U.S. retailers in dire need of growth look to the China market
In 2017, a growing number of Western retailers decided to go where they can grow. Toys “R” Us, Starbucks and now Walgreens are among retailers expanding their brick-and-mortar and e-commerce presence in China’s booming retail market.
As Western retail markets contract due to bankruptcies, store closures and acquisitions, retailers are increasingly looking beyond their domestic markets for sustainable growth, and for many the large, lucrative China market is tantalizingly rich with possibility.
Consider the following recent retail investments:
- Walgreens: This month, Walgreens Boots Alliance announced it would expand its global retail pharmacy operations with a 40 percent stake in China’s leading pharmacy chain, Sinopharm Holding Guoda Drugstores Co. Ltd.
- Starbucks: The coffee giant made global headlines this month after opening its largest store in the world in Shanghai, China. The massive Starbucks Reserve Roastery store combines artisan excellence and augmented reality (AR) retailtainment to generate excitement and word of mouth.
- Lululemon: The Canadian yoga apparel retailer has expanded its international business in China. Chinese consumers are driving sales for products related to the health and wellness lifestyle, including fashionable yoga merchandise.
- Toys “R” Us: Despite bankruptcy in North America, the toy retailer’s Asian business is booming. Toys “R” Us even opened 10 new stores in China in October, mere weeks after announcing woes in its domestic market.
- H&M: Although the Swedish apparel company overinvested in physical stores in North America, it plans to expand further into the China market using e-commerce to attract young, tech-savvy shoppers.
Even smaller companies are expanding to Asia. L.A.-based baby products retailer Babyhaven launched a cross-border e-commerce website this year to capitalize on favorable market conditions, including China’s elimination of its One Child Policy, which sparked a mini Baby Boom.
As Chinese consumers’ affluence has increased, so has their appetite for foreign products. For instance, popular product categories for cross-border e-commerce shoppers include cosmetics, mom and baby products and nutritional supplements.
DISCUSSION QUESTIONS: What’s the primary hurdle holding U.S. retailers back from expanding into Asia (through physical stores and/or e-commerce)? Do you expect this movement to continue, or do you think the recent foreign expansion is a short-term trend?