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China's Retail Sector
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Silvia D'souza
Apr 30, 2013, 5:17:37 AM4/30/13
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China's Retail Sector
Sector Development
China's retail sector amounted to over RMB 7tn and accounted for 15% of the country's GDP in 2011, up from just 10% in 2006. The sector has posted double-digit growth since 2000 - a clear indication of the fast economic growth and rising consumption power of the Chinese population. Despite a recent slowdown in GDP growth, affecting the dynamics of retail sales, the sector still has ample development opportunities and is expected to continue growing in double-digits over the next five years.
Trends
The sector was liberalized and opened to foreign investors to a greater degree after 2004 and has now entered into a phase of upgrade and transformation, consolidation and fast growth of modern retail formats. The process of consolidation amongst enterprises started around 2005, with bigger retail chains acquiring or merging with smaller ones that operate in the regions in order to expand their nationwide networks and competitive positions. Another trend is the move from a single neighborhood store model to a multi-business model and a bigger customer focus with the establishment of more specialty stores and a better customer targeting, dividing stores into various grades, styles and setting different policies for different city tiers.
Sector Competition
The competition in the sector is intense and has increased in the past 2-3 years. An intensifying rivalry is being observed between traditional and online store retailers, suppliers and other retailers, domestic and foreign retailers, with foreign chains posing a serious challenge to domestic ones. Competition pressure has led to price wars between local suppliers. In August 2012, an escalating price war between Tokyo Department Store, Suning Appliances and Guomei resulted in intervention by the National Development and Reform Commission. These developments and the rising wages and rent costs challenge the market players and
require faster sector upgrade and standardization.
Foreign Players
More than 25 of the word's leading retail chain operators were present on the Chinese market in 2004, operating on a limited basis or through JVs. According to data from the National Bureau of Statistics, there were 901 foreign-funded enterprises and 791 enterprises from Hong Kong, Macao and Taiwan, operating in the retail trade sector in China in 2011. This number was 793 and 504 in 2009, respectively. The sector has become attractive to foreign investors after its deregulation in 2004, despite the unofficial barriers and complicated administrative, registration and operational procedures reported by companies and industry
analysts. One of the easiest ways for a foreign company to enter the market is by forging various partnerships with local companies.
Detailed analysis report available on EMIS (http://www.emis.com/blog/chinas-retail-sector)
Sector Development
China's retail sector amounted to over RMB 7tn and accounted for 15% of the country's GDP in 2011, up from just 10% in 2006. The sector has posted double-digit growth since 2000 - a clear indication of the fast economic growth and rising consumption power of the Chinese population. Despite a recent slowdown in GDP growth, affecting the dynamics of retail sales, the sector still has ample development opportunities and is expected to continue growing in double-digits over the next five years.
Trends
The sector was liberalized and opened to foreign investors to a greater degree after 2004 and has now entered into a phase of upgrade and transformation, consolidation and fast growth of modern retail formats. The process of consolidation amongst enterprises started around 2005, with bigger retail chains acquiring or merging with smaller ones that operate in the regions in order to expand their nationwide networks and competitive positions. Another trend is the move from a single neighborhood store model to a multi-business model and a bigger customer focus with the establishment of more specialty stores and a better customer targeting, dividing stores into various grades, styles and setting different policies for different city tiers.
Sector Competition
The competition in the sector is intense and has increased in the past 2-3 years. An intensifying rivalry is being observed between traditional and online store retailers, suppliers and other retailers, domestic and foreign retailers, with foreign chains posing a serious challenge to domestic ones. Competition pressure has led to price wars between local suppliers. In August 2012, an escalating price war between Tokyo Department Store, Suning Appliances and Guomei resulted in intervention by the National Development and Reform Commission. These developments and the rising wages and rent costs challenge the market players and
require faster sector upgrade and standardization.
Foreign Players
More than 25 of the word's leading retail chain operators were present on the Chinese market in 2004, operating on a limited basis or through JVs. According to data from the National Bureau of Statistics, there were 901 foreign-funded enterprises and 791 enterprises from Hong Kong, Macao and Taiwan, operating in the retail trade sector in China in 2011. This number was 793 and 504 in 2009, respectively. The sector has become attractive to foreign investors after its deregulation in 2004, despite the unofficial barriers and complicated administrative, registration and operational procedures reported by companies and industry
analysts. One of the easiest ways for a foreign company to enter the market is by forging various partnerships with local companies.
Detailed analysis report available on EMIS (http://www.emis.com/blog/chinas-retail-sector)
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