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Retailers need to diversify distribution to survive

THE offer of multi-channel services is key for retailers to answer the challenging changes in demand of consumers, a latest study by consultancy McKinsey & Co shows.

As many as 93 percent of consumers conduct online research before visiting a physical store for electronic goods, according to findings from a survey of more than 5,900 consumers on the mainland earlier this year, according to McKinsey’s annual iConsumer research report.

Scenario-based impulsive shopping will also be a bright spot as consumer expenditure in out of home scenes are picking up.

China’s overall online shopping market is estimated to add 19 percent to US$812 billion this year, lowering from 74 percent annual boost in 2011.

As industry-wide growth tapers off, online retailers are fighting for new growth through tie-up with offline players as well as extending their market share among existing consumers.

Omni channel shopping still has growth potential with relatively low adoption rate among consumers, meaning that retailers need to improve their offerings and sort out more satisfactory services, the report pointed out, with few have taken advantage of options such as placing online orders and collecting from offline outlets.

Exhibition space shall not be viewed as a challenge but rather a new channel to help build brand awareness, said Lambert Bu, a McKinsey partner in Shanghai.

Social shopping still accounts for a small proportion of the online shopping market, although 85 percent of respondents said they often use social networking sites, fundamental services such as delivery and availability of merchandise are lagging behind mainstream online shopping sites.

Brands sometimes shall also balance the operation cost of offering individualized offerings such as tailor-made products.

Although physical stores face huge challenges, commercial property owners still remain optimistic about future business situation of shopping centers.

According to a joint study released yesterday by China Chain Store and Franchise Association and the commercial property service provider CBRE, the comprehensive development index of China's shopping center stands at 67.2 points in the past year, with market sentiment remain upbeat.

The study covered 100 shopping centers from 58 cities and municipalities in 28 provinces.

Business situation among shopping centers in first tier cities remain robust, while over supply in the second tier cities are dragging down performance with third tier cities showing great market potential in terms of high-end shopping spaces.

There are more than 4,000 mid and large size shopping center around the country but in some areas faces overheating issues.

Outlets and community shopping centers are also leading the way in terms of business performance compared to urban shopping centers, according to the study.


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