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China leads retail market expansion
03
Jun '15
Global management consulting firm A.T. Kearney’s Global Retail Development Index (GRDI) 2015 shows that China leads the pack of 30 countries in retail growth.

China's GDP growth of 7.4 per cent in 2014 was its lowest in a quarter century. Yet, relative to other developing markets, its performance is unparalleled, and in 2014 its retail growth was an impressive 11.6 per cent. China's retail market is expected to surpass that of the US as the world's largest retail market by 2018. China returned to number one in the GRDI rankings for the first time since 2010; it also ranked second in A.T. Kearney's most recent Foreign Direct Investment (FDI) Confidence Index.

Retailers in China are adapting to an environment of slower economic growth. Emphasizing profitability as well as market share, retailers are pruning and optimizing store portfolios. Grocers and department stores, in particular, are driving a lot of change, with leading players closing roughly 200 stores in 2014 compared to just 35 closings the year before.

US giant Walmart announced the closure of at least 29 stores in China, although it plans to open 111 new stores by 2016, as it clearly rethinks its plan. Carrefour closed eight stores and opened 11 in 2014, and launched a new convenience store format, Easy Carrefour, in Shanghai. Marks & Spencer will be closing five Shanghai stores in 2015 while opening flagships in Beijing and Guangzhou.

Some existing retailers are growing by expanding into new sectors. Wumart, a leading Chinese grocery retailer, entered the home improvement space by acquiring a 70 per cent share of B&Q China. Chinese conglomerate Sanpower acquired an 89 per cent stake in UK department store player House of Fraser, with plans to open up to 50 stores in China. Suning, China's largest consumer electronics retailer, plans to enter grocery by opening 1,000 supermarkets by 2020.

Despite the less exuberant market, some retailers with strong consumer and brand appeal have managed to sustain continued expansion. Apple plans to grow its retail presence in China from 15 to 40 stores in the next two years. Global fast fashion retailers opened a combined 264 stores in 2014, including 80 Uniqlo stores, 60 H&M stores, and 16 Zara stores. Some luxury players are also expanding despite China's anti-corruption policy, which many feared would dampen demand. Hermès opened its fifth Maison Hermès in the world in Shanghai, and Lane Crawford opened its third Mainland China store in Chengdu.

Shopping malls are feeling the pinch as growth slows. After aggressive recent construction and tremendous e-commerce growth, malls are showing signs of over-density and overcapacity. Many malls are trying to draw customers with better food offerings and entertainment experiences.

China's e-commerce market continues to sizzle, and it ranked second in A.T. Kearney's most recent Global Retail E-Commerce Index. E-commerce grew 50 per cent to nearly $450 billion in 2014—including $150 billion in mobile sales, now representing a third of the market—and is predicted to reach $1 trillion by 2019. (SH)

Fibre2fashion News Desk – India


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