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China Retail Report Q2 2010
Business Monitor International, Jan 2010, Pages: 52
China Retail Report provides industry professionals and strategists, corporate analysts, retail associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's retail industry.
The Q210 China Retail Report forecasts that the country’s total retail sales will increase by 79% in local currency terms by the end of the forecast period, growing from an estimated CNY11.59trn (US$1.69trn) in 2009 to a projected CNY20.77trn (US$3.58trn) in 2014. Retail sales broke through CNY10trn (US$1.5trn) for the first time in 2008, according to the Ministry of Commerce (MOFCOM). Strong underlying economic trends, population growth and the increasing wealth of individuals are key factors behind retail market expansion. Regulatory reform following China’s accession to the WTO in 2001 has allowed foreign retailers to make significant inroads into the market, contributing to forecast average annual retail sales growth of 15% in US dollar terms.
China’s nominal GDP was an estimated US$4.78trn in 2009. Average annual GDP growth of 8.0% is predicted through to 2014. With the population estimated to increase from 1.36bn in 2009 to 1.41bn by 2014, GDP per capita is forecast to grow by 85.5% to reach US$6,533 in 2014. Our forecast for consumer spending per capita is for an increase from US$1,407 in 2009 to US$2,729 in 2014. The growth in the overall retail market will be driven, in large part, by a growing urban population with high disposable incomes and an interest in aspirational purchasing. According to socioeconomic forecasters Global Demographics, more than 30% of all urban households in China had yearly incomes in excess of CNY40,000 (US$5,848) in 2007. The National Bureau of Statistics (NBS) estimates that urban retail sales accounted for nearly 68% of total retail sales in 2009, albeit down slightly on 2008.
Retail sectors that are likely to see substantial growth over the forecast period include over the counter (OTC) pharmaceuticals, with estimated sales of US$9.57bn in 2009 predicted to rise by 74.6% by 2014, reaching US$16.71bn. Automotive sales, worth an estimated US$151.78bn in 2009, are forecast to grow 78.7% by 2014, reaching a projected US$271.28bn. Sales of consumer electronic products are predicted to increase by 55.8%, from an estimated US$128.77bn in 2009 to US$200.64bn in 2014. A sizeable multinational retail presence following the lifting of foreign direct investment (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, etc – already accounting for an estimated 22% of the total retail market, far higher than India’s 7%.
Chinese retailers have been expanding into secondary and tertiary towns and cities.
As of 30 June 2009, GOME Electrical Appliances Holding, China’s leading retailer of household appliances and consumer electronic products, had 298 outlets in 178 second-tier cities, accounting for over a third of its total number of stores and generating 28.08% of its total sales, up 2.88 by percentage points (pp) from 2008. Partnerships between local players and multinationals are also allowing for rapid development of the retail market. In November 2007, Beijing Hualian Group signed a joint venture agreement with BritishChina company Costa Coffee to open 300 Costa stores in Beijing, Tianjin, Hebei, Northeast China and other regions in the next few years.
Retail sales for Asian countries in 2009 were an estimated US$2.29trn. China and India alone accounted for almost 93% of regional retail sales in 2009 and by 2014 their share of the regional market is expected to be close to 94%. Growth in regional retail sales for 2009-2014 is put at 105%, or an annual average 15%. The Philippines should experience the most rapid rate of growth, followed by China. For China, the estimated 2009 market share of 74.1% is expected to rise to 76.5% by 2014.
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