Executive Briefings

Chinese Retail Stores 'Dying' as Online Sales Flourish

"It's dying," says an electronics-store retailer, shaking his head as he looks out at abandoned stores and torn promotional posters in what was once the busiest market in the Zhongguancun district, known as China's silicon valley. "There are more sales staff than customers around here. Everyone buys online now."

Chinese Retail Stores 'Dying' as Online Sales Flourish

The six football-field-sized floors are dotted with shuttered shops, victims of the rise of internet-based businesses like Jack Ma’s Alibaba Group Holding Ltd. and billionaire Richard Qiangdong Liu’s JD.com, which started out in Zhongguancun almost two decades ago.

The online revolution promises to boost productivity and could create 46 million new jobs in China by 2025, many of them higher-skilled, according to a report by New York-based McKinsey & Co. in July. The losers will be as many as 31 million traditional roles, the equivalent of the entire employed population in Britain.

While such creative destruction is a global phenomenon, its speed and scale in China is unparalleled, said Cao Lei, director of the China E-Commerce Research Center, a private research agency based in Hangzhou, the hometown of Alibaba.

“The internet helps improve productivity and efficiency, but it can be quite painful for traditional businesses,” Cao said. “Bookstores fail first, then clothing chains, then consumer electronics stores, then air-ticket booking offices, and in the future, bank branches and other traditional services facilities may fail.”

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The six football-field-sized floors are dotted with shuttered shops, victims of the rise of internet-based businesses like Jack Ma’s Alibaba Group Holding Ltd. and billionaire Richard Qiangdong Liu’s JD.com, which started out in Zhongguancun almost two decades ago.

The online revolution promises to boost productivity and could create 46 million new jobs in China by 2025, many of them higher-skilled, according to a report by New York-based McKinsey & Co. in July. The losers will be as many as 31 million traditional roles, the equivalent of the entire employed population in Britain.

While such creative destruction is a global phenomenon, its speed and scale in China is unparalleled, said Cao Lei, director of the China E-Commerce Research Center, a private research agency based in Hangzhou, the hometown of Alibaba.

“The internet helps improve productivity and efficiency, but it can be quite painful for traditional businesses,” Cao said. “Bookstores fail first, then clothing chains, then consumer electronics stores, then air-ticket booking offices, and in the future, bank branches and other traditional services facilities may fail.”

Read Full Article

Chinese Retail Stores 'Dying' as Online Sales Flourish