have been missing—brands they
in 2017 and 2018, they are still healthy,” eMarketer can trust—and that could change China more
forecasting analyst Cindy Liu said (eMarketer). than the trade war. What will change China’s
controlled form of capitalism is the presence in
Although retail sales in China was relatively the country of American companies like Costco,
weak in 2019, the US base retial giant Costco which promote a modern version of capitalism
Wholesale opened its first brick-and-mortar where the consumer rather than the producer is
store on the Chinese mainland in that year. The at the center of the economic universe; and where
14,000-square-meter store is located in southwest profit is a consequence of pursuing a business
Shanghai, with 3,400 stock-keeping units of 60 rather than the cause of being in business. Most
kinds of goods including household appliances, notably, Costco has set itself apart from other
fresh food, daily necessities and travel accessories US retailers in terms of customer satisfaction. It
(Xinhua, Cosco Opens). The United States and is ranking 83 in customer satisfaction compared
China may be involved in a trade war, but the to 82 for Amazon and 72 for Walmart. That’s
Chinese shoppers at this American wholesaler something China desperately needs, as it makes
were at war with one another in a pitched battle the transition from a producer to a consumer
that forced the warehouse store to close early. society. Chinese shoppers are infamous bargain
If the American retail landscape has created hunters. Their financial habits encourage savings
winners and losers, the rifts are even more starker and discourage ostentatious spending. Costco’s
between companies that make it in China—and bulk buying offerings appeal to that psychology.
those that don’t. Home Depot closed its last On top of that, Costco has clearly prepared well in
stores in 2012. Best Buy bought a majority stake terms of product selection, with the judicious mix
280
