Is the world power of retail trade is no longer a world power?
Since the late 1970s, China has reoriented from a closed, centrally planned system to a more market-oriented economy considered one of the largest in the world. The first reforms were aimed at modifying collectivized agriculture and were expanded after gradual price liberalization and financial decentralization. The increased autonomy for state enterprises, creation of a diverse banking system, development of stock markets, rapid growth of the private sector and enhanced openness to foreign trade and investment made an important impact on the course of these reforms.
Consequently, in the past 30 years, the Chinese economy has demonstrated incredible growth, vigorously making its way into the ranks of world leaders. This was especially evident during the global financial and economic crisis of 2008–2009. However, after only 3 years, the population heard the first reports of a decline in the rate of economic growth of the Chinese People’s Republic. Since then, the slowdown in the growth rate of the second world economy in nominal GDP continues to gain momentum. In 2015, this number turned out to be the worst of the last 25 years: 6.9% of GDP (as in 1990). This is a good indicator for The Third World and even for The Second World countries, but not for China, which has been considered the locomotive of global growth and previously demonstrated double-digit rates.
The Undermining Of The Chinese Economy Causes The Decline Of The Retail Industry
The slowdown of China’s national economy is connected with structural changes as the country strives to get away from an unstable model of economic growth. If earlier the industrial production was the main focus, in recent years, the Chinese leadership has been betting on the development of the sphere of services and domestic consumption. According to NBS, the retail sales in China in December grew by 11.1% in annual terms, which is worse than the forecast assuming growth of 11.3%. Analysts suppose China continues to face the decline of the traditional retail trade due to the slow sales and changes in consumer habits.
The National Business Information Center of China highlights in the first nine months of 2016, 50 of the largest domestic retailers fell by 1.9%, which represents a 2.6% slowdown in comparison with the same period in 2015. In 2017, total sales of 2,700 key retail enterprises increased in absolute terms by 4.6% compared to 2016. The growth of retail trade on the whole was 3%. We repeat:this number is pretty good for an average country but not for the former world power of retail. Where is the root of evil depriving China of its perennial title?
Other Reasons Making The Chinese Retail Weak
The main problems shaking the stability of China are both external and internal, including minor inconveniences as well as large-scale takeovers. Over the past two years, the country has suffered from numerous upheavals, particularly, from a reduction of $3 trillion in the stock market and a fall in exports by 8.3% severely affecting the middle class. China’s foreign exchange reserves are melting. In 2015, they fell by $300 billion to $3 trillion, which undermines confidence in the central bank’s ability to protect the national currency.
In addition to general economic troubles, retailers have become victims of the rapidly changing trade preferences and decreasing consumer sentiment. According to Fitch Analyst, market experts expect weak sales for traditional retailers as consumer preferences are developing, and the constant changes in the formats of purchases lead to higher competition.
One of the most crucial preference changes is shifting to e-commerce which takes 20 percent of the country’s retail sector, suppressing shopping activity through traditional channels as department stores and street-corner stores. This tendency causes low profits for private retailers owning at least one offline shopping center with a fixed cost base for rent and staff. Online trading is gradually but surely replacings traditional retail businesses.
The Chinese retail industry fell into the trap of “cheapness.” Previously being highly in demand for cheap, mass products, it recently turned out China is not the bargain basement anymore. Other countries as India and Indonesia, are queued up to offer a more affordable labor force. Some economists call this process “The Lewis turning point.” It means the labor source, which seems to be inexhaustible, begins to dry up, while salaries grow rapidly. In these conditions, China requires urgent reforms aimed at the development of innovative management to radically increase labor productivity. Otherwise, there can be a further slowdown in economic growth finally transforming it into stagnation.
OSA DC Is A Solution For The Chinese Economy Prosperity
The ways to resolve the existing Chinese economic problems and return its high positions in retail are quite complex and long-term. First, the leadership has to rebuild the Chinese economy to help modern retailers stay afloat under unstable financial conditions. In their turn, retailers have to modify their businesses in favor of the consumer behavior model.
Considering the retail environment is increasingly competitive, retailers can gain an edge by improving their product mixes and customer service. Luckily, in an era full of innovative technologies and approaches this becomes an exciting task rather than a depressing need. The best thing to do to attract and retain consumers is to let them make smart purchases meeting all their requirements, tastes, and budgets. An especially great idea is to complement this feature with digital and personalized shopping opportunities.
The Chinese market has an acute need for a hero to revolutionize the way retailers, manufacturers and consumers interact in the retail ecosystem to enhance the shopping experience for all parties. And this a hero is already on the stage.
OSA DC offers a unique solution for the Chinese retail market, aimed at regaining consumers and retailers trust.The OSA DC platform is designed for retail evolution’s next stage and can ease consumers and retailers daily issues. It neutralizes inefficiencies in the retail industry by uniting disconnected parties (manufacturers, retailers, consumers, and third parties) within a single Ecosystem, thus fixing three major issues that hinder the retail industry today:
Inventory tracking: The blockchain reduces overstocking and understocking, problems costing retailers $400 billion every year.
Consumer trust: The blockchain’s immutable ledger provides more reliable product data to prevent businesses from abusing consumer trust.
Product waste: OSA DC minimizes supply chain product waste that loses retailers $100 billion in potential profits annually.
Retailers traditionally operate on extremely narrow margins, and they face stiff competition with other retail chains and online retail. In recent years, retailers have reported declining customer traffic and increasing business costs. To combat these problems, they often cut costs and/or downsize staff, but this may aggravate these problems. The situation is somewhat different for premium retailers, as stock-outs are rare and full shelves are maintained by charging higher prices. This, in turn, allows retailers to accept high product waste levels as they are fully covered by the extra profit they generate.
As for end consumers, they get the biggest benefits of the OSA DC Solution. In most cases, consumers suffer from supply chain failures and can punish suppliers and retailers accordingly by taking their business elsewhere. OSA’s solutions can lower prices for customers as retailers and suppliers revolutionize product management and business strategies in a highly competitive environment. Thus, consumers have the ability to search for available products listed on the platform based on their individual requirements whether these come from diet or budget. Every product category has a wide range of product attributes, features, and specifications, and OSA DC can help to find it across the myriad providers and retailers on its platform.
Furthermore, OSA DC has been making great steps towards the Chinese retail market. The company has taken part in numerous Chinese conferences during the last few months. One of them was China Europe Blockchain Technology Application Forum 2018,” jointly sponsored by Jiuqu Technology and representatives from OSA DC. OSA DC believes blockchain technology can be applied in supermarkets chains offering benefits like quantity statistics, real-time inventory reporting, sales forecasts, and product stock predictions. These benefits significantly save costs and time for consumers and retailers. The company took part in Top Asia Events 2018, which was held in China. OSA DC believes by dramatically reducing waste, Blockchain, AI-powered efficiencies delivered to retailers can spread to other industries and countries and have a positive impact on the world’s economy.
