Retail is the final link in goods circulation, the point where consumption drives growth and a major employer. With information technology and logistics advancing fast, physical retail’s need to upgrade has intensified, and the pandemic – painful in the short term – has created an opening for the digital and intelligent transformation of traditional retail.
Latest data show online retail sales reached RMB 13.09 trillion in 2021, up 14.1%; online sales of physical goods grew 12.0% to RMB 10.80 trillion, 24.5% of total retail sales. Experts expect 2022 to keep generating new consumption models through online-offline fusion, sustaining online growth while creating conditions for physical retail’s digital transformation.
Physical retail speeds up its pivot
Physical retail has long faced homogeneous competition, weak digital foundations and dated management. Li Mingtao, chief e-commerce expert at the China International Electronic Commerce Center, said the defining gain of digital-intelligent transformation is the ability to serve individual customers in store – from grasping consumption trends to knowing each visitor’s needs precisely.
Three features stand out for 2022. First, retailers will build distinctive brands, using data tools to reposition for specific consumer groups with unique products and services. Second, digital-intelligent tools will run the whole chain – not just site selection or shelf placement but end-to-end reconstruction of decisions. Third, more retailers will launch private labels: moving from reselling suppliers’ goods to developing their own, with precise demand matching as the key to success. As Zhao Ping of the China Council for the Promotion of International Trade research institute put it, more private brands are a real benefit for consumers.
Lower-tier markets remain the main target
Better digital capability and supply-chain service let retailers reach further. With community-level consumption active in 2021, retailers are pushing into neighbourhoods and villages. Suning Retail Cloud’s first community sales-service store in Nanjing illustrates the model: fusion means truly empowering the physical store, not merely moving it online, Zhao said.
In cities, retail-plus-social models still have room to grow, and health retail built on community pharmacy stores will expand as ageing urban populations make health products the second-highest-frequency household purchase after fresh food. Neighbourhood centres offer new chances for department stores to transform.
In the countryside, rural incomes are growing faster than urban ones, and as new products, services and ideas reach villages, closing the urban-rural consumption gap becomes the industry’s main goal – integrating one-person shops and family stores into retail supply chains so farmers enjoy city-standard goods and services close to home. Livestream-driven marketing also interacts with offline retail, drawing traffic with viral products and building new consumption scenes that meet social needs alongside shopping.
Cross-industry collaboration gets more efficient
China’s retail sector is large but not yet efficient – low value-added and, historically, marked by low-level duplicated construction. China Chain Store and Franchise Association president Pei Liang noted that rapid online retail growth has driven innovation but also sharpened unfair competition against physical retail.
Because retail is both highly competitive and partly public infrastructure, the answers run in two directions: fair competition through better anti-unfair-competition and antitrust rules, taxation and market supervision; and government investment in circulation infrastructure – farm produce supply chains, digitalisation and SME support.
Raising retail value-added, Pei said, improves the sector’s ability to absorb employment, raise its GDP contribution and attract capital and talent. Zhao expects the fusion of 5G, big data, IoT and AI with all retail scenes to digitalise logistics end to end, connect circulation network nodes efficiently, and make goods and services flow more smoothly.
Experts advise physical retailers to build efficient, well-connected retail systems for cross-region and cross-format complementarity, use open digital service systems to deepen cross-industry collaboration, and shift from store-count expansion to data-driven site selection, product selection and marketing – raising quality rather than just scale.
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