10 - Chinese retailers’ behavior

Abstract

This chapter discusses Chinese retailers' behavior. The Chinese retail market has shifted from a seller's market to a buyer's market since 1998. The dominant power in the market has shifted from suppliers in the planned economy to retailers in the current transitional economy. Chinese retailers are very weak in their competency, particularly in developing successful models. Most of them make their strong bargaining power the main means to make profit. Their profits are mainly from the non-operation side, such as “channel fees,” and favorable payment terms rather than the management side, such as high efficient supply chain. The most popular Chinese retail model is so called a “channel fee” oriented model. Most Chinese retailers' business model is channel fee-based, which is just a simple retail trader model. They make profits by charging channel fees from their suppliers. The Chinese channel fee is not just one kind of fee but a group of fees, including many different fees and varies from one retailer to another depending on a supplier's bargaining power; so does the amount of the fee. The over-charged channel fee brings serious negative impacts on developing the Chinese retailing, and it particularly weakens the competitiveness of both the Chinese retailers and the Chinese retailing. Some Chinese retailers are exploring competitive models. Most Chinese retailers still have a long way to go.