China’s retail sector has enjoyed dramatic economic growth, as a result of adopting economic reforms and opening its door to foreign investors.The traditional wet markets, small variety stores, food stands, street vendors and the largely city owned department stores that formed the backbone of traditional retailing is slowly vanishing. In their place new modernised domestic and multi national flagship chain storesThe sheer size of China, in both territory and population, makes marketing there far from simple. The level of economic and social development in different regions and cities varies enormously. This leads to significant differences in the types of retail environment found in different locations, which in turn has extensive influence on consumer shopping habits.Retailing in China has witnessed diversification in terms of business ownership, retail format and national origin of business players. As a result, Chinese market is now a battlefield for both domestic and multinational retailers.China’s Retail market is developing rapidly but it is highly fragmentedand composed of many small and medium-sized retailers, unlike in the United States, where big-box retailers dominate.
The above retailers have successfully been penetrating Chinese market since 1980’s.
Retail sales increased 16.3% in 2011 Q1, while GDP expanded 9.7%. Retail sales are expected to double in the next three years.Retail sales in China amounted to nearly $2.1 trillion in 2010, nearly 50% of those in the U.S. China’s retail sales are expected to grow by around 10% in 2011.China’s retail sector is showing some signs of consolidation in 2011. The market share of the top 20 retail chains rose to 8.9% in 2011 from 8.4% in 2010
Prime Retail space is becoming scarce due to which rental costs is rising, though the central government controls the real estate market, rule interpretation and implementation are inconsistentThe logistical technologies are way too underdeveloped, with poor infrastructure.China completely lacks an efficient national distribution system, There is no single distributor with national reach so manufacturers are forced to deal with large numbers of intermediaries across different regions. Smaller cities and rural areas are particularly poorly served by the distribution chain.There is a lot of ambiguity in the legal environment of the Chinese Retail Market
Challenges on the horizon but opportunities galore
Retailing in china
Retailing in China
Retail Industry of China• China’s Retail sector has enjoyed spectacular economic growth• The traditional wet markets, small variety stores, food stands, street vendors and the largely city owned departments stores that formed the backbone of traditional retailing is slowly vanishing• Retailing in China has witnessed diversification• China’s Retail market is developing rapidly but it is highly fragmented
Top retailers Retailer Players Overall Retail Sales ($ Million)Suning Home Appliances 11,103Gome Home Appliances 7,486 Dashang Group 3,486 RT Mart Shanghai Carrefour
Market Features• Chinese retailing serves 1.3 billion consumers and is developing with high economic growth rates.• The industry is characterised by accelerated growth and active Mergers and Acquisitions, and restructuring
Main Points Fact Sheet• Over 25 of the world’s largest retailers are conducting business in China• Five of China’s domestic retailers are ranked among the 250 largest retailers on Global Powers of Retailing for 2010• Retail sales increased 16.3% in 2011 Q1, while GDP expanded 9.7%• Retail sales amounted to nearly $ 1trillion in 2010, nearly 50% of those in the US
Disadvantages• The growth of Chinas retail industry has been hindered somewhat by the traditional custom of the Chinese people to make most of their purchases from neighbourhood, family-run stores and kiosks• Foreign retail giants contend that prime retail real estate space always goes to a local player, which puts them at a disadvantage• It is also a difficult market because Chinese consumers have demonstrated a preference for and a loyalty to retailers that are native China-based companies. Apparently "Made in China" doesnt have any derogatory connotations when you live and shop in China. Even so, there arent many Chinese retail chains that are dominant enough at home or abroad to qualify for the annual Worlds Largest Retailers List
Challenges• Real Estate Markets and Land Use Regulation• Logistical and Supply Networks• Cultural differences of “doing business”• High transaction costs for retail MNCs in dealing with various government agencies to obtain licenses and permits• Global retail companies see the potential in the Chinese retail market as well. More than 25 of the worlds largest retailers are conducting business in China, according to the U.S. Department of Commerce. Global retail stores seem to be particularly appealing to the younger generation.• PRC government regulations restrict foreign investment in certain sectors• China completely lacks an efficient national distribution system Despite the influx of global retailers, however, Chinese retailers remain dominant and are growing along with the growing Chinese economy. China now has the fourth largest economy in the world, and is closing in on Japan, which had the third largest economy in 2009.