China's shops suffer as online rivals boom

China's bricks and mortar retailers are feeling the heat from the growing popularity of their online counterparts. A new study shows online sales growth is outpacing traditional stores, three to one.

The annual report by China General Chamber of Commerce shows great contrast between physical and online stores. While online sales have taken the lion's share of the domestic market, this is the first time this annual report has taken online stores into their consideration. And their growth is astounding.

Wang Yao, Director of The Nation Commercial Information Center of China, said, "All of the online stores sales have grown over 30 percent, yet physical stores expanded only around 10 percent. The difference is self-evident."

On the other hand, China's top physical stores' sales expansion rate tumbled almost 10 percent last year, coming even lower than that of 2009, when the financial crisis hit around the world. Together with a sales loom, the profit margin also fell. Experts say the net margin could reach 3 to 4 percent in foreign countries, but in China stores can only have 1 percent.

Li Yanchuan, President of CSF Market, said, "Our gross profit margin is 12 to 13 percent. Net profit is only 0.8 percent."

Most of the top 100 retail stores are high and medium-end ones, and they are taking more of the impacts from their online rivals, which often enjoys price advantages. Director Wang says the mobile sales is the trend, and the price in online stores will gradually inch closer to those in physical ones.