The future of retail in China: e-commerce vs physical stores in 2026

In 2025, China sold RMB 13.09 trillion of physical goods online, 26.1% of total retail sales, according to the National Bureau of Statistics (NBS). In the first half of 2026, the share was about the same, around 25.9% (our calculation from NBS data). Ten years of “online will eat everything” have ended on a plateau.

On paper, that looks like good news for physical stores. The data can give another perspective. Inside the 74% that still happens offline, some formats grow fast and others are shrinking just as fast. The real question of the future of retail in China is less “online or offline” than “which store, for which mission”.

Retail in China, 2025-2026 : key figures

The online share has stopped climbing

For most of the 2010s, the online share of retail went up every year. Tmall, JD and later Pinduoduo took share from department stores and hypermarkets, and Double 11 became the biggest shopping day in the world. Many smaller international brands often used Tmall to test-water their product marketability before opening any store.

That growth has slowed. In 2025, physical goods sold online grew 5.2%, faster than total retail (+3.7%) but much slower than before. In the first half of 2026 online grew 4.8% while total retail grew only 1.3%. The share moves by a few tenths of a point, not by points anymore. We saw the same fatigue in the shopping festivals, which we covered in Double 11 in 2025 and the 2026 618 festival.

Two things explain the plateau. Platforms compete on price so hard that the online channel no longer offers a clear advantage for many products. And a large part of new “online” demand now goes through instant retail, which is fulfilled by physical stores within 30 minutes. In NBS statistics, part of it is counted as online, part as store sales. The border is blurring.

Offline : the winners and the losers

Growing : convenience, membership and discount

Among large retailers tracked by NBS, convenience stores grew 6.6% and supermarkets 3.8% in the first half of 2026. These are the stores close to home, which also serve as stock points for delivery apps. We explained why in our article on neighbourhood stores in China.

Membership warehouse clubs are the other success. Sam’s Club China passed RMB 140 billion of sales in 2025, up about 40% from RMB 100.5 billion, with 63 stores and more than 10.7 million paying members spending around RMB 13,100 each (Winshang). It also runs more than 500 front warehouses and cloud warehouses for delivery. In other terms, the most successful “physical” retailer in China is also one of the best at delivery. We covered it in Sam’s Club in China.

Then come the discount chains. Discount snack stores (量贩零食) went from almost nothing to around 56,000 outlets in 2025, according to CITIC Securities estimates quoted by Yicai (Yicai). Ming Ming Hen Mang (鸣鸣很忙) had 19,517 stores in September 2025, Hao Xiang Lai (好想来, under Wanchen Group) more than 15,000 in June 2025. Their gross margins sit around 10%, so they live on volume and supply chain. Our article on the snack market in China gives more detail.

Shrinking : brand stores and department stores

On the other side, brand exclusive stores fell 8.7% and department stores 2.1% in the first half of 2026 (NBS). These were the stars of the 2000s and 2010s. In 2009, opening a flagship store in a department store on Huaihai Road or Wangfujing was the sign that a brand had made it.

Today, a standalone brand store must justify its rent with something e-commerce cannot give : service, experience, trial, or community. Specialty stores also fell 1.5%. This does not mean brand stores will disappear. It means the average one is too expensive for what it delivers.

Malls : divided

Malls follow the same split. The top malls in Shanghai, Chengdu or Shenzhen keep their traffic and their luxury tenants, while second-rank malls in lower-tier cities struggle with vacancies. We looked at this in our article on malls in China and in shopping malls in Shanghai. A mall that gives people a reason to come, food, kids, events, does better than one that only sells clothes.

Online is changing shape too

The online share is flat, but what happens inside it keeps moving. Search-based marketplaces such as Tmall and JD now share the online wallet with content platforms. A consumer discovers a product on Douyin or in a Xiaohongshu note, then buys it in the app, or later on Taobao, or the same evening on a delivery app. Increasing brands are trying to incorporate shopping as a part of their social media experiences, and in China this is already the default. We covered it in our articles on live streaming in China and on Xiaohongshu (RedNote).

For brands, this means the online “store” is less and less one flagship on Tmall. It is a set of touchpoints, each with its own rules, its own fees and its own audience. Such brands will be more likely to develop private traffic flow, through WeChat groups and mini programs, and to increase loyalty. Those that rely only on paid traffic on marketplaces see their acquisition cost go up every year.

What it means category by category

Categories do not move together. Let’s take, for example, three very different ones.

• Fresh food and daily groceries : the store near home wins, either visited or used as a delivery point. Convenience stores, supermarkets and Sam’s Club grow here.
• Snacks and drinks : discount chains have taken a large share of impulse purchases from supermarkets and convenience stores, on price.
• Fashion and beauty : discovery is on content platforms, purchase is split between online and a smaller number of better stores. Brand stores that only sell, without service, suffer the most.

This suggests that a single “online vs offline” target for a whole company makes little sense. The split should be set by category and, often, by city tier.

What “new retail” got right, and what it did not

In 2016, Alibaba’s Jack Ma announced “new retail” (新零售), the fusion of online and offline. Hema (盒马) was the showcase, and every group launched its own version. Looking back, the idea was right but the first models were too expensive. Many unmanned stores and tech-heavy supermarkets closed after a few years.

In a 2019 interview with us, Max Peiro of Re-Hub summarized the consumer side in two sentences : “Customers don’t think about silos. So, brands should break those silos.” (The dynamics of Chinese new retail). He also said that “the clear winner in this race is the Chinese consumer”. Seven years later, it is hard to say it better.

What survived from new retail is simpler than the vision. It is a dense network of stores near homes, a strong app or mini program, membership, and fast delivery. Sam’s Club, Hema in its new formats, Meituan’s partners and the convenience chains all follow some version of that model.

Daxue Overview

• Online retail has plateaued around 26% of total retail sales.
• Offline growth is in convenience stores, supermarkets, membership clubs and discount chains.
• Brand stores (-8.7%) and department stores (-2.1%) shrink.
• Stores near homes double as delivery hubs. The online / offline border is blurring.

Daxue Take

I would tend to think the “e-commerce vs physical stores” debate is outdated in China. Chinese consumers choose a mission more than a channel : stock up at Sam’s, top up at the convenience store or on Meituan, discover on Douyin or Xiaohongshu, compare on Taobao. Each mission has a winning format.

For brands, this changes the role of each store. As I wrote in our piece on route-to-market in China, offline retail is largely about density of residential population, and this offline presence influences online sales at the same time. The flagship store becomes a media and service point. The neighborhood store becomes a warehouse. The online store becomes the price reference.

Daxue Recommendations

• Map consumer missions for your category before choosing channels.
• Review your brand stores : keep the ones that bring service or community, and question the rest.
• Get listed in the formats that grow : convenience, membership clubs, discount chains, and their delivery networks.
• Build one pricing architecture across channels. Discount chains and platforms will test it.
• Measure store performance including the online sales it drives nearby.

FAQ

What share of retail is online in China?
Physical goods sold online were 26.1% of total retail sales in 2025, according to NBS, and about the same in the first half of 2026.

Which physical retail formats are growing in China?
Convenience stores (+6.6% in H1 2026), supermarkets (+3.8%), membership clubs such as Sam’s Club, and discount snack chains.

Are department stores declining in China?
Yes. Department store sales fell 2.1% and brand exclusive stores 8.7% in the first half of 2026 among large retailers.

Is new retail still relevant in China?
The idea of merging online and offline is. The first expensive models were replaced by simpler ones : stores near homes, apps, membership and fast delivery.

As a conclusion, retail in China is not moving online anymore, it is reorganizing offline around delivery and membership. The brands that win are those that know which store serves which mission. How is retail thought in your China plan for 2026?

About the author

Matthieu David is the founder and CEO of Daxue Consulting. He arrived in China in 2009, founded Daxue in Beijing in 2012 and hosts the China Paradigm podcast. He has advised more than 400 companies on their China market strategy.