Current Status and Format of China’s Retail Industry

David F. Miller Center For Retailing Education and ResearchInternational Retailing Education and Training (IRET )

Current Status and Format of China’s Retail Industry

Current Retail Status Module David F. Miller Center for Retailing Education and Research

Current Status of China Retailing Overview Total volume of retail sales of consumer goods is

$1,253 Billion RMB, an increase of 15.5% (2009)

Top 100 Chain Store Retailers in 2009 $136 Billion in sales, an increase of 13.5% 137,000 stores, an increase of 18.9% Market share, 11%

Foreign retailers Sales increased 20.4%; Number of stores increased 15.7%


Sales of Top 100 Chain Store Retailers in China (Billion Yuan)


Current Status of China Retailing Overview (Cont.)

Regional growth First Tier Cities

Sales increased 5.3% Number of stores increased 7.2%

Second and Third Tier Cities Sales increased 19.3% Number of stores increased 14.7%


Types of Retailers in US (Levy and Weitz, 2004)

Conventional SupermarketBig-Box Food Retailers

(Supercenters, Hypermarkets, andWarehouse Club)

Convenience Stores

Discount Stores Specialty Stores

Category SpecialistDepartment Stores

DrugstoresOff-Price Retailers

Value Retailers

Food Retailers General Merchandise Retailers

Nonstore Retailers

Electronic RetailingCatalog and Direct-Mail

RetailingDirect Selling

Television Home ShoppingVender Machine Retailing

Current Retail Status Module David F. Miller Center for Retailing Education and Research 2-6

Characteristics of Food Retailers

Current Retail Status Module David F. Miller Center for Retailing Education and Research 2-7

Characteristics of General Merchandise Retailers


Types of Retailers in China (China’s National Standards on Classification of Retail Industry)

Conventional Grocery Stores Convenience Stores

Value RetailersSupermarketsHypermarkets

Warehouse ClubsDepartment StoresCategory Specialist

Specialty StoresHome Improvement Center

Shopping Centers(Community, CBD, Suburb)

Factory Outlets

Electronic RetailingCatalog and Direct-Mail

RetailingDirect Selling

Television Home ShoppingVender Machine Retailing

Store-based Retailers Nonstore Retailer


Retail Shop Format Features

Location Residential area or traditional business area

Trade Area and Target Customers Radius of 0.3km; relatively fixed resident customers

Size 100 square meters

Commodity Structure Mainly cigarette, soft drinks, alcohol drinks, snack foods

Selling Form On counter style or self-choice style or combination of the 2

Service Open more than 12 hours a day

Information System None or very basic information system

Conventional Grocery Store


Conventional Grocery Store (Cont.)

Location Module David F. Miller Center for Retailing Education and Research

Conventional grocery store in China vs. Mom and pop stores


Mom and pop store (US)Conventional grocery store (China)


Street/Open Market


Open Market


Department stores in China



Location Center of business area of cities;Business districts formed in history

Trade Area and Target Customers

Mainly flow customers who pursue fashion and taste

Size 6,000-20,000 square meters

Commodity Structure Various categories of commodities; such as clothes, footwear, bags and suitcases, cosmetics, appliances

Selling Form Open-shelf self-choice style combined with on counter trade

Service Emphasize on service;Built in restaurant, cafeteria, and entertainment facilities

Information System High level


Key Players (2008)Retailers Sales (100 M

RMB)Number of Stores

Bailian 943 6418

Dashang 626 150

Chongqing Shangshe 263 294

Hefei 194 125

Yinzuo 187 164

New World 148 33

Wuhan Zhongbai 142 630

Liqun 139 866

Changchun Yatai 121 18

Wangfujing 120 17


The Market Share of Department Stores


Current Status

Fast Growth 30% Growth Rate

Relatively High Profitability Gross margin =15.8% Profit = 4.4%

Geographically Unbalanced Sales in Shanghai, Beijing, Tianjing, Liaoning and

Shandong comprise 46.5% of national sales. Industry is Relatively Fragmented

CR4 = 21% Mainly Regional and No National Leaders


Current Status (Cont.)

It has been influenced the most by the current economic recession, but the industry is continuously growing.

Market is further segmented Community Department Stores, Fashion Department

Stores, High-end Department Stores, and Shopping Mall Department Stores

Customer service has significantly improved Large scale discounts hurt the profitability Distribution system needs changes.

Buying from regional agents



Location Business area, inner city, and communities


Radius of 2 kmMainly residents in the trading area

Size Less than 6,000 square meters

Commodity Structure Mainly prepackaged food, fresh food and commodity

Selling Form Open-shelf self-choice styleDifferentiated entrances and exitsPay at exit

Service Open more than 12 hours a day;

Information System Relatively high level



Location Business district, inner city, suburb, vital thoroughfare, and large residential area


Radius of 2 kmMainly residents in the trading area and traffic

Size More than 6000 square meters

Commodity Structure Various categories of commodities Willing to develop self-owned brand

Selling Form Open-shelf self-choice styleDifferentiated entrances and exitsPay at exit

Service Open more than 12 hours a day

Information System Relative high level


Introduced in the early 1990s Serving International Visitors

1990s: Shifted focus to the local community. Supermarket developments took off in big cities.

2000 to Present: Have been experiencing rapid growth and competition became fierce.


Supermarket and Hypermarket Sales (Billion RMB)


Number of Supermarket and Hypermarket Stores


Key Players (2008)Retailers Sales (100M

RMB)# of Stores Market share

China Resources Vanguard

638 2,698 13.4%

Lianhua 500 3,932 10.5%

Carrefour 338 134 7.2%

RT-Mart 336 101 7.0%

Wu-Mart 302 2,010 6.4%

Wal-mart 278 123 5.8%

Nonggongshang 267 3,330 5.6%

Xinyijia 175 105 3.7%

Trust Mart 164 104 3.4%

Hualian 150 1,946 3.1%


Current Status

Hypermarkets Gross margin is 13.43%, profit is 4.53%

Supermarkets Gross margin is 12.32%, profit is 4.15%

Market concentration CR4=40% CR8=60%



Fresh food is becoming the “cash cow”. The relationship with suppliers needs

improvement. Hypermarket growth is the fastest among the

various formats. Saturated in the first and second tier cities Expanding in the third and fourth tier cities

Foreign retailers dominate the Hypermarket format. Innovations and Differentiations

High-end Supermarkets, Fresh Food Supermarkets, and Community Supermarkets.

Supermarkets pursue regional advantages and serve communities.


Convenience Store



Location Business area center; vital thoroughfare and public area (surrounding stations, hospitals, business buildings, entertainment centers, gas stations, etc.)


Within a five minute walk; single and young people

Size 100 square meters and highly space efficient

Commodity Structure Mainly fast food and commodities, priced higher than market average

Selling Form Mainly open-shelf self-choice stylePay at cash register at the door

Service Open more than 16 hours a dayProvide facilities for fast food and some other services

Information System High level

Convenience Stores


U.S. Vs. China

Convenience store (US)Convenience store (China)


Convenience Store (Cont.)


Convenience Stores


Number of Convenience Stores


Sales of Convenience Stores (Billion RMB)


Market Share of Convenience Stores


Current Status

Convenience stores are mainly regional. Haode, Kede and Suguo in Eastern China Meyijia, Tianfu and Shanghao in Southern China Liqun and Weike in Shandong 7-11 is a national store chain

12 leading retailers own 60% convenience stores Domestic retailers dominate the convenience store

format, with the exception of 7-11. Shanghai and Zhejiang have half of the

convenience stores.



Competition with other retail formats has become intensive.

More attention is paid to fresh food Instant food and meal boxes

Improved distribution Foreign convenience retailers replenish twice daily Chinese convenience retailers replenish once daily Constructed distribution centers

Become big chain or die Most of the convenience stores are in the red.



Location Center of city business areasInside department stores and shopping centers

Trade area and target customers

Mainly attract customers who are shopping for certain kind of product

Size Differs with the products offered

Commodity Structure Mainly specific kind of productProfessional, various kinds, plenty of choices

Selling Form Open-shelf, self-choice style combined with on the counter trade

Service Emphasize on quality serviceSalespeople are knowledgeable and professional

Management System High level


# of Specialty Stores


Sales of Specialty Stores (100M RMB)


Non-Store Retailing

Source: ACMR-IBISWorld Databasen-Store Retailing


Online Retailing - Products and Services

Segmentation-products and service


Revenue and Revenue Growth Rate


Geographic Distribution of Revenue

About 97.4% of industry revenue was generated in East China, North China and Middle South China in 2009.


Online Retailing

The number of Internet users increasing fast 1996, 0.1 million; 1999, 4 million 2009, 340 million (No. 1 in the World)

110 million internet shoppers, increased 45.9% in 2008

2009 online sales was $248.35 billion

31 out of top 100 chain store retailers in China had online retailing as of 5/2010


Online Consumers

On-line consumers are most of the age groups 18-24 and 25-30,according to CNNIC (China Internet Network Information Center)


Business to Business (B2B) E.g.: Alibaba

Customer to Customer (C2C) E.g., Taobao ， Paipai

Business to Customer (B2C) E.g., Dangdang, Joyo, and Jingdong Shangcheng

Business Models


Industry Characteristics

Big market with great potential Barriers to entry are low Competition is increasing Government supports The level of regulation is decreasing. C2C dominates the market

B2C is 1/8 of C2C


Market Share of Online Stores(China Internet Information Center, 2009 Survey report on China Internet Market)


Market Share of Online Stores Taobao

Sales in 2008 were $146.2 M, an increase of 131%

Close to 100 million registered users (by the end of 2009).

Age 25-32 = 48%; Age 16-24 = 35%


Sizes of Different Retail Formats (2008)

Sales (Million Yuan)

Growth (%)

Acreage(Square meters)

Growth (%)

# of Employees

Growth (%)

# of SKUs Growth (%)

Hypermarkets 212.9 12.4 11,275 1.8% 239 0.7 25,537 4.8

Supermarkets 72.4 11.3 2,672 1.4% 101 2.8 14,325 7.4

Department Stores

883.97 11.1 32,531 1.4% 887 0.0 93,422 0.8

Convenience Stores

4.73 12.3 139 0 9.1 5.8 2,614 -0.4

Home Electronics

501.64 2.0 7,667 1.9% 289 -1.0 14,216 11.4

Drug Stores 37.06 7.1 752 0 61 0.0 6,739 4.0


Efficiency and Profitability of Different Formats (2008)

Sales/# employee (1000 Yuan)

Growth (%)

Sales/Square Meter (1000 Yuan)

Growth (%)

Sales/# SKU (1000 Yuan)

Growth (%)

Transaction/day

Growth (%)

Sales/customer (Yuan)

Growth (%)

Gross Margin (% )

Growth (%)

Hypermarket

891 1.8 17.6 6.27 7 8.4 10059 1.0 58.1 12.9 12.9 0.3

Supermarket

719 8.3 27.1 9.81 5 3.5 4554 6.5 43.6 4.5 12.9 0.9

Department Store

997 15.3 27.2 9.3 3.5 9.2 10839 -5.2 226.4 1.5 14.1 0.3

Convenience Store

521 6.6 34 12.3 1.8 12.7 758 -2.7 16.2 11.1 16.4 0

Home Electronic

1733 7.9 65.4 6.89 35.3 -8.5 729 -7.8 1901.0 2.3 10.8 1.0

Drug Store

610 6.6 49 7.1 5.5 2.9 1724 -3.8 48.2 1.3 23.0 -0.7

Current Status and Format of China’s Retail Industry

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