Abstract
The Q409 BMI China Retail Report predicts that the country’s total
retail sales are expected to increase
by 43% in local currency terms by
the end of the forecast period, growing from CNY10.70trn
(US$1.54trn) in
2008 to a projected CNY15.25trn (US$2.54trn) in 2013. Retail sales broke
through
CNY10trn (US$1.5trn) for the first time in 2008, according to the
Ministry of Commerce. 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 annual retail
sales growth of 15% in
US dollar terms.
China’s nominal GDP was US$3.82trn in 2008. Average
annual GDP growth of 7.8% is predicted by
BMI through to 2013. With the
population estimated to increase from 1.35bn in 2008 to 1.40bn by 2013,
GDP per capita is forecast to grow by 61.8% to reach US$4,594 in 2013. Our
assumption of consumer
spending per capita is for an increase from
US$1,161 in 2008 to US$2,750 in 2013.
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 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) had forecast that urban retail sales would account
for
nearly 70% of total retail sales in 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$8.50bn
in 2008 predicted to almost double by 2013,
to reach US$16.68bn.
Automotive sales, worth US$118.60bn in 2008, are forecast to grow by 61%
by
2013, reaching a projected US$191.01bn. Sales of consumer electronic
products, meanwhile, are
predicted to increase by 44%, from US$111.36bn in
2008 to US$160.58bn by 2013.
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’ – i.e. Western-style chain
outlets, department stores, supermarkets, etc. – already
accounting
for an estimated 20% of the total retail market, far higher than India’s
5%.
Chinese retailers have also been expanding into secondary and tertiary
cities. By the middle of 2008,
GOME Electrical Appliances Holding,
China’s leading retailer of household appliances and consumer
electronic products, had 305 outlets in 171 second-tier cities, representing
more than one-third of its total
number of stores and generating more than
20% of its total sales.
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 (JV)
agreement with
UK-based coffee company Costa to open 300 Costa stores in
Beijing, Tianjin, Hebei, north-eastern China
and other regions in the next
few years.
Retail sales for the BMI universe of Asian countries in 2008
were an estimated US$2.05trn. China and
India alone in 2008 accounted for
almost 93% of regional retail sales, a share they are expected to
maintain
throughout the forecast period. Growth in regional retail sales for the period
2008 to 2013 is put
by BMI at 70%, or an annual average 14%. India should
experience the most rapid rate of growth,
followed by Indonesia and
Malaysia. For China, the estimated 2008 market share of 75.1% is expected
to
fall to 72.8% by 2013.
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