---
title: "2015 China Retail Industry Development Forecast"
description: "In a complex environment where all enterprises are focused on disrupting the world, making accurate predictions about an industry's development is difficult. However, unlike real estate, finance, and manufacturing, which rely on policy support during crises, retail has always been able to rely on itself. This article forecasts that 2015 will bring changes such as the marginalization of large-store strategies, the resurgence of small formats, the blurring of enterprise boundaries, and the gradual slowdown of e-commerce growth, while emphasizing that innovation and adaptation are key to survival."
author: "陈岳峰"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2014-12-20"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/2015-china-retail-industry-development-forecast-81c816ac/"
markdown: "https://xinjignxiao.com/en/articles/2015-china-retail-industry-development-forecast-81c816ac.md"
original_source: "https://mp.weixin.qq.com/s/X29Uzp6XS1A0Fsw0M8g5pQ"
translation: "https://xinjignxiao.com/zh/articles/2015%E5%B9%B4%E4%B8%AD%E5%9B%BD%E9%9B%B6%E5%94%AE%E4%B8%9A%E5%8F%91%E5%B1%95%E9%A2%84%E6%B5%8B-81c816ac.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/2015-china-retail-industry-development-forecast-81c816ac/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# 2015 China Retail Industry Development Forecast

> In a complex environment where all enterprises are focused on disrupting the world, making accurate predictions about an industry's development is difficult. However, unlike real estate, finance, and manufacturing, which rely on policy support during crises, retail has always been able to rely on itself. This article forecasts that 2015 will bring changes such as the marginalization of large-store strategies, the resurgence of small formats, the blurring of enterprise boundaries, and the gradual slowdown of e-commerce growth, while emphasizing that innovation and adaptation are key to survival.

Friendly reminder: Click the blue text above to follow "FMCG Distributor Professional Consulting" for more marketing and distributor internal management content.

In such a complex environment where all enterprises are bent on disrupting the world, making a relatively accurate forecast for an industry's development is itself a very difficult task. However, looking back at the course of China's economic restructuring over the past few years, I have found that unlike industries such as real estate, finance, and manufacturing, which can only hope for policy rescue when encountering crises, retail, though struggling, has always been an industry that can rely on itself under multiple pressures. Of course, this industry also has no policy to rescue it, so it can only depend on itself—this actually forces retail enterprises to innovate and break through in the face of severe survival and development challenges, striving hard to plan for the future.

This may be the unique charm of this long-lasting industry, and it is also the key to its inevitable resurgence in the future. It will never disappear; it will only continue to advance through innovation.

So, let us embrace the retail industry's 2015 with a more relaxed mindset. You may see that in the coming year, new changes will make the industry's path less difficult than in previous years.

**Different Fates for Different Business Formats**

Specifically for various retail formats, 2015 will not bring particularly significant changes. Therefore, many retail enterprises, facing sluggish store growth and weak e-commerce capabilities, are once again favoring commercial real estate—real estate can bring far higher profits than retail, and if operated well, can provide substantial financial support for the enterprise's subsequent development. In fact, some enterprises have in recent years used commercial real estate to feed commercial innovation, with good results. However, not all retail enterprises can play this game; those lacking resources and smaller in scale will find it difficult to achieve anything in this area, so it is better not to have such thoughts.

The much-hyped shopping centers will still see a boom in openings in 2015, but for newly developed ones, there may be more caution. Currently, there are not many shopping centers nationwide that are truly booming; many are praised but not profitable, with similar formats, low quality, poor marketing, and inaccurate positioning, and quite a few have closed down. For example, how many of Baolong Real Estate's shopping centers in various places can still be shown off?

In the supermarket sector, hypermarkets in first- and second-tier cities are basically saturated—this is not something that will wait until 2015; it is already the current situation. From 2015 and into the coming years, in terms of the overall trend, the development space for this format in first-tier cities has greatly shrunk. Even if there is some, it is in suburban areas; in urban and commercial center areas, there must be exits before new entrants can have room to survive. In third- and fourth-tier markets, this format still has strong vitality, but overall, if there is no innovation in operations, this vitality will not last long in the sinking channels.

As in my forecast for 2014, the worst off remain department stores, home furnishing and building materials, and home appliance retail outlets. The survival prospects for these three formats remain grim.

The department store industry has been loudly advocating innovation, but in thinking and strategy, they cannot break through the inherent mindset of being a "second landlord." Their transformation either remains superficial and formal, or they can only lean on commercial real estate, which cannot save the declining department store industry; it can only continue its decline. Home furnishing and building materials will continue to be silent in 2015; in 2014, it was already like this, with almost no voice in the industry—it was originally an outdated product, yet it falsely "boomed" for several years, which is truly strange.

Home appliance retail is even less likely to reverse its fate. Looking at Suning's left-right struggles, one can see how frantic the transformation of home appliance retailers is. Although Gome's performance improved in 2013 and 2014, even turning losses into profits, this does not indicate that the home appliance retail format will have good development space in the future, because maintaining a turnaround for one year or even 2-3 years can be achieved through various means, but it cannot shake the fundamental trend that this format will eventually be eliminated by the market. It is said that Five Star Appliance has created a new generation of stores, transforming from operating space to operating products, introducing categories such as home furnishings, health and medical, sports, and games into the stores. I think this innovation is commendable, but relying solely on cross-industry mixed operations cannot turn the tide. Simply put, changing the facade cannot bring this format, which profits from a distorted model, back to full vitality.

**Large-Store Strategy Marginalized**

Based on the predicament of large stores being squeezed by high costs and e-commerce, physical retail enterprises will be more cautious in their large-store expansion strategies in 2015, especially supermarket retailers, who may completely marginalize the large-store strategy they have followed for over a decade.

Moreover, it must be emphasized that retailers currently dominated by the hypermarket format, which previously had a large number of stores as an advantage, may find this advantage become the biggest shortcoming constraining future development. Forward-looking retailers need to address this early.

We see that in the Chinese retail market, whether it is Walmart or Carrefour, the expansion pace of foreign retail giants has greatly slowed down. Although they repeatedly reveal plans to open a certain number of stores in China over the next 3 or 5 years, this is more to maintain external confidence in their development; strategically, these enterprises have become more conservative. Retailers in other formats are rarely proposing aggressive store expansion strategies. As for domestic retail enterprises, except for a very few like Yonghui, which still stubbornly expands hypermarkets with fresh food as its core advantage, most enterprises have shifted their large-store strategies from a single format to more diversified shopping centers or community shopping centers.

Another noteworthy piece of news is that on October 16, 2014, Walmart's global headquarters lowered its full-year sales forecast and stated it would vigorously adjust investment directions, increase e-commerce investment, and no longer focus on iconic shopping centers (hypermarkets) for expansion. This is indeed highly symbolic, especially for physical retail, seeming like another blow. However, analyzing the specific market and situation, Walmart should still have space and interest for new store expansion in the Chinese market. Besides the promising prospects of Sam's Club, it recently established a professional commercial real estate company and invested 600 million yuan to build a shopping center in Zhuhai. Clearly, this retail giant's appetite for the Chinese market is as strong as ever, not significantly changed by the environment.

Community commerce, on the other hand, will usher in greater development opportunities in 2015 and will begin to show its pivotal role and status early in the year. Looking at regional retailers that are performing well against the trend, whether it is Lecheng Supermarket, Xiangjiang Department Store, or Jinhaolai, they all rely on community positioning and make full use of products and services. For example, Lecheng's Qianshan Road store achieved profitability in the month it opened, and Xiangjiang Department Store, in a third-tier city like Hengyang, Hunan, with 13 supermarket stores, achieved annual sales of 1.7 billion yuan, accounting for 70% of the local market share. Its four stores over 10,000 square meters each have annual sales of 250-300 million yuan, with an average transaction value of about 80 yuan, and the highest store reaching 92 yuan. This shows strong vitality and proves that community commerce has endless space. Additionally, from the landing measures of Alibaba, Tencent, and JD.com, and the attempts of SF Express's Heike stores, community commerce, being more down-to-earth, is also the most critical link in the O2O closed loop. From this perspective, community industry is one of the competitive weapons for retailers in the future.

**Small Formats May See a Revival**

The one-stop shopping hypermarket model will face greater challenges: the advantage of being large and comprehensive is being overtaken by the refinement of being small and beautiful. Standalone bakeries, drugstores, mother-and-baby stores, snack food stores, and fruit stores have sprung up on streets in recent years, and various specialty stores are making a comeback with a fully upgraded appearance.

Anhui Lecheng Supermarket is the pioneer of small formats among supermarket enterprises. In 2014, it established an independent small-format company, which has since spawned six store formats: Mr. Le Stationery, Le Dazui Snack Kingdom, Le Street, Low-temperature Fresh Vegetable Market, Le Food Hall, and Le Garden. Through this model, they can open independent stores or combine them into a complete hypermarket. This model has already been imitated by several domestic retail enterprises.

Although some retail enterprises still do not take these small formats seriously, they pose a significant threat to hypermarkets. For example, Henan's Jinhaolai has turned its self-operated washing and cosmetics products into an independent format, opening drugstores similar to Watsons, "knocking down" first-tier brands in price and profiting from self-operated niche brands—this is almost a revolution against the supermarket's washing and cosmetics section. More noteworthy is Zhoumo Food Supermarket in Wuxi, with over 300 square meters and 2,000-3,000 kinds of snack foods, achieving daily sales of nearly 200,000 yuan and annual profits of over 10 million yuan. It is easy to imagine that if it opens next to a hypermarket, how much of the hypermarket's snack food share could it erode?

These small formats were once integrated into hypermarkets as key components of one-stop shopping. But as the shopping environment in hypermarkets becomes increasingly noisy, service levels remain "always the same," and personalization is severely lacking, the appeal of one-stop shopping to consumers has greatly diminished, and professional small formats are once again favored. This also shows that innovation in physical commerce has great potential, and the retail industry will return to the essence of business under various pressures: products come first, service second. Service is an effective extension to enhance performance based on product supremacy. But without products, it is nothing.

I believe that in 2015, some small formats will enjoy a better development environment, and this year may become the first year of a revival for small formats—of course, this does not mean that small formats can rest easy from now on. The environment changes rapidly, and it is likely that the currently thriving specialty stores will soon be replaced by a new model.

**Boundary-less Enterprise Operations**

In my article "2014 China Retail Industry Development Forecast," I analyzed that physical retail enterprises would seek development through omnichannel operations. This is not as simple as the widely publicized omnichannel; omnichannel still revolves around various retail channels.

Many retail enterprises are no longer pure retailers, and some even have their main business or primary profit source no longer in retail. Diversification is no longer simply around the upstream and downstream of commerce but spans a broader range, crossing various industries: real estate, finance, culture, investment, securities, media, hotels, catering, manufacturing... They are attacking on all fronts and indeed blooming in all directions. This also means that the future business scope of retail enterprises will be more dispersed, that is, the boundaries of enterprise operations will become increasingly blurred, and a stage of boundary-less operations is coming or has already arrived.

I prefer to call such omnichannel enterprises "pan-channel enterprises" seeking a way out under crisis. Whether it is omnichannel, all-format, or pan-channel, I support enterprises trying more as long as they grasp the appropriate degree. Because, whether it is leveraging regional resource integration or extending their own advantages, as long as it injects new momentum into the enterprise's development and has a relatively clear profit model, it is worth exploring. Many retail enterprise executives, especially those of listed companies, often emphasize to the outside world that their main business is still retail, or they are still focused on a certain format, and will not shift their main business to avoid misinterpretation by the capital market. This is, of course, a capital market strategy. But in reality, enterprises prioritize survival and development, and adapting strategies to the times is an inevitable choice; they should not be overly disturbed by external factors.

However, it still needs to be reminded that enterprises must act according to their capabilities, avoid overreaching, and never blindly follow trends because a certain field has huge profits. Because, even omnichannel carries considerable risk. For example, Suning, starting from home appliance retail, expanded into supermarket and department store businesses—even within the same retail format, it is still like "every trade has its own mastery." Additionally, with local supermarket giants like Suguo and other department store retailers, Suning has enough on its plate, showing the difficulty of cross-industry operations. Pan-channel carries even higher risks than omnichannel. It is understandable for retail enterprises to break through on multiple fronts, but they must be more cautious strategically and tactically to avoid falling into a bigger vortex. After all, diversification has its way out, and specialization has its benefits.

**Industry Turbulence Continues to Adjust**

2015 will be a year of sustained turbulence and adjustment for the retail industry. Whether it is foreign giants or domestic newcomers, the pace of store closures and adjustments continued in 2014. In 2015, adjustment will still be the main theme, not because the industry is still declining, but because physical stores have reached a point where they must undergo a "thorough reform" of transformation and upgrading.

In 2014, China Resources' acquisition of Tesco was approved; Dairy Farm International invested 5.69 billion yuan to acquire a 20% stake in Yonghui Superstores, and the funds raised by Yonghui will also be used for expansion and mergers; Better Life (Bubugao) acquired Nanchang Department Store in Guangxi for nearly 1.6 billion yuan and clearly expressed interest in acquiring regional retail enterprises... These signs indicate that the industry will deepen in mergers and acquisitions, and this trend will not weaken in the coming year. First, the phenomenon of the strong getting stronger and the weak getting weaker has not improved but has become more entrenched, with polarization becoming more obvious. Second, the industry's downturn in recent years has also caused some strategically unstable enterprises to waver, creating more M&A opportunities. Third, under the current circumstances, capable enterprises find M&A akin to bottom-fishing, which is more cost-effective, as physical retail enterprises are less likely to wait for a high price, and their bargaining chips have greatly decreased.

Currently, the concentration of China's commerce is only about 7%, far lower than the United States' over 30% and Japan's over 20%. The industry trough has created an opportunity for consolidation, and further improvement in industry concentration is an inevitable trend, as verified by the development of the international retail market. M&A opportunities in regional retail markets will increase. In this regard, whether it is capable enterprises within or outside the industry, it is advisable to pay more attention to this area in 2015. Given that some excellent regional retail leaders have previously focused more on operations and lack experience in acquisitions, I suggest that retail enterprises with such strategies establish professional investment and acquisition departments as early as possible, because the next two years or so may be the best time for acquisitions. If my judgment is correct, in 2-3 years, the industry will usher in a new round of prosperity. At that time, wielding the M&A stick may still be fine, but the cost may be significantly higher.

**Small and Medium Enterprises Face Uncertainties**

Large retail enterprises are polarizing, and the polarization of small and medium retail enterprises is also becoming more obvious. In 2015, this phenomenon will intensify.

On the one hand, small and medium retail enterprises with solid foundations and strong operational capabilities, due to regional characteristics and resource concentration, are less affected by e-commerce than large enterprises expanding nationally. Moreover, through innovative operations, store upgrades, and service improvements, some have even narrowed the distance with local consumers and even created new business opportunities.

On the other hand, some small and medium retailers that benefited from China's economic growth and real estate development, having neglected to hone their operational skills, are now helpless in the face of declining performance, barely holding on and hoping for a sudden industry upturn. But the problem is that the past profit model can no longer be sustained. These small and medium enterprises should now think about whether to continue waiting to die or to learn from the pain and start over, doing things meticulously and solidly—this is a long process, and in the current environment, it is unpredictable whether they can succeed. Alternatively, these enterprises should start thinking about how to exit gracefully, because marrying into a wealthy family is better than being sold off as a servant girl to a random household. In 2015, small and medium retail enterprises might consider elevating this issue to a strategic level for assessment.

Additionally, regarding whether small and medium enterprises should also integrate online and offline, my suggestion is: small and medium enterprises with weaker scale do not need to agonize over e-commerce. If you are entrenched in a third- or fourth-tier city, no matter how ambitious you are, taking the e-commerce path will not bring much development space or a bright future. Since that is the case, it is better to solidly manage product and service operations, first cultivate your own small plot of land, and then wait for opportunities to develop. Why waste time on a direction with no future? If you look carefully, across China, there are peers in regional markets that challenge e-commerce and competitors in terms of price, quality, and service—these are the true role models to learn from.

**E-commerce High Growth Gradually Slows**

Like e-commerce, physical retail also maintained annual compound growth of 20% or even 50% for many years, especially the top 100 chain enterprises, which have basically grown at a rate higher than the national GDP for nearly 15 years since 2000. It is only in the last three or four years that growth has gradually slowed under various competitive pressures.

E-commerce has developed more rapidly than physical retail. First, because e-commerce was in a half-dead state from the 1990s to the early 21st century, staying in the "cold palace" for a long time, and only in recent years has it risen to prominence. The saying "the daughter-in-law who suffered for years finally becomes the mother-in-law" applies here, and its momentum is overwhelming. Second, China's economic development, especially the development of lifestyle and technology electronic commerce, highly coincides with consumer spending habits, giving e-commerce a perfect opportunity to rise.

But precisely because of this, e-commerce is also a skyscraper built from the ground up. This abnormal growth model is unsustainable and will have a shorter high-growth period than physical retail. Simply put, JD.com can achieve annual growth of 100% or even 200% or higher from 10 billion to 30 billion yuan, but after sales exceed 100 billion or 200 billion? In absolute terms, it is impossible to maintain such high growth levels.

This trend should also serve as a wake-up call for the complacent e-commerce industry: when the high-growth phase passes and the capital boom fades, will enterprises still have enough strength to withstand the multiple pressures of the current lack of clear profit models in the industry and enterprises, the market environment shifting from a broad boom to calm, capital no longer reveling, and physical retail fighting back vigorously?

**The Traditional vs. E-commerce Concept War Comes to an End**

Traditional commerce and e-commerce seem irreconcilable, with a "you die or I die" attitude. Public opinion has always been one-sided, claiming that e-commerce will quickly replace traditional retail. However, after several years, e-commerce development is indeed noteworthy, but traditional commerce, though significantly affected, still stands tenaciously.

In fact, as I judged at the end of 2013, in terms of the overall retail market size, physical retail enterprises still dominate, holding 90% of the market share. This trend did not change in 2014, and it will not change in 2015 or even in the coming years. What will change is that physical commerce will become increasingly infused with e-commerce genes, and the integration of e-commerce and physical stores will accelerate.

Therefore, just as I believe that in the future there will be no distinction between new media and traditional media, only media that survive and those that do not, the retail industry will ultimately have no distinction between e-commerce and traditional or physical commerce. Amazon has already started opening physical stores in the U.S., JD.com has partnered with over 10,000 convenience stores, Alibaba has invested in Intime, etc. E-commerce giants are all penetrating offline. And physical retailers are no longer debating whether to go online. Walmart announced in 2014 that it would increase e-commerce investment and stop blindly opening large stores; Better Life renamed its e-commerce business "Yunhou" and built a fully open large platform. Physical retail is vigorously attacking online with investment and effort.

In the words of Wang Tian, chairman of Better Life, 2014 was the first year of retail's internetization. This statement may not be precise, but it vividly summarizes the changes happening in commerce. My judgment is that this first year is not just about retail touching the internet; it is about physical commerce gradually understanding the ways of internet enterprises and, based on summarizing the methods of internet enterprises and e-commerce, making effective innovations combined with their own situations.

During the 2014 Double 11, nearly a hundred physical retail enterprises took advantage of the momentum to launch the "Lotus Action," with all stores choosing one week for simultaneous promotions. This also indicates that the competition between e-commerce and physical commerce has entered a new stage, a stage of sustained competition, rather than meaningless industry debates. Because industry disputes are just concepts; corporate performance is fundamental.

**Seizing Mobile Internet Opportunities**

Alibaba's successful listing in the U.S. made Jack Ma China's richest man, and Masayoshi Son, founder of SoftBank, Alibaba's major shareholder, became Japan's richest man. This brought internet enterprises to a new peak in terms of reputation, market value, and the success value of capital investment in this industry. But it also indicates that Alibaba and other e-commerce enterprises at the summit are about to face the great challenge of the rapid end of the PC era of e-commerce, as the mobile internet era accelerates. This needs no further elaboration.

Driven by the popularity of smart terminals and mobile networks, the mobile internet is growing explosively, with a compound annual growth rate of nearly 70% over the past five years. The fastest growth is in mobile commerce and mobile applications. Mobile shopping is eating into the market share of traditional PC shopping—this is very interesting: when e-commerce seemed to turn chain operations into a traditional business model overnight, the emergence of the mobile internet suddenly knocked the complacent e-commerce enterprises back to the past, meaning they face greater development difficulties and challenges before fully enjoying their previous advantages. As a CEO of a cosmetics vertical e-commerce company frankly said when communicating with a physical retailer: "Even if you are going to die, you will die slowly. But if e-commerce enterprises are going to die, it may happen overnight." This fully shows that the development problems and anxiety faced by e-commerce enterprises are actually no less than those of physical commerce.

In 2013, the number of mobile internet users reached 500 million, and the market size reached 106.03 billion yuan, a year-on-year increase of 81.2%. From 2015 to 2020, the mobile internet market size will continue to maintain a high growth trend. Therefore, seizing mobile internet business opportunities will become a common focus for both e-commerce enterprises and physical retail enterprises. In the PC shopping era, physical retail enterprises did not gain any first-mover advantage, so they were in a state of being beaten everywhere. But in the mobile internet era, everyone seems to be on the same starting line. E-commerce has not yet found an effective business model in the mobile internet field, let alone "snipe" physical retailers as they did with PC shopping. Interestingly, some well-known retail enterprises have already turned more attention to the mobile internet, establishing the strategy that the mobile internet is a new opportunity for physical retail e-commerce. It can be seen that in this field, the battle between the two sides may be more like a duel and more exciting. Let us wait and see.

**Smart Technology Leads Commerce**

Currently, the application of smart hardware in commerce is becoming more common. Hardware products are increasingly mature in technology and quality, with endless innovations. At the same time, free WiFi has become standard in physical stores, and the development of newer generation network technologies like 4G provides broad imagination space for smart technology in business operations, management, and marketing. Big data, big intelligence... As Li Ning's previous slogan said: "Anything is possible" is becoming a reality.

Here are just two examples: First, the technology of using WiFi for indoor positioning has matured and is gradually being applied in the commercial field. This technology can provide customers with precise mall positioning, navigation, and shopping guidance services, such as quickly helping you find exits and elevators, and parents with children can use it to track their children's location to avoid getting lost in the store. Even, if you leave your handbag somewhere in the mall, just a few meters away, your phone will alert you, reminding you of the lost item...

Additionally, this technology can provide physical stores with core information such as customer traffic routes, dwell time, and visit frequency, dynamically simulating the changes in foot traffic and sales revenue brought by adjustments in the mall's format planning and layout. This enables physical commerce to break through traditional spatial limitations, achieving store intelligence, true big data analysis, and personalized marketing interactive platforms.

Another noteworthy development is BaiduEye, released by Baidu in September 2014. Domestic retailer Intime Commercial has signed an agreement with Baidu to introduce it into its stores. This product combines Baidu's research achievements in deep learning, image recognition, and big data analysis, helping customers make better consumption decisions through first-person perspective sharing, personalized product recommendations, and indoor navigation, thereby comprehensively improving the shopping experience.

When applied to physical stores, through big data and various applications, there will be a qualitative change in marketing. For example, customer A often posts parent-child photos on Sina Weibo, and their Baidu account avatar was updated two months ago; customer B occasionally comments on travel destinations and clothing in WeChat Moments; customer C shops frequently on e-commerce sites like Taobao and JD.com; customer D is a master in World of Warcraft and last visited the store 26 days ago... Through such data, precise analysis of consumer habits can be achieved, making physical store marketing more targeted.

Ordinary consumers can also wear BaiduEye to get fast and accurate navigation services in terms of experience, price, promotional information, store location, and detailed product information while shopping. For example, once you see a product, you know which dress is the same style as Zhang Ziyi's, which sneakers are endorsed by your idol, the different styles of a brand's products in other malls in the nearby business district, the brand stories behind some products, and user reviews connected to social networks. You can see at a glance the prices on official websites and mainstream e-commerce sites; even suggestions for matching an outfit, etc.

E-commerce has brought more than just impact to commerce. From this perspective, the development of e-commerce has more positive significance because it has brought unprecedented changes to commerce, forcing the entire industry to innovate from the inside out in details from models to services. The closer integration of technology and commerce is a product of the battle between e-commerce and physical commerce. The rapidly growing mobile internet is making smart commerce a reality, from a castle in the air to taking root.

**Traditional IT Companies Must Transform**

BAT (Baidu, Alibaba, Tencent) has, through the grafting of internet platforms and business models, made many IT enterprises that previously only favored other industries and looked down on the small cake of retail smell the business opportunities. Many IT enterprises have integrated and redeveloped their solutions with BAT platforms, deriving multiple solutions for physical retail enterprises, covering supply chain, product management, new channel marketing, big data, and other aspects.

This poses a huge survival challenge to traditional IT enterprises that depend on retail enterprises for their livelihood. Although retail is the earliest industry in China to fully open to foreign investment, compared to other industries, it seems relatively more closed. Many IT solution providers specifically targeting retail enterprises have long relied solely on this industry for survival and development. Perhaps due to too deep contact with commerce, they feel more traditional compared to other IT enterprises. This has led to a strange phenomenon in this industry: domestic commerce has given birth to several large enterprises with hundreds of billions in revenue, and many with tens of billions, but the IT enterprises in this industry have not grown into industry giants along with the rapid growth of retail.

The era of comprehensive technology commerce is a huge opportunity for these IT enterprises. However, despite smelling the smoke of the e-commerce and physical commerce battle and the scent of change, they seem to have made no substantive moves in the comprehensive innovation and transformation of their own solutions, especially in combining with internet platforms, with few new works. Taking Fuji Rongtong as an example, it has been living off the old Rongtong solution for years. Although it has come up with a micro-store in recent years, there are few landing examples, and even fewer successes.

Nothing is set in stone. Equipment vendors face the same problem. If their thinking remains stuck in the past, one day, new retail equipment enterprises that subvert existing equipment may quickly emerge in other industries, providing retail enterprises with innovative equipment products that offer different experiences. Imagine, are equipment vendors already aware of this?

In fact, the time left for these enterprises is not much. If before 2014 they could still get by with the old ways, then starting from 2015, traditional IT enterprises (including equipment vendors) that do not change will taste the bitter fruit of being gradually abandoned by retail enterprises—if they cannot keep up with the pace of retail enterprise transformation, why should they continue to cooperate with you?

**Physical Retail Performance Rebounds**

Many retail enterprises say that in the past, just having a store was enough to make money, but now, no matter how hard they try, performance is hard to increase significantly. Indeed, physical retail has been hovering at a low point for several years; stores are hard to open, money is hard to earn, and customers are hard to deal with.

Since 2011, retail enterprises have been facing difficulties such as high costs, high competition, low returns, and difficult expansion. Profits are low, performance is declining, costs are rising, and the impact of new channels is adding insult to injury. At present, the overall slowdown in retail industry growth continues. Data shows that from January to August 2014, China's total retail sales of consumer goods reached 16.61 trillion yuan, a year-on-year increase of 12.1%, down 0.7 percentage points from the same period last year. The growth rate of large retail enterprises is also slowing significantly; from January to August, the total sales of goods of enterprises above the designated size was 8.3 trillion yuan, with a growth rate of 9.7%, 2.4 percentage points lower than the total retail sales of consumer goods.

But this phenomenon may see a change in 2015. The gradual recovery of the consumer confidence index, the release of normal consumer demand after the short-term suppression of the high-end consumer market by anti-corruption, including market rationality, the gradual return of consumer habits, various innovations in physical store operations and services by retail enterprises, and continuous attempts in e-commerce business will all lay the foundation for performance recovery. Physical retail will slowly emerge from the shadow of sudden significant performance declines, and physical store operations will improve significantly in 2015, returning to a normal growth value. Of course, this also depends on the format of physical stores; different formats have different survival conditions and future prospects, and some formats that are inevitably declining or will be eliminated will still have a hard time. Additionally, it should be noted that the retail industry should not have unrealistic expectations; the era of micro-growth will not end in the short term. For specific enterprises, single-digit growth will be the norm for most. To usher in the next explosive period, physical retail enterprises need to achieve a transformation in business models as significant as the leap from traditional commerce to chain operations.

However, on the other hand, when things are already at their worst, how much worse can they get? Retailers must not be blinded by concepts and new models. The front-end product categories, operational capabilities, and service levels, along with the back-end logistics and supply chain strengthening, are the essence of commerce. Everything else is fleeting, and there is no need to over-believe in internet thinking. Remember: empty talk harms enterprises, while hard work prospers the nation. As the saying goes, if winter comes, can spring be far behind? What is needed is that at the right time, an "apple" happens to fall on the head of a retailer sitting under the "tree."

--------------------------------------------


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671