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In the next five years, China will lose one-third of all its physical stores, a recent report hypothesized. In addition, another third will transform into experiential shopping centers, and the last third will successfully integrate online and offline business, according to the report on China's business development issued by the Chinese Academy of Sciences and Social Sciences Academic Press.

Many brick-and-mortar stores have encountered difficulties stemming from the impact of e-commerce, soaring rental prices and other factors. According to data provided by Hong Tao, director of the Business Economics Institute under Beijing Technology and Business University, 138 department stores, 262 supermarkets and 9,464 clothing stores closed in China between 2012 and 2015.

The problematic contrast between an increasing supply of stores and a shrinking demand contributes to the wave of closures. Data in the report shows that there are nearly 4,000 shopping centers in China, which is three times as many as there are in the U.S. The number is projected to further grow to 10,000 by 2025.

In addition, many stores provide similar services; without a single, core competence, these stores are destined to lose business to their competition. To survive in such a fierce environment, the report suggested that stores explore new lanes for profit.

Jing Linbo, director of the Chinese Evaluation Center for Humanities and Social Sciences, offered the suggestion that physical stores offer differentiated service to customers.

“Customers will only be willing to pay for a service provided by stores as long as [that service] keeps improving in quality and satisfying customers' needs,” Jing said.

“Physical stores should abandon the old mode. They can use online shopping and WeChat to facilitate transactions and provide more convenient service,“ added Hong Tao.