Key Figures and Growth Areas

From January to June, China’s total retail sales of consumer goods amounted to 23.5969 trillion RMB, representing a 3.7% increase compared to the same period last year.

Online retail sales of physical goods reached 5.9596 trillion RMB, up by 8.8%, accounting for 25.3% of the total retail sales of consumer goods.

Significant growth was observed in the online retail sales of food, clothing, and daily necessities:

• Food products: +17.8%
• Clothing: +7.0%
• Daily necessities: +7.8%

Technological Impact on Retail

According to a spokesperson from the NBS, the advent of new technologies such as big data and artificial intelligence has generated innovative consumption scenarios.

Emerging consumer models like live-streaming e-commerce and instant delivery services have been pivotal in driving the 8.8% increase in online retail sales of physical goods. Additionally, the volume of express delivery services has surpassed 80 billion packages.

E-Commerce Trends and Analysis

The China Retail Performance Index (CRPI) for July, released by the China General Chamber of Commerce, showed the e-commerce physical goods total sales index at 50.2%, down 4.2 percentage points from the previous month but still within the expansion range.

Meanwhile, the e-commerce average order value index stood at 50.0%, a 1.6 percentage point increase from the previous month.

Analysts attribute the rise in the average order value to the conclusion of mid-year e-commerce promotional events, which resulted in a decrease in “bargain-hunting” consumer behavior.

Outlook

The robust growth in China’s online retail sector reflects the continuous evolution and adaptation of the retail industry to new technologies and consumer preferences. As digital transformation accelerates, the integration of AI and big data is expected to further enhance the efficiency and appeal of online shopping, maintaining the sector’s upward trajectory.

China’s Retail Sales Sees 4.7% Year-on-Year Increase in Q1

China’s retail sector showed a robust increase in March, with total retail sales of consumer goods climbing to 3.9 trillion yuan ($568 billion), marking a 3.1% rise compared to the same month last year, according to data from the National Bureau of Statistics released on April 17. Excluding automobiles, sales rose by 3.9% to nearly 3.5 trillion yuan.

For the first quarter of 2024, the total retail sales reached approximately 12 trillion yuan, a 4.7% increase year-over-year. Sales excluding cars also mirrored this growth rate, amounting to 10.9 trillion yuan.

Urban areas saw significant retail activity, with sales amounting to 3.38 trillion yuan in March alone, up by 3% from last year, while rural retail sales rose by 3.8% to 518 billion yuan. Over the first three months, urban sales increased by 4.6% to 10.4 trillion yuan, whereas rural sales grew faster at 5.2%, reaching 1.6 trillion yuan.

The data also highlighted a divergence in performance across different retail sectors. In March, goods sales increased by 2.7% to reach 3.5 trillion yuan, while the catering industry surged by 6.9% to 396 billion yuan. From January to March, goods sales rose by 4% to 10.7 trillion yuan, and catering revenues jumped by 10.8% to 1.3 trillion yuan.

Looking at retail formats, the first quarter showed mixed results. Supermarkets, convenience stores, specialty stores, and brand-exclusive shops saw sales increase by 2.2%, 5.2%, 6.3%, and 1.1% respectively, while department stores experienced a sales drop of 2.4%.

E-commerce continued to expand rapidly, with online retail sales hitting 3.3 trillion yuan in the first quarter, up by 12.4% year-over-year. Online sales of physical goods, which include food, clothing, and other consumer items, grew by 11.6% to 2.8 trillion yuan, representing 23.3% of the total retail sales. Specific increases were seen in food (21.1%), clothing (12.1%), and other consumer goods (9.7%).

Excluding automobiles, the retail sales ascended to 3,813.1 billion yuan, demonstrating a 7.9% rise. This surge is part of a broader trend observed throughout the year, with total sales reaching 47,149.5 billion yuan, up 7.2% from the previous year.

Non-automobile sales contributed significantly, reaching 42,288.1 billion yuan, a 7.3% increase, showcasing the robust consumer confidence and spending that defines the retail landscape in China.

Urban and rural areas alike witnessed growth, with urban consumer goods sales hitting 3,707.1 billion yuan in December, a 7.2% increase, and rural sales climbing to 647.9 billion yuan, up by 8.9%.

Annually, urban sales reached 40,749.0 billion yuan in 2023, and rural sales saw a notable 8.0% increase to 6,400.5 billion yuan, highlighting the widespread economic vitality across various demographics.

The consumption pattern analysis reveals a diversified growth trajectory, with goods retail sales reaching 3,814.5 billion yuan in December, a 4.8% year-on-year increase.

The catering industry, in particular, experienced a remarkable boom, with income soaring to 540.5 billion yuan, up by an astonishing 30.0%. Over the year, goods retail sales saw a 5.8% increase, totaling 41,860.5 billion yuan, while the catering industry’s income surged by 20.4%, reaching 5,289.0 billion yuan, underscoring the dynamic recovery and expansion of China’s service sectors.

The retail format analysis for 2023 indicates a nuanced landscape.

Department stores, convenience stores, specialty stores, and brand stores in retail enterprises above the designated size witnessed growth rates of 8.8%, 7.5%, 4.9%, and 4.5% respectively.

However, supermarkets experienced a slight contraction, with sales decreasing by 0.4%, signalling shifting consumer preferences and the evolving retail environment.

Online retail sales emerged as a formidable force, totaling 15,426.4 billion yuan in 2023, an 11.0% increase from the previous year.

Physical goods online sales accounted for 27.6% of the total retail sales, reaching 13,017.4 billion yuan, up by 8.4%. Within this segment, food, clothing, and consumer goods experienced growth rates of 11.2%, 10.8%, and 7.1% respectively, illustrating the increasing consumer reliance on digital platforms for a wide range of purchases.

Private domain operation trends of retail chain enterprises in China

Founded in 2018, Shihuituan is a gourmet community e-commerce service platform. It focuses on fruits and vegetables as well as household items targeting the community as the entry point.

For Youhaodongxi (meaning “Got Good Stuff”) founder Chen Ying, Shihuituan is ultimately meant to become the Uber of convenience stores. “We don’t own convenience stores, but we aim to revamp convenience store transaction models, supply chain models, software systems, and user outreach patterns.”

In the past six months, community group purchase has been a hot topic. After successfully tapping into the community scenario, the local services market is finally within reach of WeChat sellers. Communities, with their large numbers, can no doubt alleviate the consumer flow anxiety faced by both online and offline retailers.

Half a year in, the “thousand group-purchasing app war” is still going on. Several leading contenders have already emerged, leaving little room for small players in the battlefield. The evolving tactics of these leading companies will largely shape the future of community group purchasing.

Whether or not we will see another Meituan rise from the ashes will depend mainly on what these leading companies manage to deliver in 2019. Online for only half a year, Shihuituan (developed by Youhaodongxi) was first to publish their winning reports.

Their numbers show that after reaching the 100 million benchmark at the end of last year, Shihuituan’s GMV soon reached 150 million yuan in January of 2019. They have now penetrated over 10 million households in 60 cities, with 1.5 million registered users and 40 thousand group leaders.

“In third-, fourth- and fifth- -tier cities, the core challenge is ordering size, for which group purchasing is the perfect solution”, says Chen Ying. Previously, rural startups often failed because of purchasing power. Without subsidies, they find it difficult to survive.

Chen Ying first became interested in the group purchasing model 3 years ago. “Youhaodongxi is the first-tier city version of group purchasing, the ‘curator’ (in Youhaodongxi) and the ‘group leader’ (in Shihuituan) are the same things.” The only difference is that due to higher purchasing power in first-tier cities, Youhaodongxi takes on the role of guarantor.

Although group purchasing has only been around for a few years, companies in this arena have already passed the 100 million mark, which goes to show the potential of the field.

With the IPO of Pinduoduo, the market is increasingly welcoming of social retail businesses, while consumers are also beginning to embrace group purchasing. Chen Ying grasped this market signal: the world is ready for community group purchasing.

Youhaodongxi has already taken roots in the first- and second-tier cities. For Chen Ying, the question is how it enters into third- and fourth-tier cities, as well as the rest of the country. “Shihuituan is our major play in the bid to enter rural markets.”

Peng Wang’s first move after his appointment as leader of Shihuituan was to test out different models. “We chose two cities with different geological and consumer characteristics, Nanjing in southern China, and Tianjin in the north. We wanted to test different models.” The one in Tianjin was a convenience store model, while in Nanjing they tested a local mothers model, said Shihuituan CEO Wang Peng.

The advantage of convenience stores is that they already have a customer flow as well as storage space, so they took off fairly quickly. In comparison, it took much more effort for local mothers to start, but because of the tight-knit relationships between neighbors in a community, the delayed potential of local mothers soon became evident.

In July and August of last year, however, Shihuituan’s business in Nanjing took a drop due to the local mothers model. Wang and Chen learned the hard lesson that these local mothers will always put their child first.

“The more free time children have, the fewer time mothers have. If for example, the mothers go on vacation with their children during summer break, the business will stop. This is not a sustainable business model.”

Compared to convenience stores, it is also much harder to find a suitable local mother. One must gain entry into the online circles of the community to find an appropriate candidate…

Read the full article on the eBook: How a community-based e-commerce startup managed to reach 60 cities and 10 million households in China.

China’s growth of FMCG sales is weaker in Q1 2018 compared with previous quarters, while new retail accelerates the online and offline integration.

Kantar Worldpanel reports that the fast-moving consumer goods (FMCG) market in the first quarter of 2018 was relatively weak with value growing by just 2.3% in the latest 12 weeks compared to the same period in 2017. China’s GDP grew by 6.8% in the first quarter of 2018, which is consistent with the last two quarters in 2017.

In the full year of 2017, FMCG growth rate reached a three-year high of 4.3%.

Modern trade (including hypermarkets, supermarkets, and convenience stores) grew by only 0.9% in the first quarter of the year in China. Across city tiers, provincial capitals, prefecture-level cities, and county level cities enjoyed faster growth, up by 2.8% collectively. Across regions, the West region has seen the strongest growth, up by 4.6%.

Leading Grocery Share of Modern Trade – National Urban China (%)

Note: Retailers in orange color are from Alibaba camp; retailers in blue are from Tencent camp.

Leading retailers taking sides either with Alibaba or Tencent

Among the top 5 retailers, Sun Art, Vanguard, and Walmart all strengthened their leading position and Yonghui surpassed Carrefour to be the No. 4 retailer in China.

As the only retailer in top 5 that enjoyed double-digit penetration growth, Yonghui’s share rose from 3.2% a year ago to 3.8% in the past 12 weeks in 2018. This performance has further been supported by the opening of 77 new stores in the first quarter of 2018. Yonghui has announced a bold plan to open 100 Yonghui Super Species and 1,000 Yonghui Life stores during 2018, with its O2O APP covering all its retail formats and 50% of overall business.

The first quarter of 2018 also witnessed the two Internet giants’ accelerated move into the offline world with various partnerships and acquisitions of key retailers.

The trend has continued into April when Vanguard Group announced its partnership with Tencent/JD. This would mean that the Tencent/JD camp would represent 21.7% share of the modern trade of FMCG. Further acquisitions are also being witnessed beyond the grocery sector, such as Alibaba’s full acquisition of Ele.me, the leading food delivery service, and investment into Easyhome, a home furnishing chain to broaden its offline reach and touch more areas of Chinese consumers’ lives.

E-commerce players trying to reinvent traditional trade

Kantar Worldpanel reported 26% growth in FMCG spends through e-commerce platforms in the first quarter of 2018. Both Tmall and JD.com are neck and neck in the B2C camp, yet YHD (acquired by JD.com in June 2016) experienced a continued loss of shoppers, with penetration falling from 1.5% last year to 0.6% in the latest quarter.

As e-commerce looks for new ways to drive traffic online, the key players are also turning to small format neighborhood stores and grocery stores.

In January, Tmall announced the opening of its first Tmall CVS in Hangzhou, transformed from a mom and pop shop. Alibaba applied big data and modern retail management system to help those traditional stores better optimize product procurement and assortment. JD.com also accelerated its pace in transforming the sector, with the ambitious plan in place to open 1,000 stores every day. Both are trying to extend their physical footprint to tap into lower-tier cities and rural areas where e-commerce penetration is still relatively low.

Check out new retail trend in China here or China’s luxury consumption trends in the new retail era.

This post was originally published on Kantar.com.

Convenient stores are historically the best performing type in China’s traditional retail market as you can see from the chart below of different types of retail stores in China.

The Impact of Taobao Villages 2017

The Chinese Ministry of Commerce (MOFCOM) views the fast-moving consumer goods (FMCG) market and industry in China with increasing optimism going into the second half of 2017. On the backs of China’s ongoing supply side reforms, MOFCOM sees an upswing in innovation and internal market development. 2016 saw a rapid increase in the number of FMCG enterprises as well as a significant increase in sales figures. New, big-data driven solutions began to enter the market, but major challenges remain for the FMCG industry.

STATE OF THE INDUSTRY

At the end of 2016, there were some 18.1 million businesses within the FMCG sector, an increase of 5.2% from 2015; of these, 2.45 million were corporate entities, which was an increase of 28%, a shift MOFCOM believes reflects increasing sophistication on the part of FMCG enterprises. Total sales of FMCG reached 29.65 trillion yuan (US$ 4.36 trillion), an increase of 10.4% from 2015.

Profits among mid- and large-sized enterprises remained stable, growing 3.8% to reach 165 billion yuan (US$ 24.2 billion). While the ROI for mid- and large-sized enterprises fell slightly to 3.64%, gross profit ratio increased slightly to 9.72%. There may be the beginnings of a reduction in corporate debt in this

Profits among mid- and large-sized enterprises remained stable, growing 3.8% to reach 165 billion yuan (US$ 24.2 billion). While the ROI for mid- and large-sized enterprises fell slightly to 3.64%, gross profit ratio increased slightly to 9.72%. There may be the beginnings of a reduction in corporate debt in this

Profits among mid- and large-sized enterprises remained stable, growing 3.8% to reach 165 billion yuan (US$24.2 billion). While the ROI for mid- and large-sized enterprises fell slightly to 3.64%, gross profit ratio increased slightly to 9.72%. There may be the beginnings of a reduction in corporate debt in this sector, but the evidence is still lacking; at the end of 2016, the debt-to-capital ratio of these mid- and large-sized enterprises fell to 72.3% from 2015’s 72.8%.

Within the FMCG sector, the online retail market remained a bright spot, with consumption rapidly expanding even as quality and safety within the market increases. Online sales hit 5.16 trillion yuan (US$ 759 billion), an increase of 26.2% from 2015; online FMCG sales were 4.19 trillion yuan (US$ 616 billion), an increase of 25.6%.

The market for physical retailers showed some signs of warming up in 2016, especially in convenience and local stores, malls, and supermarkets. However, there were signs of an increasing divergence within the physical retail sector between department and specialty stores (which showed sales growth of 1.3% and 3.1% respectively) and supermarkets and malls (with the growth of 6.7% and 7.4% respectively).

The market for physical retailers showed some signs of warming up in 2016, especially in convenience and local stores, malls, and supermarkets. However, there were signs of an increasing divergence within the physical retail sector between department and specialty stores (which showed sales growth of 1.3% and 3.1% respectively) and supermarkets and malls (with the growth of 6.7% and 7.4% respectively).

The market for physical retailers showed some signs of warming up in 2016, especially in convenience and local stores, malls, and supermarkets. However, there were signs of an increasing divergence within the physical retail sector between department and specialty stores (which showed sales growth of 1.3% and 3.1% respectively) and supermarkets and malls (with the growth of 6.7% and 7.4% respectively).

The market for physical retailers showed some signs of warming up in 2016, especially in convenience and local stores, malls, and supermarkets. However, there were signs of an increasing divergence within the physical retail sector between department and specialty stores (which showed sales growth of 1.3% and 3.1% respectively) and supermarkets and malls (with the growth of 6.7% and 7.4% respectively).

CHALLENGES

There are also major challenges ahead for China’s FMCG industry. Retail floor space in 2015 was 53.8% larger than in 2011 but was concentrated in Eastern China, cities, and department stores and supermarkets. This has led to an “unbalanced network” problem in which Western and rural China are underserved, as well as a “last mile” problem in which there are far fewer local and convenience stores than in the similar Japanese and Taiwanese markets (54 per million people in China vs. 425 in Taiwan).

Additionally, increasing costs have placed pressure on profit margins within the industry. While purchasing costs grew at a rate lower than sales growth (2.0% vs. 2.7%), labor costs grew at 4%, much faster than sales growth. Rent costs, meanwhile, have virtually doubled since 2011. Additional cost pressure comes from logistics, which consumes some 14.9% of GDP and a similar proportion of costs within the FMCG industry.

Rent costs, meanwhile, have virtually doubled since 2011. Additional cost pressure comes from logistics, which consumes some 14.9% of GDP and a similar proportion of costs within the FMCG industry; this figure has fallen recently, but is still approximately twice the ratio found in developed markets (USA, Japan, Germany).

Big data, while offering a way forward for FMCG retailers, is as yet still in its infancy; data gathering is still limited by the lack of POS (card) transaction data and prevalence of a cash economy, though online payment apps promise to change this lack. The use and analysis of existing data are still in its infancy. Quality, safety, and fairness, especially within online markets, is still a point of concern; fraud, false advertising, and lack of accountability are still commonplace.

Consumer association data (which must be regarded as incomplete) shows a 2.3% increase in complaints and a whopping 65.4% increase in complaints directed at online retailers. Similarly, data safety is an issue; some 51% of online accounts have suffered from data links leading to spam and telemarketing, while losses to ID theft and fraud reached 91.5 billion Yuan (US$ 13.5 billion).

Quality, safety, and fairness, especially within online markets, is still a point of concern; fraud, false advertising, and lack of accountability are still commonplace. Consumer association data (which must be regarded as incomplete) shows a 2.3% increase in complaints and a whopping 65.4% increase in complaints directed at online retailers. Similarly, data safety is an issue; some 51% of online accounts have suffered from data links leading to spam and telemarketing, while losses to ID theft and fraud reached 91.5 billion yuan (US$ 13.5 billion).

PROSPECTS

Looking towards industry prospects, MOFCOM sees a new round of change in the FMCG sector. In addition to major activity and growth within the online retail markets, there is increasing integration of on- and offline sales and payment methods, and online payment software has increased in efficiency, security, and versatility. These trends have allowed for better integration of sales channels and increasing digitalization on the part of physical retailers.

Big data and cloud computing applications are becoming more commonplace, providing better targeted marketing and more convenient payment. This will, in MOFCOM’s view, make it easier for enterprises to position themselves, their brands, and their products within a competitive market.

Consumer spending habits are undergoing major changes. In addition to the normal slow increase in consumer spending, there have been significant improvements in consumer sentiment surveys from mid-2016 on. Consumer expectations, as regards purchases, have shifted towards health and quality of life rather than fulfilling basic needs. Consumer spending increasingly rewards healthy or green goods, high-quality durables, smart goods, and luxuries, and is increasingly conducted online.

CONCLUSION

Despite the challenges, the advent of big data-driven strategy and planning, the shift to online retail, and the integration of physical retail with “wired” methods of payment and sales channels are driving major changes in business models for FMCG enterprises. These changes, as well as changes in the economic climate, regulatory environment, and environmental sustainability will continue to transform this industry in China.

How to satisfy Chinese consumers’ demand in digital retail era

The spending growth of China’s FMCG market showed to 2.9% in 2016 from 3.5% in 2015, according to Kantar Worldpanel. The growth of hypermarkets, supermarkets, and convenience stores slowed to a growth rate of just 0.7% in 2016。

However, counties in China grew by 5% YoY and the west region expanded its sales by 6.6% in 2016.

Local Chinese retailers continued to outperform international retailers in China in 2016. Sun Art increased its share from 7.5% to 7.8% while Yonghui remained the fastest growing player in 2016.

53.5% of China urban families purchased FMCG online. Kantar Worldpanel reported a staggering 54% growth in FMCG spending through e-commerce channel. China online retail sales grew by over 26% in 2016.

14 Chinese companies from China and Hong Kong made it to Deloitte’s top 250 retailer list.

Also read: China cross-border e-commerce insights 2016/2017

Online and convenience stores in China are enjoying strong momentum while supermarket growth continuously slowed and hypermarket sales even declined according to Kantar Worldpanel.

Chinese shoppers’ online purchase have expanded to wider range of categories and more imported goods. Imported FMCG items are four times more likely to be purchased online than in physical stores according to the report by Kantar.

The online sales of FMCG goods in China grew by 36.5% in 2015 from a year ago. In 2013, 40% of online sales growth comes from switching from offline channels. It jumped to 47% in 2015.

Among China’s top 10 convenience retailers, only FamilyMart and 7-Eleven have a national footprint across Tier-1 cities, with the others still maintaining a regional focus.

Growth of the number of China’s top convenience retail outlets 2013-2015