Online business is booming in China. According to data from iResearch, an Internet market research firm, the current scale of China’s e-commerce is similar to that of the United States, at $206 billion. A recent study by the Boston Consulting Group estimated that by 2020 China’s e-commerce market will exceed $1 trillion.
What tangible effects can we expect from this expansion? Stuart Ross, director of the China department at Jones Lang LaSalle — an American real estate investment management company — said that the e-commerce boom will bring with it massive development opportunities.
As the e-commerce white paper released by Jones Lang LaSalle shows, certain large consumer websites have begun to establish their own logistics networks, building and managing warehousing facilities independently. Real estate developers will have the opportunity to use their expertise to cooperate with digital businesses, with high-tech businesses not only supplying quality tenants to developers — but also helping developers in obtaining necessary land from government authorities.
As China’s largest logistics developer, Global Logistics Properties, revealed in its annual report that among its total warehouse capacity the space available for lease by e-commerce has increased from 14% in 2011 to 20% to 2012.
According to the data from iResearch, the Chinese online commerce market is growing faster than in all other major countries. While annual growth has stabilized at around 17% in the U.S., China’s e-market started from virtually non-existent in 2003 to an average annual growth of 90% over the past five years.
There is huge room for growth in China’s online retailing businesses. Compared with the developed world where 70 to 80% of residents are connected to the Internet, only 40% of people in China are online — and only 40% of those have shopped online. In the United States, 70% of Internet users are also Internet shoppers. Boston Consulting estimates that by 2015, China will see annual increases of 40 to 50 million Internet users, and 30 to 40 million online shoppers.
Window shopping
Michael Klibaner, director of the Greater China Research Department at Jones Lang LaSalle, reckons that China has become a large e-commerce nation and the development of this market will alter the commodities’ consumption, purchase, stocking, and delivery methods. Only the developers, brands and operators that are at the leading edge of this trend will manage to remain competitive.
Chinese online brands and retailers are actively expanding their distribution capabilities in the market outside of the usual first-tier cities. As for logistics developers, they ought to be attentive to the major inland cities where the emergent consumers are clustered, and consider constructing new storage facilities to comply with future warehouse rental needs.
In developed countries, the rise of e-commerce has already demonstrated its strong impact on retail companies, and the real estate market for retailers.
Deng Rushun, director of Greater China Retailer Real Estate at Jones Lang LaSalle, is convinced that these worries exaggerate the threat of e-commerce while at the same time underestimating the resistance of various types of physical stores. Easy and practical online shopping won’t extinguish the desire to go out shopping. Still, certain retailing businesses will indeed lose their competitiveness. Inexpensive and highly fragmented mass non-branded apparel outlets will be the ones most at risk. Shopping centers that mostly have these kinds of low-end generic retailers as tenants will be the first to be affected, and may not wind up surviving.
Compared with the low-end retail shopping centers, the shopping malls belong to one single operator and can use a top-down strategy to adapt to the new environment. By taking into consideration a unifying theme, positioning, marketing and technical factors, they can provide customers with different shopping experiences.
In China “window shopping” as a recreational and social activity is still deeply rooted — and is something that one simply can’t get by logging on.
