Why China'S Online Retail Market Is Growing Fast?

< p > according to a special research conducted by McKinsey Global Research Institute, the growth rate of China's online retail market ranked first among the major countries over the past 2003-2011 years.

Over the past 9 years, the average annual compound growth rate of China's online retailing has reached 120%.

By comparison, the growth rates of the United States, Britain, Korea and Canada are all below 20%, while Japan, Germany and France are 27%, 22% and 35% respectively, and Brazil and Russia, emerging market countries, are only 34% and 39%.

Not only that, the penetration rate of China's online retail is also fast in the forefront of the world.

In 2013, China's online retail sales accounted for 8.04% of the total retail sales of consumer goods, compared with less than 6% in the United States, according to the statistics of the US Bureau of statistics.

If we continue to maintain rapid growth, this figure will exceed 20% in a few years.

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< p > < strong > the "vicious circle" of retail under the line < /strong > /p >

< p > it is undeniable that the convenience and huge agglomeration effect of network retailing and economies of scale and scope are undeniable.

These are, of course, important reasons for the rapid growth of online retailing in China, but they are also common reasons of other countries, not the special causes and backgrounds of China.

The particularity of China lies in its poor business environment under the line. This is the basic reason for the continuous growth of online businesses represented by online retailing.

The so-called retail business environment under the Chinese line is not good, mainly due to the tax revenue, administrative costs, all kinds of administrative charges, fines, inspections, apportionment, etc., and high rent caused by the government's monopolization of urban land supply, resulting in the retail businesses at the bottom of the line unable to sell goods at a lower price, resulting in a vicious cycle of "high cost - high price - low sales - low turnover rate - high cost high price".

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< p > simple comparison of Western Europe, the United States, Hongkong and Mainland China, including mobile phones (Samsung, Apple), computer (Lenovo), clothing (Levis jeans), sports shoes (Adidas, Nike), milk powder, handbags (Coach, LV), cars, high-end cosmetics (Clinique, IELTS Lauder) and other commodity prices, it is not difficult to find that in the case of comparable brands, the same price of goods basically presents such a ranking: the cheapest is the United States, followed by Hongkong, followed by Western Europe, the most expensive is the mainland of China.

Overall, it can be found that the retail price of the same quality goods in the US may be only 20%-60% in China, and if some factors such as discount are considered, some brands will be even lower. Even if compared with European countries such as France, which has much higher labor costs and higher taxes, many of the comparable quality retail prices of China will be much higher.

Especially clothing, shoes and hats, toys, bags, cosmetics, and processed foods such as milk powder.

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< p > if the prices of handbags, watches, cars, middle and high-end cosmetics and other commodities are mainly caused by high consumption tax and tariffs, the domestic research has done a lot, and the conclusion has been very clear. So, the huge price gap of clothing, shoes and hats and other daily commodities is not only due to tax reasons, but also other important factors related to the price.

If we observe carefully, in China's online retailing, the fastest growing and largest share is not just cars, watches, high-end cosmetics, handbags, but clothing, shoes and hats and other daily commodities.

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< p > it is not difficult to find that the most basic factor of price formation is factor price, namely capital interest, labor wages, land rent and entrepreneur's profit.

Another factor that must be considered is the commodity tax paid (different national systems are different. For example, the United States takes the excise tax as the goods tax, while China and some European countries are value-added tax, which is the internal price tax. Therefore, the difference must be taken into account in the analysis, other taxes and the expenses of various kinds of dealing with the government.

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< p > according to the above basic framework, we can make a preliminary analysis of the phenomenon of "the most expensive" in Chinese mainland goods: < /p >

< p > a href= "http://www.91se91.com/news/index_c.asp" > wage cost < /a > is certainly not the reason why Chinese commodity prices are high.

Although China's labor costs have been rising rapidly in recent years, they can not be compared with Europe, the United States and Hongkong, so they can be ignored.

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< p > capital cost can explain some differences.

Because most retail businesses in China are unable to obtain loans from banks at the interest rates stipulated by the central bank, their capital costs are bound to be higher than those of other countries and regions.

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< p > the cost of land element (land rent) is a very important explanation factor.

Compared with other countries and regions, all the land in China's cities is owned by the state, so that only one of them is sold. Therefore, the land is monopolized by local governments and leads to less land and higher prices, which will eventually push up the rent.

The only one that can be compared with China is Hongkong. The land of Hongkong is all the government (the so-called "official land"), and its rent level is obviously higher than that in the mainland.

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< p > tax can explain part of the difference.

China's tax is very complex. Even on the basis of external tax rates, China's tax rate on goods is much higher than that of the United States: in China, most goods are value-added tax 17%, and books and a few other commodities are 13%; in many European countries, VAT is not too low, and some countries are higher than China; but in the United States, although different state cargo taxes are different, the highest state is only 10% (North Virginia is only 5%, Ohio is only 6.75%, New York is only 8.75%, New York is only 8.75%, and Chicago is 10%).

However, in most states of the United States, all foods, not only primary agricultural products, but also processed products, are exempt from goods tax as long as they are food.

Moreover, our country also levying higher consumption tax on some commodities, including cosmetics and some luxury goods. If it is imported goods, it will impose additional duties.

Consumption tax and tariff can explain most of the price differences of luxury goods, and also explain the huge price differences of some consumer goods.

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The cost of dealing with the government P can also explain some differences.

There is no doubt that in China, the cost of dealing with government departments is the highest. This is precisely the important background of the central government's "decentralization".

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The above 5 aspects can better explain why the retail price in mainland China is "the most expensive in the world" while the retail price in the US is "the lowest in the world". P

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< p > in the United States, retail prices are the cheapest in the world because of the lowest commodity tax and basically no need to deal with the government, so there will be no associated costs (as long as legitimate business). Because land is private and the land rent is low, the capital market is developed and therefore the cost of financing is low.

Together, they form a virtuous cycle of "low cost - low price - high sales volume - high turnover rate - low cost low price".

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< p > in Hongkong, land rent is the highest in the world because land system is similar to that in the mainland.

However, because the government does not collect taxes and is honest, the cost of dealing with the government is very low.

The development of capital market reduces financing cost and interest cost.

These are important guarantees that Hongkong can enjoy a slightly higher retail price than the United States.

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P, Europe and the United States, land is private, so the rental cost is not high, capital market is developed, and interest cost is not high.

But Europe is a typical heavy tax area, which is very famous.

Many countries also impose consumption tax and VAT at the same time, which eventually leads to higher retail prices.

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< p > China's system is the most special in the world: land is monopolized by the city government, the rent is high, and some big cities can almost shoulder the same with Hongkong.

Capital markets are underdeveloped, banks are outdated and financing costs are high.

The consolidated tax burden is basically comparable to that of Europe.

The cost of dealing with various governments is well known.

Such a high rent, high taxes, high interest rates and high cost of dealing with the government will make China's retail price lower. If we take into account the policy discrimination in other aspects of China's circulation industry, this problem is even more serious.

In this way, the high cost of the system has created the reality that China's retail prices of commodities are "the highest in the world".

Most retail businesses under normal operation have many costs which are difficult to circumvent, resulting in a vicious cycle of "high cost, high price, low sales, low turnover rate - high cost and high price" for retail businesses below the line.

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< p > < strong > < a > href= > http://www.91se91.com/news/index_c.asp > > innovation > /a > /strong > /p >

Compared with < p >, < a href= "http://www.91se91.com/news/index_c.asp" > Network retailing < /a > has largely circumvented the high cost which must be borne by offline under various ways. This is precisely the secret of the rapid growth of China's online retailing.

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< p > whether it is the Jingdong itself, the larger seller on the platform of Tmall or Jingdong, and the sellers who sell on Taobao, it can avoid the high rent caused by the rising land price to a certain extent, for example, many institutions and facilities are set up in the low rent suburbs, but the offline enterprises can not do this.

Although some sellers also have to pay the "enter shop fee" which is similar to the store that they must enter under the line, but these expenses can be greatly apportioned through the aggregation effect of the Internet, thus economies of scale will emerge.

Moreover, most enterprises can at least avoid the cost of dealing with the government to a certain extent.

Some sellers can also avoid the high taxes and apportionment and "fees" to a certain extent.

Because its capital turnover is relatively faster, paction efficiency is higher, inventory is lower than offline stores, so that interest payments can also be greatly reduced.

Given the significant economies of scale and economies of scale brought about by the rapid growth of online retail, some sellers can achieve a virtuous cycle of "low cost - low price - high sales volume - high turnover rate - low cost low price".

This objectively achieves tax reduction and decentralization of small and medium-sized retail enterprises in disguise.

From this perspective, we can conclude that the phenomenal and sustained high speed growth of China's online retailing is largely due to the high rent, high turnover tax, high government paction costs and low circulation speed faced by the offline retail industry, which is a typical "forced" innovation.

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< p > < strong > policy reflection < /strong > < /p >

< p > we must realize that the rapid growth of China's online retail market is essentially a high growth driven by the extreme deterioration of the offline business environment, and whether this high growth will continue to improve the business environment of the "forced" line. Because the current administrative system, land system, tax and fee system, policy system, and the improvement of the financial system are faced with many obstacles, the rapid improvement of the offline business environment is not realistic.

However, the forced mechanism has already been formed.

The problem is not to seek to block the rapid growth of the online market by strengthening tax collection and administration, and strengthening administrative supervision, but rather to carry out the basic spirit of "making the market play a decisive role in the allocation of resources and better play the role of the government" in the third Plenary Session of the 18th CPC Central Committee, and the basic requirement of "promoting the reform of the domestic trade circulation system and building a legal business environment".

However, it should be pointed out that the basic efforts to promote the reform of the domestic trade circulation system are mainly in the "rule by law business environment" of the tax and fee system, the financial system, the land system and the administrative system outside the circulation field.

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