China's retail boom has encouraged a massive influx of new outlets but the extra competition has hurt profit margins, according to a new market survey.
China's retail sales grew by 10 percent last year - a stand-out performance amid the gloom of retail markets abroad.
But at the same time, the number of retail outlets has grown faster than the value per store, according to 2003 China Market Information Digest released yesterday by the global market research company AC Nielsen.
Covering key statistics on over 120 major fast-moving consumer goods (FMCG) categories and three years of market trends, the China Market Information Digest is designed to provide a complete picture of China's retail market and to help evaluate the behavioral changes in different market segments.
China's consumer packaged goods market is huge and has enormous potential. In 2002 its market outpaced those of other global economies with sales of major FMCGs reaching 36.3 billion yuan (US$4.38 billion).
"Our China Market Information Digest and previous studies all point out that, with an increasing number of retail outlets, China is becoming a battlefield. Both local and foreign retailers and manufacturers are trying to claim a share," said Glen Murphy, managing director of AC Nielsen China.
"Thrilling and enticing as it is, China is never an easy market. With intensified competition resulting from China's further opening of the market and entry to the WTO (World Trade Organization), retailers and manufactures are compelled to develop clear strategies in order to win consumers in the long term," he said.
The survey also found that while most consumer goods categories were growing fast, their average prices were in decline.
Among the 29 food/beverage and non-food categories monitored nationwide in the Digest, 15 were identified as the largest packaged consumer goods categories. Carbonated and sports drinks still topped the list with a total sales value of nearly 10.4 billion yuan (US$1.25 billion) in 2002, although the figure had declined from 11.1 billion yuan (US$1.34 billion) in the year before. Shampoo is the second largest category.
Only eight of the 29 categories reported an increase in average price in 2002.
The Digest said the future of China's retail market is in supermarkets, hypermarkets, convenience and department stores, rather than traditional grocery stores and kiosks.
Over the past several years, these "modern trade" outlets have taken off in China, dramatically changing its retail market landscape. In 2002, there were up to 25,000 such outlets - up 35 percent.
The growth in total sales from "modern trade" in 2002 reached over 8.9 billion yuan (US$1.07 billion), a 24 percent increase from 2001. That accounts for 25 percent of the total retail sales in China.
"Obviously the market is getting more and more competitive as the increase in the number of retail outlets - which has outpaced the growth of retail sales - has lowered the sales volume per store," Murphy pointed out.
(China Daily July 16, 2003)
