China s E Tail Revolution

Despite a broadband penetration rate of only 30 , e tail commanded 5 6 of total retail sales in China in 2012, on par with the US. And the sector is already profitable Chinese e tailers are logging margins of 8 10 of earnings before interest, taxes, and amortization, which is slightly larger than the average margin for physical retailers.

From a global perspective, both retailers and e commerce firms are transforming from a single channel to a multi channel retail system that encompasses physical stores, e commerce, mobile terminals and social media.

A review of the retail sector in the last 20 years has revealed that the rise of e commerce was similar to the emergence of discount retailers many years ago both were focused on price and convenience.

However, with a growth rate significantly higher than for total retail trade, the share of e commerce in total retail trade is also growing.

China s e tail market is the world s second largest (after that of the United States), with an estimated 210 billion in revenue last year. Since 2003, the market has posted a compound annual growth rate of over 110 .

While power generation was the first segment of the electricity industry to be reformed, more recently distribution and retail supply have also become areas for reform.

The retail sector includes two main types of retailers store and non store retailers.

Producers are also engaging in direct sales to consumers through on line retailing, bypassing retailers.

Retail trade 353

The top 100 retailers (see table 3) account for 25 per cent of worldwide retailing sales.

Retail fuel dealers

Wholesale and retail trade

27. Retail and wholesale

The factor that could limit the dominant market position of retailers is the increasing reliance on e commerce and the shift in power to consumers.

According to other views, a much smaller market share, as low as 8 per cent, could suffice for a retailer to have market power.

By contrast, Alibaba (which owns marketplaces such as Taobao) and 360buy.com (which focuses on electronics) rank among China s top ten retailers, and already provide national coverage through the reach of express delivery companies. As a result, China s retail sector seems more likely to follow a two stage development path, with e tailers emerging as the major national players.

The Euro Retailer Produce Working Group (EUREP) is a European based trade organization for retailers.

In most countries, the retail sector has typically developed in three stages first, local or regional players dominate, before a smaller number of national companies takes over, with e tailers ultimately challenging traditional businesses. But China lacks national leaders, with the top five Chinese retailers in different product categories commanding less than 20 of the market, compared to up to 60 in the US.

While the first operates fixed point of sale locations, non store retailers or retailers away from a fixed location reach customers and market merchandise with methods such as broadcasting infomercials , paper and electronic catalogues, door to door solicitation and selling from portable stalls.

The size of the retail market in Ecuador might not make it attractive for new entrants, as no leading international retailers are active in the country.

On line retailing is still in its infancy and represents a minor share of total sales, but it is significant for selected products, such as books and computers.

Growing use by retailers of own brands and discount retailing have also been driving prices down significantly.

With 15 million retail outlets, India has the highest retail outlet density in the world.

Retailers could exercise their power in setting prices at the local level.

Wholesale and retail petrol

Retail trade and repair services

Significantly broaden distribution via retail and the Internet.

The distribution sector includes commission agents, wholesalers and retailers who act as enablers of trade.

The informal retailing sector will have a role to play once markets are opened and formal retailing expands.

In particular, online retail sales of physical goods amounted to approximately RMB5.08 trillion, while online retail sales of services amounted to nearly RMB1.49 trillion.

In Europe, for example, on line retailing accounts for 2 per cent of total grocery sales, but it is growing by 50 per cent annually.

Magical new retail

The era of pure e commerce firms will soon come to an end. E commerce will no longer exist in the next 10 to 20 years, replaced instead by new retail .

The retail sector is characterized by economies of scale and scope as well as vertical integration and the existence of large retail chains.

Retailers are able to access and tap different cost structures in different countries and are becoming global.

Informal retailers could become the suppliers or the customers of formal retailers, or their franchises.

The process of opening the retail sector in China began in 1992 when foreign investment was allowed in retailing on a trial basis.

Retailers are distributors selling to end consumers.

Foreign sales represent a significant share in total sales of the main European retailers.

Some products enter the market through wholesalers who in turn distribute the products to a variety of retailers, while in other cases the producer sells directly to the retailer.

Indeed, the Indian government s decision to welcome foreign retailers coincided with French retailer Carrefour s announcement that it will shut down its substantial operations in Singapore by the end of this year. Meanwhile, its British counterpart, Tesco, is shifting away from the large hypermarket format and investing heavily in online systems.

The fresh food supermarket war has escalated, and have become a phenomenal topic in the new retail sector. Just what is new in new retail?

Wholesale and retail trade

Wholesale and retail trade, restaurants and hotels