Digital competition: the effects of Chinese online shopping platforms on Swiss commerce

A study conducted by the University of St. Gallen reveals that a significant number of Swiss consumers regularly shop on online platforms, with Temu ranking as the fourth most popular choice in Switzerland. The platform's annual turnover is estimated to be between CHF 600 and 800 million Swiss francs. In response, Retail Associations have urged the Federal Council to address the issue of unfair competition posed by Chinese online platforms. Prof. Carmine Garzia, an Adjunct Professor at the Faculty of Economics at the Università della Svizzera italiana (USI), analysed this phenomenon on the programme "Il Faro del TG" on RSI.

As explained by Professor Carmine Garzia, Chinese shopping platforms have more than one advantage over their Western competitors: "The main advantage of Chinese platforms is their pricing; they offer very low supply conditions and partner with companies that help them maintain highly competitive prices. The second advantage is their widespread presence in online channels, which enables them to attract consumers searching for specific products. Lastly, they often focus on relatively basic, low-value items, so consumers do not perceive buying from China or Southeast Asia as risky".

The significant price differences between Asian and Western retailers are due, as explained by the USI professor, to several factors: "Firstly, access to suppliers that are often not directly accessible by Western sellers. Moreover, Chinese platforms sometimes have dedicated production, which allows them to have products at a lower price. Furthermore, in some cases, they also manage to optimise logistics and transactions, obtaining more favourable terms with financial transaction providers than other smaller retailers".

Professor Garzia expressed scepticism regarding potential state intervention to restrict e-commerce through taxation. While Switzerland does import products from China and neighbouring regions, it is important to note that these countries are also the primary destinations for Swiss luxury watch exports.

A further element emphasised by the professor is the ability of Chinese platforms to engage in digital marketing: "These platforms can display the most relevant ads based on our searches, ensuring that the right advertisements appear in our feed according to our interests. This demonstrates that these companies are not merely low-cost competitors; they are capable of developing effective digital marketing strategies that leverage data and consumer profiles". According to Professor Garzia, since these companies cannot be challenged on price, it is specifically in the area of digital marketing strategy where Western competitors should focus their efforts.

"We need to acknowledge that certain product categories are being bought on platforms where the main criteria are price and delivery time. This makes it challenging for local markets to compete in this area of trade. However, small retailers and shopping centers have opportunities in different product categories. Implementing state intervention in this situation would be very complex," concluded the Professor.