Introduction to the Asia Pacific Retail Industry
Countries in the Asia Pacific region have continued to witness a fast growth in their economy. Asia, which accounts for more than 60% of the world population with 4.3 billion (United Nations-ESCAP, 2013) people is a diverse economic region with different levels of advancements in terms of economy and diverse cultures which affects the retailing power of the countries in the region. The Asia Pacific region also consists of the world richest nations with reference to per capita income. They include Australia, Japan, China, and Singapore. In 2013, the Asia Pacific region had a GDP of $22.6 trillion which was a third of the world’s total GDP (Economists Intelligence). The retail market in the Asia Pacific region is the largest with China experiencing the highest growth rate of 11% in 2013.
The large market size in the region together with economic strength are the drivers of the increased expansion of international retailers in the region (Gaffney, Fung, Fong, and Murray, 2014). In addition, the increased number of the urban population with a rise in income has increased consumer demand potential. The urban population in Australia accounted to 86% in 2017 with China having 58% of its population concentrated in urban areas (The World Bank, 2018). The Asia Pacific countries have a third of the world’s middle class with the number expected to rise to 46% by 2020 (The Brookings Institute, 2012). The middle class mean that the region has a high consumption rate.
The high growth in the tourism Industry is also a contributor to increased retailing in Asian Pacific nations. For instance, Asia Pacific witnessed a total of 248 million tourists which was almost a quarter of the total world tourism (United Nations World Tourism Organization, 2014). Tourism is an important industry when it comes to the promotion of local, regional and international goods.
The retailers can be referred to as the individuals who act as a link between the producers or manufacturers and the consumers. Effective retailers ensure that the consumers are able to access goods of their choice at fair prices (Productivity Commission, 2011). In the retail industry, the retailers are not only involved in the selling of goods but also, they help consumers to access new products in the market and their prices.
Australian has more than 150,000 businesses that deal with retailing of products and services. The businesses employ a population of more than 1.5 million employees which adds up to 11% of the total population working in the country. The retail industry has also contributed greatly towards the economy. More than $54 billion dollars were generated from the industry in 2009-2010 which was 4% of the total GDP (Productivity Commission, 2011). On the other hand, China is far much above Australia in terms of its retail base. It is now the second largest in terms of retailing in the world.
The total consumer retail sales totaled $1.6 trillion dollars in 2008 and the number doubled in 2013 with $3.6 trillion dollars increase (Fung Business Intelligence Centre, 2014). The consumer market in China is increasingly growing as the income increases, the demand for quality products and services increase (Fung Business Intelligence Centre, 2013). China has had a transformation in its retail market, the traditional department stores are being replaced by shopping malls. The sales in retail are still expected to grow rapidly as they have not yet met the potentiality (Chin, and Chow, 2012). This will lead to more expansion of retail base in China.
Economic Drivers and Growth Potential
In history, Australia has been cut from international retail . This is because of the geographical location of the country. The large physical distance from Australia to other countries acted as a barrier for foreign retailers. The small retail market in Australia also acted as a natural barrier among other barriers making the country to have an isolated market(Jones Lang Lasalle, 2013). Most of the products in Australia were also bought from domestic producers protected by the government (Sammartino, 2006). In recent times, more international retailers have been entering the Australian market especially those dealing with Luxury products, sporting, music, and books (Productivity Commission, 2011). Some of them include Zara from Spain (fashion retailers) and American Costco and Gap. The entrance of Zara in Australia in 2011saw many shoppers visiting the retailer. The high number of customers in the shop cleared the shelves.80% of the stock at Zara had been cleared in an hour (Lewington and Speranza, 2011).
On the contrary, China’s Location on the map has had a positive result when it comes to retailing. More people have been willing to establish retail stores in the country but this has not come without challenges. Foreign retailers in China face problems such as poor treatment of individual foreign retailers by the government, high prices of retail products than those offered domestically, and also high rental charges for stores in China. The sale of retail products in China have been concentrated on the Eastern and the coastal regions of Zhejiang, Guangdong, and Jiangsu. The coastal region had sales adding up to 60% of the total sales in 2001.
Department stores
The department store in China has developed from time to time with the sector being dominated by the regional retailers. The players in the department stores have struggled to keep the retail market pace in recent years with the introduction of shopping malls, online retailers and specialty stores. The department stores offer a wide range of consumer good categorized in departments. Some of the top department stores in China include Shanghai Friendship Group, which had sales totaling 570,000 million yuan, Dakian Dashang Group, Chongqing Department store, and Golden eagle retail group among others.
Following the fierce competition in the department store, some stores have started to reform their stores targeting the premium consumers. The department store players have also incorporated entertainment and catering departments in an attempt to differentiate themselves from others.
There were a number of department stores in Australia in the 20th century but the number has continued to decline with the emergence of new forms of retailing (Fung Business Intelligence Centre, 2013). Departments in the stores include clothing and textile, furniture department, sporting goods, home appliances, and electronics among others (McArthur, 2013). The main players in the Australian department stores include David & Jones, Kmart, Big W, and others. The department stores in Australia are trying new strategies in order to survive closure (JLL, 2018). Such strategies include expanding the range of products and merchandise methods with an aim of making it attractive to consumers, the other strategy is through growing online presence in terms of distribution and retail and also through improving the customer experience through refurbishments.
International Retailers in Asia Pacific
Shopping Malls
China has had a boom in mall construction over the past few years with more than 4000 shopping centers. The largest mall is the New South China mall which occupies about 66,000 square meters with more than 2300 stores. Consumers in China are able to go for a one-stop shopping with everything contained in one roof. The number of malls in China has doubled in the last 7 years as the country had about 2,900 as per 2011 (Fung Business Intelligence Centre, 2013). The malls are also being established in suburb areas due to factors such as rising rent in cities, availability of large space in suburbs compared to the cities, convenient transportation, and growth of automobile industry which makes traveling efficient.
The reason behind an increased supply of shopping malls in China is due to the fact that the government of China has offered incentives to support the construction and development of malls. Malls in China have come up with a strategy of ensuring people spend more time inside. This is through the incorporation of catering and entertainment to boost consumer experience (Shepard, 2017). Shopping malls have included food and drinks, gym centers, playgrounds for kids, English schools and also movie theatres. The revenue generated from department stores and shopping malls in China is estimated to be $260 billion dollars in 2018 (IBISWorld, 2018). Other malls in China include the New Century Global Center in Chengdu with 2000 rooms and occupies 16 million sq. ft, IFC Mall in Hong Kong, and many more.
In Australia, the first shopping Centre to be opened was in Chermside, Brisbane in the year 1957. The mal had a total of 25 retailers and a department store. In the following years, several shopping centers were opened in Sydney city and Melbourne. Unlike in China, most of the centers were opened in the suburbs’ construction boom, with the availability of cheap cars and an efficient transport system made it easier to access the centers. Another argument was that it was better for the retailers to meet the consumers in the places they lived instead of waiting for urbanization. 60 years later, the store in Brisbane has more than 360 retailers, three department stores, a cinema theatre, and food court. In 2015, Australia had about 1800 retail centers. The famous shopping malls in Australia include Chad stone shopping Centre in Melbourne with a 190,000 sq. meters floor housing more than 500 stores. The annual turnover recorded in 2013 was $1.4 billion dollars. Other shopping malls include Westfield fountain gate, Pacific fair, Eastland Shopping Centre among others.
Online Retailing
The data by ABS (Australia Bureau of Statistics) shows that the value of online retail transactions increased from $40 billion dollars in 2005 to $143 billion dollars in 2010. A study conducted by Roy Morgan shows that over 9.8 million people in Australia bought something online which is 47% of the total population above 14 years. Online payment systems have made it easier for consumers to purchase a product and pay immediately for the purchase. With more than 16 million smartphone users in Australia, the number of internet users has increased making mobile purchases increase to 58% in 2017.
China’s Retail Industry
In China, Online retail is the engine of China retail industry. The number of internet users as per the year 2015 was 700million with 200million users forming 28% of rural online users. In relation to the adoption of online payment, China had a total of 420 electronic payment users (Jane and Ying, 2017). In the past years, the number of e-payment companies has increased with an offer of free transaction services to consumers and retailers. This is aimed at increasing the number of mobile payment users. The total sales from e-retail by consumers in China totaled $1 trillion dollars in 2017, which was a 32% increase from 2016 ($870 billion dollars) (Tong, 2018). An advancement in technology in Asian countries especially in China has made internet access accessible on mobile phones and this has created an increasing trend in the adoption of e-commerce technology. E-commerce sites used in China include Alibaba, Suning & Gome, 360buy, and others.
Other than the opportunities and the large benefits created by the retail industry, the main Challenge that cross-cuts all Chinese retailers include an increased cost of operation in terms of the cost of labor and rent. This has been a barrier to new investor both domestic and international willing to start or expand businesses in the country. Another challenge is the unbalanced retail in the cities and suburbs or the local communities. High development of the retail industry in major cities and lack of a well-structured city planning has led to increased traffic, high competition in the cities (Fung Business Intelligence Centre, 2013). Large-scale retailers have failed to develop the small cities in the country leading to an imbalanced development.
An increased population of Chinese people has adopted the online retailing technology which poses a threat to the traditional retail businesses. Online retailers offer their products at a low price creating high competition.
In Australia, the challenge of a high operation cost is also a challenge where the prices of energy are increasing and an increased retail rents make it difficult for the retailers in Australia to keep up with international retailers (Cooper, 2018). The challenge of third parties in the online retailing also poses a problem. With the increased advancement in technology, Consumers and retailers operating online face a problem of lack of privacy and security in their operations. Man, in the middle attacks have increased leading to huge losses for some online retail companies.
The Guanxi culture in China has greatly influenced the retail industry. The culture lies in creating a good relationship with others whether it is an individual or organization. Guanxi culture is important for ensuring the success of the business as it allows networking and interaction. The culture has also contributed greatly to the high consumption in luxury goods as the people in China believe that the more expensive the product is, the more recognition one gets and this creates a better relationship (Yan, 2009). Other cultural values include collectivism where the Chinese practice the value. This creates a situation where a group of people is honored through the practice of teamwork and information sharing (Lunicheva, 2014). This is important to business as it is seen through the rate of acceptance of technology in the country.
Australia’s Retail Industry
On the other hand, Australian culture has also impacted the retailing business in the country. Australia has had the main barrier to its geographical location affecting foreign retailers who wish to conduct business in the country. This has made Australia accept a diversity of the population to invest and tour the country. This has made it the most diverse country in the world with 30% of the total population consisting of foreigners. The culture of accepting new people has created a high demand for consumer products from within the country and foreign nations. Globalization has impacted to increased sharing of information, technology and also values which have created a new culture of the consumer population. This has improved the retail market in the country.
Conclusions and recommendations.
The retail industry in Australia and China has a big role to play in ensuring they meet the changing preferences and demand by consumers. Now that the increasing advancement in technology affects the retail industry, the retailers in China and Australia need to adapt to the changing market. The retailers have also to think globally. This means that retail businesses should aim at tapping the large online market.
Competition should be viewed as an opportunity by retailers. This is because competition leads to innovations that improve efficiency. For instance, the entry of Amazon to Australia will help the local online retailers to improve their way of conducting business in order to retain customers. Uniqueness is also important in today’s competitive world of business. The retailers have to ensure they make the necessary changes and adjustments to their products and services in order to stay a step ahead of the competitors.
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