China's Offline Retailers See Falls in Revenue

　　Based on a recent report by the China General Chamber 1 of Commerce, the sales volume increase rate of the country's top 100 retailers 2 has slowed down by 10 percent. However, while many offline giant retailers are seeing falls in revenue, online retailers have been enjoying rapid growth.
 
　　Zhang Wan 3 takes a closer look.
 
　　The report shows that among the top 100 retailers, 92 offline retailers witnessed an increase of 11 percent in their sales volume in 2012, 9.9 percent lower than during the same period in 2011. The sales increase is even lower than the number under the financial crisis in 2009.
 
　　With sales volume increase rates slowing down, the net profit of these retailers has been decreasing. Media reports the average rate of profit of overseas giant retailers to be roughly 3.4 percent; however, their Chinese peers believe the actual figure to be far lower.
 
　　Here is Li Yanchuan, the vice 4 president of a chain supermarket company in Beijing.
 
　　"The average net profit within the industry used to be about 1 percent, while the gross profit was 12 to 13 percent. However, our net profit has now dropped to 0.8 percent, which means we can only earn 0.8 yuan out of a 100 yuan sales revenue."
 
　　In contrast to the situation faced by most offline stores, online retailers are seeing their sales booming. All 8 of the country's leading online retailers are among the top 100 retailers across the nation to see their sales volume increase by 30 percent.
 
　　Zhang Zhigang, president of the China General Chamber of Commerce, explains the reason behind this.
 
　　"Offline retailers seeing sharp declines in sales are mainly from the catering 5 and general merchandise industries. By offering greater convenience and efficiency, as well as lower prices, online retailers have brought about the sharp sales decline of offline retailers."
 
　　Apart from the challenge of competing with e-commerce giants, some experts believe higher cost is another important factor slowing down the growth of offline stores.
 
　　Wang Yao, the head of the China National Commercial Information Center says that in 2012 and the first quarter of 2013, offline retailers have been negatively influenced by three main factors, higher labor 6 cost, higher rental 7 cost and competition from online retailers.
 
　　Here is Li Yanchuan, president of the chain supermarket company in Beijing.
 
　　"The rental cost of most of our supermarkets has increased by 50 percent over the past year, and meanwhile, labor costs are also on the rise, at about 11 to 12 percent."
 
　　Industry insiders further believe that the outdated 8 operation model which many offline stores still use is also a reason behind their decline. Currently, most department stores make profit through leasing their spaces and charging suppliers various management fees. As a result, most department stores look similar without unique identifying features; as such the price war is considered the only way out for them.
 
　　Facing the profit decline, many offline stores have started to take action to make change. Instead of leasing spaces, some stores have turned to making purchases from manufactures directly and selling by themselves.
 
　　For CRI, I am Zhang Wan.