The Chinese retail industry and the Australian retail industry differs in terms of industry structure, growth potential and are differently impacted through differential cultural aspects. The Chinese retail industry is mostly dominated by small and medium size companies, whereas, the Australian retail Industry is mostly dominated by large size companies. Moreover, it has been observed from the study that the different growth potential differently affects the revenue generated by the retail industries of this country.
Table of Contents
Background information on the retailing system in both countries 3
Section 1: The differences in the structure of the retail market in both countries 5
Section 2: Estimation of potential size and profitability of retail industry in both countries 6
Section 3: Analysis of the potential problems facing the retail industry in both countries 7
Section 4: Consideration of cultural aspects impacting retailing in both countries 9
Conclusion and Recommendations 11
Key findings 11
Reference List 12
Retailing is a process of distribution through which all the activities related to selling the merchandise directly to the intended consumers are done. Retailing services differ from country to country. There are many different types of retailing such as store retailing, non-store retailing, and corporate retailing and so on. In the present study, the difference between Australian retailing and Chinese retailing will be highlighted. Along with this, the structure of retailing in both of these countries would be highlighted. The potential size and profitability of the retailing and the problem faced by this industry would be identified.
Background information on the retailing system in both countries
Starting from single stores to chain stores and regional to national stores China has developed their position in the retail industry. The retail sales in China has continued to grow and the online retail sales of China amounted ¥9.51 trillion in the year 2018 (Stats.gov.cn, 2019). As compared to the sales in the year 2017 it has grown about 23.90% in the year 2018. In the last year the e-commerce of China has increased its market share. The total retail sales in China reached $5.61 trillion in the year 2018 that is 9% higher than the previous year. This contributes 72.2% in the GDP of China.
Figure 1: China’s online retail and total retail sales
(Source: Stats.gov.cn, 2019)
Australian retail sales grew 2.4% in the year 2019 that is 2% higher than the previous year. The average growth rate in the retail industry is 5.6% higher. The online sales of Australian retail industry have reached about 28.6 billion AUD. As per the views of Cai et al. (2016), the new trend of technological incorporation in the retail industry increasing its growth year by year. The Australian retail industry is facing rapid change from inco4r5poration of technology in retail sales to increasing shopping tendency of the customers. Most of the retail stores expanding its business through entering in the online platform making it easier for the customer to avail services and goods from the retailers.
Figure 2: Australia’s online retail and total retail sales
(Source: Pc.gov.au, 2019)
Section 1: The differences in the structure of the retail market in both countries
There is a wide disparity among the regions and the countries in Australia in terms of rural-urban income group, retail demand and purchasing power of the consumers. In the year 2017, the 42% of the total retail sales of China has been generated from Zhejiang, Jiangsu, Henan (Stats.gov.cn, 2019). The names mentioned earlier are the most prosperous eastern regions of the country. However, the lowest retail sales were observed in the areas such as Tibet, Ningxia, Hainan and others. In comparison to this, Australia is one of the most urbanised countries with 90% of people living in urban areas.
The highly fragmented composition of the market consists of many small and medium sized retailers. On the other hand, the retail market in Australia is largely diversified in terms of the size, region, competition and format of retailing. Australian retail market is dominated by large size of retailers.
Unlike the Australian retail market China’s market is dominated by these small and medium sized retailers. There are about 549,000 retail stores in China with 15 employees in each on average. In comparison to this, there are 140,00 retail businesses are there is Australia. There is a lack of cross-provincial retailers in China. The market mostly consists of department stores and supermarkets and in this sector businesses have 44 employees on average (Li et al. 2017). There are some Foreign invested enterprises such as Wal-Mart Stores and Carrefour SA.
The lucrative retail businesses in China include vehicles, motor cycles and auto parts. In the year 2018, these businesses contributed 39% of total revenue of china. However, unlike the food and beverage sector, clothing and apparel, furniture in Australia, Chinese sectors dealing with the same face more competition and their profitability is low. As per the views of Lim et al. (2018), in Australia retail industry has to operate under several regulatory regimes. Therefore their ability to innovate is decreased and they face huge restrictions in competitiveness. Australian retail sales contributed 4.1% of the country’s GDP in the year 2018. As per the views of Siebers (2016), increasing the quality of goods would be better for increasing sales in China, whereas Australia needs to improve its parcel process designing. A significant shift in the consumer preference can be observed due to the advancement in technology in both countries.
Section 2: Estimation of potential size and profitability of retail industry in both countries
Chinese retail industry is continuously growing by increasing opportunities from within. As per the views of Bai et al. (2017), China has a retail growth that is faster than expected. Due to the continuous explosion of the e-commerce services the retail industry is growing very fast. Depending on high profitability of the market, it is expected that China is going to beat the US in terms of growth in the retail industry by 7.5% increased sales (Li and Zhang, 2017). China is growing in retailing by depending on the smaller upstarts like Pinduoduo. However, as per the views of Egger et al. (2018), the retail growth in the coming year can be violated by the fact slowing of the economy. The consumption growth is propelled by the young shoppers in China and they are less thrifty in nature. However, due to economic uncertainty the big ticket purchases might fall down. For instance, the selling of cars has fallen by 5.8% in the year 2018 (China-briefing.com, 2019). Apart from the economic risks in the long run, China is going to take a high position in the retail market all over the world.
In comparison with China, Australian retail market has witnessed low profitability in the year 2017 as the major retailers left 295 stores closed due to lower sales volume. However, the retail market in Australia is growing and it is estimated that depending on the online retail services it will increase its contribution in the country’s GDP. The total online sales of Australia have exceeded $32 billion in the year 2018. As compared to China, 85% of the Australian citizens have access to internet and this is the path that most of the Australian retailer has chooses for accelerating their growth in the market. The per capita GDP of China is $88 thousand and this indicates that the consumers have a high purchasing power compared to China (Pc.gov.au, 2019). Unlike China, Australia has a strong relationship with the Americans; therefore, it is a support system of Australia if they face any economic difficulty.
Section 3: Analysis of the potential problems facing the retail industry in both countries
Having a high growth potential and an impressive position in market both the retail sectors face some challenges or problems. Competition with the 250 global players operating in Australia is very likely in the retail market of the country (Deloitte.com, 2019). Firstly, Due to the new entrants in the market the remaining 250 sectors can face threat of lowered sales. China has showed a great interest in conducting business in online platform in the Australian market. For instance, Alibaba has opened its headquarters in Australia in the year 2017.
Secondly, the increasing inflation rate in Australia (1.6%), poses another threat to the Australian retail market (Stats.gov.cn, 2019). Increasing inflation rate forces businesses to increase the price of the products. This directly affects the customers buying behaviour and reduces sales.
Thirdly, changing market trend is another challenge for the Australian retail market. As most of the retail sectors are unable to keep pace with the changing technological trend, it may become challenging for most of the Australian retailers to increase their growth. For instance, customers want match their experience with high quality technological tool such as Artificial intelligence and big data and this is hard to achieve without investing a huge amount in technology (Yin et al. 2016).
In China, firstly, the retail market is taken over by the millennial that mostly follow the western trends in shopping. The localised approach of China in selling the products poses a threat of low sales volume.
Secondly, the retail companies in China mostly focus on the digital savvy and they are failing to capture the motivation and rationale of shopping of the millennial. Therefore, these companies became unable to get insight into the shopping tendency of the millennial.
Thirdly, due to low investment in the market research, the Chinese companies become unable to design products incorporating practical approach according to the needs and the requirements of the customers.
Section 4: Consideration of cultural aspects impacting retailing in both countries
It is evident that culture largely impacts on the buying behaviour of the customers. Considering the same concept it can be said that retailing of China and Australia differs significantly from each other. As commented by Fields et al. (2018), customers go through five stages to make any decision regarding their purchase such as need recognition, information search, and evaluation of alternatives, purchase and post-purchase evaluation.
Figure 3: Customers five stage of decision making
(Source: Abratt et al. 2015)
Chinese people have a very deep concept of family and this largely impact on their shopping behaviour. In compliance with this fact, it can be said that the Chinese prioritise the needs of the children and old people in the family at the time of identifying needs Abratt et al. (2015). Unlike China, being individualistic, Australian citizens mostly tend to depend on individual needs. Therefore the retail sectors in China need to depend on the needs of old people and the children while merchandising goods, whereas, Australian retail industry needs to focus on every individual needs of the countrymen.
Chinese customers mostly depend on their acquaintances for acquiring information regarding any product, whereas, as per the views of Scollo et al. (2015), Australian people depend on personal experiences and information available online. Based on this, the retail industry in China needs to create an impact on every individual purchasing from their stores, whereas Australian retail industry needs to provide valuable information through advertising and promotion.
Evaluation of purchase and purchase:
As per the views of Singh-Peterson and Lawrence (2015), Chinese people judge the products mostly based on its social and symbolic value, where as Australian people decide purchasing based on the product valuation. Therefore, retailers in Australia need to focus more on increasing the product value and the Chinese retailers need to increase the products symbolic value.
Post purchase evaluation:
Chinese customers are likely to change brands for purchasing the same good and they evaluate the appropriateness of the product based on the value it created in other person’s perspective (Littlechild 2019). In comparison to this, Australian customers mostly depend on the value created by the product in their lives. Therefore, they do not switch from high quality brands. Based on this, it can be said that Australian retailers need to depend on the brands that create value in the lives of Australian individuals.
Conclusion and Recommendations
It can be concluded from the study that retail industry of China and Australia differs from each other in different ways such as the structure of the industry, cultures of both countries, size and profitability and the challenges they face. It has been observed from the study that the Chinese retail market is mostly dominated by the small and medium sized countries, whereas the Australian retail market is mostly covered by the large sized retailers. It has also been observed that the increasing inflation rate of Australia poses a risk to the Australian retail market whereas lack of insight of the Chinese retailers into the tendency of the Chinese customers needs poses risk to the Chinese retail market. In addition to this, the Chinese retail market seems to be collectivistic that depends on the needs and opinions of the acquaintances where as the Australian retail customers mostly depend on the individual needs and values.
● It can be recommended to the Australian retail industry to focus more on creating value for its customers in order to increase the sales volume.
● It can be recommended to the Chinese retail industry to increase the social and symbolic value of the products.
● China and Australia are recommended to focus on their online growth as in both of the countries, technological growth has taken place.
● In order to mitigate the risk of getting affected by the changing trend in the market, an in-depth market research is suggested to both of the country’s retail sector.
(Refer to PPT file)
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