Australian retailers need to look to the tech-savvy Chinese consumer for future industry trends, according to former David Jones chief executive Paul Zahra.
Mr Zahra, now a consultant to PricewaterhouseCoopers, was commenting on a report by the accounting firm that he said showed the increasing importance of Chinese consumers in the global retail world in both total demand and as leading indicators of retail trends.
“Australia retailers have traditionally looked to the US and the British markets for inspiration and retail trends,” he told The Australian.
“What the report is telling us is that when it comes to technology the Chinese are setting the pace in terms of mobile shopping and the importance of social media in shopping decisions.”
The report, on the Disruptive Face of the Retail Sector in China, shows that the Chinese consumer is becoming increasingly powerful despite the slowdown in the growth of the Chinese economy.
It points to the rise of the tech-savvy millennial consumer in China, who does an increasing level of shopping on a mobile phone.
The report shows that the per capita disposable income of urban Chinese has grown by more than 50 per cent from 2010 to $6240 last year despite the fact that China’s growth rate fell from 10.6 per cent a year to 6.9 per cent over the period.
Over the same period the total disposable income of rural people has almost doubled to $2300 a year.
The report predicts that the Chinese retail and consumer products market will record a compound annual growth rate of 7.5 per cent between now and 2020 to $8.8 trillion.
Mr Zahra said Australian retailers needed to be ready to gear up for an increasing move towards mobile phone shopping.
“There is a significant growth in digital shopping in China. The Chinese consumers are becoming world leaders shopping on online platforms such as Alibaba,” he said.
The report shows that young Chinese are shopping with their smart phones, buying items online and using phones to compare prices while they shop in a store.
It shows that 65 per cent of Chinese shoppers are shopping online via a mobile phone at least once a month, compared to only 28 per cent of global consumers.
It notes that data analytics is also allowing e-commerce companies in China to “personalise the shopping experience for consumers”.
Electronic payment platforms, such as Alipay and WeChat, have also helped facilitate online shopping by smart phones in China.
Mr Zahra said Australian retailers had been behind in moving to omni channel retailing but they had done a lot of work in recent years to catch up.
“Australian retailers are not leaders but they have become fast followers which makes it easier for them to adopt trends from overseas,” he said.
“A lot of the heavy lifting (in the move to online shopping) has been done in Australia and now mobile will be the next stage.”
“With the NBN coming online sales using mobiles will become easier. Mobile has to be part of Australian retailers’ plans going forward.”
Mr Zahra said the rising younger consumer in China also used social media to tap into the opinions of friends and family on what products to buy.
“Most of the shoppers are not looking to advertising, they are getting recommendations from friends and families through their comments on social media.”
Mr Zahra said the increasing number of middle class Chinese tourists coming to Australia were generating a new source of demand for Australian products.
They were also spreading the word about the products they found overseas using social media to tell their friends back in China.
He urged Australian companies wanting to sell to Chinese consumers to capitalise on Australia’s reputation as clean and green and with “wide open spaces.”
“The Chinese want the Australian lifestyle. We are quite appealing to the Chinese and Australia is a great destination for them to come to.”
He said Australia had a strong reputation for its high quality food and health care products which it needed to capitalise on.
Andrew Parker, PwC Australia’s Asia head, said China was “leading the world in many aspects when it comes to applying technology to the retail environment. This has important implications for Australia.”
Mr Parker said the Chinese economy was already the third largest in the world, with a GDP of $US11 trillion, behind the US at $US17 trillion and the European Union which had a combined GDP of $US18 trillion.
“But the EU is growing at 1 per cent, the US at 2 per cent and Chinese economy is growing at around 6.5 per cent which is adding more than $US700bn to its GDP every year. This is about a third of global growth and two thirds of an Australian economy every year.”
Mr Parker said e-commerce was rising rapidly in China with the growth of companies such as Alibaba, Tencent and Baidu.
“They are all playing at the intersection of mobile, social and commerce and creating some of the most valuable businesses in the world. They are doing innovative work which is enabling the Chinese consumer to access products from anywhere in the world anytime they want.”
Mr Parker said these big three Chinese companies were becoming leading indicators of the future of e-commerce and retailing around the world.
The PwC report shows 95 per cent of Chinese shoppers trusted brands as a result of what had been written about them by friends and commentators. Almost 70 per cent of shoppers themselves wrote reviews of products on social media.
Mr Parker added that Australian retailers should “not underestimate the potential” for the business model used by Chinese e-commerce giants to expand into the Australian market.