China’s retail sales to grow 74 per cent: Report

    China’s retail sales to grow 74 per cent: Report

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    The Q3 2010 China Retail Report forecasts that the country’s total retail sales will increase by 74 per cent in local currency terms by the end of the forecast period, growing from $2.09 trn in 2010 to a projected $4.21 trn in 2014. Retail sales broke $1.6 trn for the first time in 2008, according to data from 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 December 2001 — has allowed foreign retailers to make significant inroads into the market, contributing to forecast average annual retail sales growth of 14.3 per cent in local currency terms.

    China’s nominal GDP is forecast to be $5.4 trn in 2010 and the average annual GDP growth of 8.1 per cent is predicted between 2010 and 2010. With the population estimated to increase from 1.37 billion in 2010 to 1.41 billion by 2014, per capita GDP is forecast to grow by 85.6 per cent to reach $6,493.

    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 socio-economic forecasters Global Demographics, more than 30 per cent of all urban households in China had an annual income above $5,848 in 2007. The (NBS) estimates that urban retail sales accounted for nearly 68 per cent of the total retail sales in 2009, which was down slightly in 2008. Retail sectors likely to achieve substantial growth over the forecast period include over the counter (OTC) pharmaceuticals, with forecast sales of $13.95 billion in 2010 predicted to rise by 48.5 per cent by 2014 to $20.72 billion.

    Automotives sales are predicted to grow 61.8 per cent by 2014, reaching $271.28 billion. Sales of consumer electronic products are predicted to increase by 38.6 per cent, from a forecast of $145.76 billion in 2010 to $202.02 billion in 2014.

    A sizeable multinational retail presence following the lifting of (FDI) restrictions in 2001 has ensured the early adoption of modern retail best practices in China. Modern retail already accounts for an estimated 22.5 per cent of the total retail market, far higher than the seven per cent in India.

    Chinese retailers have been expanding into secondary and tertiary towns and cities. By June 2009, Holding had 298 outlets in 178 tier-II cities, accounting for more than a third of its total number of stores and generating 28.08 per cent of its total sales, up by 2.88 percentage points from 2008. Partnerships between local players and multinationals are providing for rapid development of the retail market.

    In November 2007, Beijing Hualian Group signed a joint venture agreement with British company to open 300 Costa stores in Beijing, Tianjin, Hebei, North-east China and other regions in the next few years.

    China and India are predicted to account for almost 91 per cent of regional retail sales in 2010, and by 2014 their share of the regional market is expected to be more than 92 per cent. Growth in regional retail sales for 2010-2014 is forecast at 72.2 per cent. India should experience the most rapid rate of growth, followed by China.

    — IndiaRetailing Bureau