Introduction
IGD predicts the Chinese grocery market will grow by 65% to $456 billion (£240 billion) in the next five years. Opportunities are great but there are also major challenges facing companies looking to succeed in the market.
The grocery market in China has been open to non-domestic retailers since the early 1990s, and until December 2004, the central government restricted the expansion of international retailers. The majority of international retailers that have entered the market have made huge headway in the primary cities of Shanghai, Beijing, Tianjin and Guangzhou. The rest of the market outside the primary cities is very fragmented and is dominated by regional domestic retailers who have a strong foothold in their local province.
Retail Sales of International Retailers in China, 2003/04 (US$ million)
Source: IGD Research
Domestic Retailers in China
Bailian Group is the largest retailer in China. It was created in 2003 following the merger of Shanghai Lianhua and Shanghai Hualian. It has an estimated turnover of 48.5 billion Rmb at the end of 2003. IGD estimates that the company currently operates 4,500 stores across the eastern regions of China. Others domestic retailers include Wu-Mart Jingkelong, and wet markets, plus numerous small state owned retailers.
Top 20 Retailers in China, Year End 2003
| |
Retailer |
Store Formats |
Store
Numbers |
Sales
Rmb (billion) |
| 1 |
Shanghai Bailian |
Hypermarket
Supermarket
Convenience |
4,357 |
48.5 |
| 2 |
Dalian Dashang |
Hypermarket
Supermarket
Convenience |
96 |
18.2 |
| 3 |
Beijing GOME Appliances |
Home appliances |
139 |
17.8 |
| 4 |
Beijing Hualian Group |
Hypermarket
Department store |
62 |
13.6 |
| 5 |
Carrefour China |
Hypermarket
Discount* |
40 |
13.4 |
| 6 |
Shanghai Nong Gong Shang |
Hypermarket
Supermarket
Convenience |
1,213 |
12.4 |
| 7 |
Su Ning Appliance Group |
Home appliances |
148 |
12.1 |
| 8 |
Sanlian Commercial Group |
Home appliances |
202 |
10.7 |
| 9 |
Vanguard |
Hypermarket
Supermarket |
467 |
10.3 |
| 10 |
Suguo Supermarket
(Jiangsu province) |
Supermarket |
1,162 |
9.6 |
| 11 |
Shanghai Yongle Appliance |
Home appliances |
55 |
8.8 |
| 12 |
Beijing Wu-Mart |
Hypermarket
Supermarket
Convenience |
429 |
8.5 |
| 13 |
Wuhan Wushang Group |
Hypermarket
Discount |
31 |
7.0 |
| 14 |
Chongqing Shangshe Group |
Hypermarket
Supermarket |
81 |
6.6 |
| 15 |
Abest Supermarket |
Supermarket |
46 |
5.9 |
| 16 |
Wal-Mart China |
Hypermarket
Supermarket
Membership Club |
33 |
5.9 |
| 17 |
Jiangsu Wenfeng Great World |
Hypermarket
Discount |
326 |
5.7 |
| 18 |
Jiangjiang Metro |
Hypermarket |
18 |
5.6 |
| 19 |
Home World Chain |
Hypermarket |
49 |
5.3 |
| 20 |
Beijing Jingkelong |
Hypermarket
Supermarket
Convenience |
156 |
5.2 |
* Since 2003, Carrefour has introduced its Champion supermarket format
Source: IGD Research, Government data
International Retailers in China
International retailers present in China are Auchan, Carrefour, Ito-Yokado, Metro, Tesco and Wal-Mart. They entered in the 1990s introducing the hypermarket format and currently operate 153 hypermarkets. As Government restrictions are removed rapid expansion into the second and third tier cities, in particular those situated in the east is predicted and IGD predicts that in 2005 international retailers will open an additional 93 hypermarkets.
What are the Popular Store Formats?
Domestic retailers lead in the supermarket sector. Carrefour is the only international retailer currently operating this format under the Champion fascia, which was introduced in 2004. Carrefour aims to have opened 30 more supermarkets by the end of 2005.
The hypermarket format was introduced into the market by international retailers. Consequently, domestic retailers were quick to develop their own hypermarkets to remain competitive. The Bailian Group and Beijing retailer Wu-Mart have developed a sophisticated offer.
Challenges
China is one country – but with 32 markets, each with its own tastes and shopping habits, understanding the diverse, fragmented and constantly evolving needs of the consumer will be the biggest challenge. There are huge differences between Chinese consumers, in terms of different generations, eating habits and where they live.
Despite the projected economic development and increase in consumer wealth, operating costs will continue to move upwards.
The cost of managerial talent and prime sites will inevitably rise as demand exceeds supply and the depletion of agricultural land to make way for rapid urbanisation will lead to an increase in the price of raw materials and staple products.
