E-shopping all the fashion as retail sales slip on mainland

Online deals by budget-conscious consumers are the only bright spot as the retail sector sees its turnover slide since the end of last year

PUBLISHED : Saturday, 29 September, 2012, 12:00am
UPDATED : Sunday, 30 September, 2012, 11:20am

Elvin Wang is typical of the formerly big-spending shoppers on the mainland who are reining in their habit as the economy slows.

Wang, 32, who works for an investment bank in Beijing, is a snappy dresser with an eye for Armani suits and Hermes belts, but lately he has done his shopping at budget outlets such as Goldlion.

"Anyone who experienced the financial crisis in 2008 feels differently now. You know you have to get prepared when the economy turns weak," said Wang, who expects his income this year to be half of what it was last year because of the weak business environment.

The former big spender has now also turned to the internet to search for the best deals for almost everything he needs - from books to electrical appliances and even beer. "I am relying more and more on online shopping. It's an easy way to buy things at a fair price," he said.

New budget-conscious consumers such as Wang are behind a steady decline in the growth of retail sales since the end of last year. The single bright spot in the general downturn is the e-commerce sector, especially the B2C (business to customers) and C2C (customer to customer) segments.

Data from the China E-commerce Research Centre shows mainland retail sales generated from B2C and C2C sites jumped as much as 47 per cent in the first half to 512 billion yuan (HK$631.5 billion). The B2B (business to business) sector rose 14 per cent to 2.95 trillion yuan. That compares to growth of 17 per cent for total retailing turnover.

Yang Xiaoying, the chief strategy officer at a high-end online fashion goods shop, said the shopping portal outperformed its peers in online fashion sites and recorded double-digit growth in the year to date.

The Shenzhen online seller of Coach handbags, Swarovski accessories and Lancome lipsticks mainly targets white-collar workers in big cities.

"Some customers have either stopped buying or are buying less than before. But the majority of our customers are office ladies with fixed salaries and they have hardly been affected by the current economic environment at this stage," Yang said.

To attract customers, discounting is now becoming more common in the e-commerce space. The country's largest B2C operator, staged a high-profile price war against its rivals Suning Appliances and Gome Electronic Appliances, which led to each of the rivals promising that their home appliance prices would be 5 to 10 per cent lower than the others.

The e-commerce portals are not only fighting for consumers but are also scrambling for low-cost retailers to advertise on their services. T-mall has told retailers that use its online shopping platform Taobao they cannot sell their merchandise on other portals during its big sale promotion next month. Rival 360buy has told retailers that use its portal that they must join its promotion, which is being held at the same time as the Taobao promotion.

Mo Daiqing, an analyst with the China E-commerce Research Centre, said online sellers were facing a challenge to raise funds in difficult market conditions.

"They are offering deeper discounts than ever in an effort to boost their top-line growth and enlarge market share, which makes things even more difficult for loss-making companies. This business model cannot last long," Mo said.