Commerce moves from bricks to clicks
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E-mail China Daily, August 27, 2012
![Advertising billboards stating 'National discounting war' can be seen in every corner of a Suning electrical appliances store in Hangzhou, in East China's Zhejiang province. [Photo/China Daily]](http://images.china.cn/attachement/jpg/site1007/20120827/00080282e94111a554774f.jpg "Advertising billboards stating 'National discounting war' can be seen in every corner of a Suning electrical appliances store in Hangzhou, in East China's Zhejiang province. [Photo/China Daily]") |
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Advertising billboards stating "National discounting war" can be seen in every corner of a Suning electrical appliances store in Hangzhou, in East China's Zhejiang province. [Photo/China Daily] |
The ongoing cut-throat price war by e-commerce operators in China is having a negative effect on the sales performance of traditional home appliance stores.
Meanwhile, experts say brick-and-mortar stores need to pay more attention to improving customer experiences to achieve sustainable development.
Since early 2011, home appliance online retailers have launched a series of price wars to increase trading volume and expand market share. The most recent broke out on Aug 15 between Suning.com and 360buy.com after the home appliance retail giant Suning Appliance Co announced it was issuing up to 8 billion yuan ($1.26 billion) in corporate bonds that would partly be used to develop its online trading and logistics systems. Suning.com is the online trading platform of Suning Appliance Co.
Attracted by the competitive prices, convenient home delivery services and quality after-sales services, many customers have switched to the online platform in recent years. A report from coo8.com (previously known as 51mdq.com), the online trading unit of Gome Electrical Appliance Holding Ltd suggested that 35.5 percent of customers aged 31 to 35 bought home appliances online in 2011, an increase from 20.6 percent in 2010.
"Some customers will explore the appliances' function in chain stores and move to online stores to get the best prices," said Peng Jianzhen, deputy secretary-general of the China Chain Store & Franchise Association.
Figures from China Market Monitor, a consulting firm specializing in home appliance market research, showed the offline sales growth of large electrical goods such as televisions, washing machines and refrigerators declined by 20 percent in the first two months of 2012, while online trading volume of large home appliances increased by 150 percent during the same period.
It was reported that many buyers cancelled their orders with offline stores and switched to online stores after the price war broke out among 360buy.com, Suning.com and Gome.
"A customer ordered a television priced at 70,000 yuan. He canceled the order after he found the same product online," said a salesperson surnamed Zhang from a Suning store in Shanghai.
Despite sales from brick-and-mortar stores being negatively affected by online shops, experts say it is too early to claim the former businesses will vanish.
"Online stores can offer good prices. However, chain stores can offer the customer the opportunity to experience new products, something that online stores cannot do," said Peng.
"Actually, home appliance manufacturers are willing to give more support to chain stores because it is a distribution channel they are more familiar with. Manufacturers do not want the existing pricing systems being mashed by online store operators," he added.
Zhu Meng, a consultant with Adfaith Management Consulting, agrees with Peng's opinion.
"Many Chinese still prefer the offline shopping experience because visiting some chain stores is also considered a way to relax," said Zhu. "Traditional stores will not be replaced by online stores in the short term."
Meanwhile, some customers say they are not satisfied with online stores because their product ranges are quite limited, especially for high-end or the most recent goods.
"I visited traditional stores to look at a branded washing machine and searched the product online to compare the prices. However, the products I preferred are not available in online stores," said Yang Ming, a white collar worker who wants to buy some home appliances for her apartment in Shanghai.
Yang eventually turned to traditional stores. She says she is not confident of buying products online without looking at models in stores.
"When you buy products in traditional stores, you know exactly what you will receive. But you cannot be certain if you buy them online," said Yang. "It is also quite time consuming to compare the prices."
Experts say chain store operators should pay more attention to improving the shopping experience to attract more customers.
"Companies might offer price comparison services in stores to ensure potential buyers can receive the best prices," said Peng. "They can also divide the store by product category rather than brands. It will be more convenient for customers to find the products they want."
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