Never mind the slowing luxury spend: China’s retail sector will continue to expand vigorously over the next few years.
New research from Business Monitor predicts an expanding and increasingly affluent population will fuel a strong rise in household spending across all retail subsectors.
Business Monitor says the highest proportion of the Chinese household budget will be spent on food and drink.
A sizeable multinational retail presence, which developed following the lifting of FDI restrictions in 2001, has ensured the early adoption of modern retail best practices in China, with organised retail – Western-style chain outlets, department stores, supermarkets, – already accounting for an estimated 22.5 per cent of the total retail market. That is far higher than India’s five per cent.
Although the Chinese retail market remains highly fragmented – with small, independent retailers throughout the countryside serving a population of more than 1 billion people – malls and department stores are now the preferred shopping destinations for many consumers.
In addition, as major cities have slowly begun to saturate, retailers are expanding into tertiary towns and cities or rural areas, looking to guarantee future growth prospects.
Business Monitor sees long-term potential in the Chinese consumer market, particularly for non-essential items and aspirational purchasing by a growing, affluent middle class.
With huge opportunities awaiting them in China, many foreign retailers plan to expand their business in the market.
France’s Carrefour has pledged some 25 new hypermarket openings annually, and the UK’s Tesco has announced it is to incorporate its Chinese operations into a new joint venture with China Resources Enterprise, paying around US$558 million in the process. The alliance, which requires regulatory and shareholder approval, would give Tesco a 20 per cent stake in a combined business operating more than 3000 stores in China.
Thailand’s largest retail conglomerate, the Central Retail Corporation, is to set up luxury malls in mainland China. Over the next 10 years, the company is planning to launch at least two malls each year in China’s top 20 cities.
South Korean retailer Lotte Shopping plans to add another 20 department stores in China over the next eight years.
Leading Chinese appliance chain Suning’s 10-year development plan will see it open 200 new stores every year between 2011 and 2020, increasing its outlets to 3500. The company is also launching a network of superstores that will sell home appliances, general merchandise, books and daily necessities.
