China's Growing Online Shopping Markets Threaten Country's Brick-And-Mortar Markets

The changing shopping habits of Americans have led to mass closures of brick-and-mortar retailers over the past decade, a trend largely blamed on the rise of online shopping. In China, as online shopping grows exponentially, the country’s mall and physical shopping centers now face the same threat.

According to Forrester Research, a research and analysis firm headquartered in Cambridge, Massachusetts, China’s online retail spending will surpass $1 trillion by 2019, up from $307 billion in 2013. At the same time, the company is projecting that mobile retail spending will grow at a 44.2 percent compound annual growth rate, which is twice as fast as online sales are expected to grow in the same period.

While online spending will reach greater heights over the next four years, the effects can already be felt by China’s shopkeepers. “It’s dying,” Wang Ning, the owner of a small stall in Beijing’s sprawling Hailong Electronics City shopping mall, told Bloomberg. The market, which has six football-field-sized floors that used to teem with customers, has seen a steep decline in shoppers. When Wang was interviewed, a week had passed since his last sale. “There are more sales staff than customers around here. Everyone buys online now.”

China’s digital revolution is exciting for those who stand to make a profit, as well as consumers benefiting from the convenience. The rise of e-commerce giants like Jack Ma’s recently listed Alibaba Group Holding Ltd. and competitor JD.com both had beginnings in the Beijing neighborhood where the Hailong mall now sits in jeopardy.

The Chinese sports brand Li Ning Co. is also suffering because of the transition to digital shopping. Bloomberg says that the company has closed more than a thousand retail outlets since 2013.

The success of traditionally brick-and-mortar brands now lies in their ability to seamlessly transition into the digital sphere. “To capture the opportunities in the increasingly competitive retail market, organizations must realize the importance of digital capabilities,” Vanessa Zeng, a senior analyst at Forrester Research, said in the company’s report. “Successful organizations must drive innovation to deliver compelling shopping experience and focus on enhanced customer segmentation … and leverage mobile to drive overall online retail business.”

China’s increasingly popular online shopping habit is most apparent on Singles’ Day, an annual blowout shopping event that was born online and celebrates the country’s unattached on Nov. 11 by encouraging consumers to engage in so-called retail therapy. Often compared to America’s Black Friday or Cyber Monday holiday sales, Single’s Day continues to gain popularity.

This past year, Alibaba announced that total sales on Singles’ Day reached a record $9.3 billion, nearly doubling the previous year’s sales of $5.75 billion.