Industry: Online Retailing in China
Driving forces of change
The innovation and technological advancements are considered as the major drivers of change in the retail industry of China. Furthermore, the preferences of the consumers in China are also found as the driving force of change in the retailing in China. The technological advancement is resulted in the trend of online retailing that is increasing day by day and the competition for the offline retailers is increasing (Lam, Li & Gong, 2013).
Relevant economic trends & forecasts
The online retail market of China has become the leading in the top markets of the world. The online industry of retailing in China has reached to the worth of 1.84 trillion yuan in 2013 and is expected to growth with very high rate in future. It is expected to reach 4.45 trillion yuan in 2017. It is the greater contributor in the economy of China, improving the consumer confidence (Lam, Li & Gong, 2013).
Market trends & forecasts
With the development in the retail industry, the demands of consumers have changed in china. The consumers now demand for more innovative, quality, sophisticated and high end services and products along with the same expectations for the customer value and experience. Their demand has changed towards more seamless and flawless shopping experience. Due to the online retailing, the customers are now more involved in online purchasing and shopping that is resulted in the competition and threats for the traditional retailers (Lam, Li & Gong, 2013).
Industry analysis
Major competitors
Alibaba is the major competitor in the online retail industry of China. In the last quarter of 2015, its retail sales were reached to $5,333 million and the revenue of mobile retailing was $2,894 million in the same quarter of 2015 (CIW Team, 2016). Other than Alibaba, the retail industry has many other retailers from both domestic and international market. Due to the growth and development in the retail industry, the international players have also jumped into the retailing in China. However, other than Alibaba, the online retailers include Taobao and eBay (Thomas White, 2011).
Industry Concentration
The retail industry of China is extremely fragmented. Traditionally, it was highly concentrated market mainly leading by the two competitors includes Tmall and JD.com. However, many other major retailers have emerged with high sales; revenue and market share in past few years. China is now a place for more than 549,000 retail enterprises (Thomas White, 2011). Not any single retailer has the highest and maximum market share but the market share is enjoyed among few major retailers. However, the online retailing in china is still concentrated as the major market share is enjoyed by Alibaba and Taoboa. In 2014, the market share in online retail industry of China was as follows (Gupta, 2015):
(Gupta, 2015)
However, Alibaba and Taobao have changed the structure of the market and got the highest market share (Gupta, 2015). The market revenue of Alibaba can be found below (Gupta, 2015):
(Gupta, 2015)
BCG matrix & explanation
The BCG matrix above is designed based on the current growth of different retail sectors in China. The departmental stores are popular and growing but the market share is low because of the increasing competition. Therefore, it is placed in Dog category. The online retailing has the highest market share in China and the growth is also high thus placed at the top position in Star category. The direct retailing is almost about the finish in China and thus, placed dog category. The discount store has evolving but still behind many other retail sectors in growth thus placed in cash flows (Thomas White, 2011).
Ansoff’s matrix & explanation
The table above shows Ansoff’s matrix for retail industry of China. For the successful retailing in china, the major focus of the retailers must be aligned with the retail style and format. The retailers are introducing new formats in both existing and the new markets (Thomas White, 2011).
Five forces analysis
Rivals
There are many leading retailers already exist in China both in traditional and online retail market.
The threat from rivals is high as the competition is very hard and few of them have the most shares in the market revenue such as Alibaba (Gupta, 2015).
Buyers
The changing preferences of the buyers can impact on the retail business more in future.
The buyers can switch to other retailers if not satisfied with the quality, offer and products.
The bargaining power of buyers is high in China retail industry.
Suppliers
The bargaining power of suppliers is low because of the fragmented nature of the industry.
However, the threats can be high from suppliers to impact on the quality of the products or service required by the buyers.
Substitute
There are multiple alternatives in the retail industry of China such as departmental store, convenient store, grocery stores, local shops, online retailers, international franchises etc.
New entrance
Critical success factors
Retail Format: Based on the above findings, it is revealed that the retail format and design is the most critical success factor in the retail industry of China. The new evolving formats are raising competition for the traditional retailers (Thomas White, 2011).
Online presence: due to the high growth in online retailing, it is very important for the retailers to make sure their presence on online channels for online retailing, mainly for achieving the high market share (Lam, Li & Gong, 2013).
Customer satisfaction: for the success of retail business, it becomes compulsory for the retailers to satisfy the needs, demands and expectations of the customers.
Summary of findings
The trends in retail industry of China are changing and evolving with the high pace and the trend is moving towards the e-commerce. The online retailing and the market share of online retailers show that the online retail industry of china is successful. The traditional departmental stores and retailers are facing high competition from online stores. The convenient nature of the retailing is now more preferable as found in the BCG Matrix. Therefore, for the growth and successful retailing in China, the retail format is found at the critical success factor for the development and growth.
Conclusions & Recommendations
Resolutions of research question and strategic issues
The findings have revealed the answers for the research questions designed initially. The current status of online retailing business in China is positioned at star level where the growth and market share both are increasing. The technological development, convenience and changing preferences of the consumers are the major factors that manipulated the behaviour of the customers in china.
The technological development in China is directly impacting the online business in terms of positive growth. It becomes more important for the retailers to make sure their online presence due to the high technological advancements in the country. It is expected that the online retailing and business will further grow in future and will become the major contributor in the economy of the country because of the high revenue and sales.
Industry attractiveness for stakeholders
The changing trends and competition in the retail industry of china directly impacts on different stakeholders such as investors, employees and society. The low entry barriers and low threats from the competitive forces except rivals is a positive attraction for the investors and employees to work in the retail industry of China.
The threat of new entrance is a positive factor for employees as they get more chances of employment in the industry (Gulati, Mayo & Nohria, 2013). Furthermore, the online retailing also attracts investors because of the low requirement of the funds. Therefore, it is recommended to the retailers to change their strategies for employees to retain them and aspiring new and skilled talent from the market to achieve the competitive edge in retail industry.
Near-term action priorities for aspiring employment candidates
Based on the strategies issues defined previously, it is recommended to the retailers that they should design the training and development program for the employees to increase their skills for IT management and online business operations. It will increase the satisfaction among the employees as the training and development in the context of online business is very important for the employment of contemporary world. The strategy will be successful for the consumers’ satisfaction in retail industry of China in future. This is how the companies can improve their position in the market.
References
CIW Team. (2016). China Retail Market News & Insights. Retrieved April 20, 2016, from http://www.chinainternetwatch.com/tag/retail/
Gulati, R., Mayo, A. J. & Nohria, N. (2013). Management, South Western Cengage Learning.
Gupta, H. (2015). Alibaba: The End Of The Honeymoon. Retrieved April 20, 2016, from http://seekingalpha.com/article/3219376-alibaba-the-end-of-the-honeymoon
Lam, T., Li, C. & Gong, E. (2013). The Changing Face of China’s Retail Market. Retrieved April 20, 2016, from http://www.iberchina.org/files/china_retail_market_fung.pdf
Thomas White. (2011). BRIC Spotlight Report: Retail Sector in China: The Next Big Thing?. Retrieved April 20, 2016, from http://www.thomaswhite.com/pdf/bric-spotlight-report-china-retail-june-11.pdf
