[Opinion] Vertical integration: how China controls the entire chain

European retail and industry are losing ground to Chinese newcomers, not because of a lack of quality or innovation, but because of a fundamental difference: vertical integration. From Puma to MediaMarkt, behind the recent wave of acquisitions lies a systematic strategy.

One Belt, one value chain

Where European companies specialise in niches or individual links in the chain, China is building a seamlessly integrated system that encompasses every step from raw materials to consumers. This is no coincidence, but a conscious choice that has been in the making for decades. China’s “One Belt, One Road” policy also stands for a single value chain.

Take the acquisitions of European brands such as Puma by Anta Sports or MediaMarkt and Saturn by JD.com. For Chinese players, these are not isolated deals, but strategic links in a larger whole. Anta already owns Amer Sports, the parent company of brands such as Salomon, Wilson, and Arc’teryx. Together, these acquisitions form an ecosystem in which design, production, distribution, and sales all come together.

JD.com‘s acquisition of Ceconomy looks like a classic retail deal on paper, but in reality it is the same kind of logistical power grab. For JD.com, MediaMarkt and Saturn are not stores, but nodes in a global network of data flows and distribution hubs. JD.com often knows what will be ordered before the consumer even types anything. The company predicts where demand will increase and which products will end up in the same basket. The stores can then become mini-warehouses, where the products are already ready for delivery.

Lack of cohesion

This has been clear for some time in the automotive industry. European brands excel in design, technology, and prestige, but lack the vertical integration that Chinese players have. China controls the entire chain: from raw materials and batteries to assembly and software. Volvo CEO Hakan Samuelsson acknowledges what many European CEOs only dare to admit in whispers: the electric car market is likely to be dominated by two or three Chinese brands. For European brands that cannot count on a Chinese partner, such as Volvo on Geely, survival will be a challenge.

Europe’s strength lies in specialization and quality, but these assets are undermined by a lack of cohesion. Meanwhile, China is building a future in which every link in the chain fits together seamlessly. The question is not whether Europe can match this model, but whether it is prepared to fundamentally rethink its own system.

Join Wingzz in September on a retail tour of some of the most inspiring cities in China. We will visit the beating heart of trade: Shanghai, Shenzhen, and Hangzhou.