Retail sector being increasingly driven by e-commerce customers as bricks-and-mortar stores feel the heat amid changing shopping habits

The government has issued a set of new policies to urge traditional retailers to strengthen their links with e-commerce sites, logistics companies, and finance and telecommunications operators, as online shopping sites have become a growing force in China’s retail sector.

The State Council, China’s Cabinet, said e-commerce operators and bricks-and-mortar shops could integrate market resources and combine their advantages by cross shareholding, mergers and acquisitions and other forms of strategic cooperation, according to the statement it released on Nov 11, or Singles’ Day, the country’s biggest shopping day of the year.

Traditional retailers should combine their advantages in services and experiences with online data and circulation and expand their intelligent layout.

E-commerce sites may conditionally release data resources to traditional retailers, to help them raise their resources allocation efficiencies and improve their decision-making standards.

“The new policies were released at a key moment during the transformation of the traditional retail industry, and they provide detailed and clear guidance on the integration of online and offline stores,” said Zhao Ping, deputy director of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.

“Online shopping has been growing rapidly, but the growth rate has slowed down year by year. This signals that the sector has entered a mature growth period, and it creates a growth space for traditional retailers.

“Bricks-and-mortar stores have been discovering the methods of online-to-offline integration. The policies will help them to make new breakthroughs and substantial progress in the data orientation of goods, stores, and customers.”

Chinese e-commerce giant Alibaba Group Holding Ltd, which initiated the Singles’ Day shopping festival in 2009, reported on-the-day sales of 120.7 billion yuan ($17.7 billion) by the midnight of Nov 11.

As the turnover of e-commerce companies surged from 52 million yuan in 2009 to over 120 billion yuan this year, traditional retailers are losing ground.

Because of their low operating efficiencies, high operational costs, the change of consumers’ habits and the impact of e-commerce, many Chinese and foreign traditional retailers have posted heavy losses.

The UK home, food and clothing store Marks & Spencer announced last week that it will shut all of its 10 stores in the Chinese mainland. In fact, it has been unable to acclimatize to the China mainland market since its launch eight years ago, and so far, not many Chinese consumers know about the brand.

The English retailer has continued to record sales declines in its international business. It has decided to temporarily keep its online stores on Tmall.com and JD.com, two of the largest shopping websites in China, but considers the rapid growth of e-commerce in the Chinese mainland as the last straw.

In its statement, the government said selling counterfeit and shoddy goods, intellectual property infringement, unfair competition, commercial fraud and other illegal activities will be severely punished. The authorities will focus on inspecting corporate headquarters and distribution centers, it said.

The government suggested that well-performing shopping malls adjust their operating structures, and transfer to a hub that combines functions of social networking, and family, fashion, and culture spending.

Highly saturated department stores with similar functions should move out of the core business areas of cities. Chain stores and brand-named enterprises are encouraged to establish convenience stores and community supermarkets, and expand their value-added services to create convenience for local residents, it said.