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%).

The e-commerce giant’s focus on enhancing customer experience and strategic investments has resulted in notable year-over-year growth, despite challenging market conditions.

Strategic Initiatives and Business Review

Alibaba’s strategic initiatives have significantly impacted key sectors, including e-commerce, cloud computing, digital media, and logistics. The company’s focus on improving user experience, technological advancements, and expanding international commerce has paid off.

• E-commerce: Alibaba’s Taobao and Tmall Group saw a 4% year-over-year revenue growth, reaching RMB 93.2 billion, driven by a 5% increase in customer management revenue. The group also reported double-digit growth in online GMV and orders.
• Cloud Computing: The Cloud Intelligence Group reported a 3% revenue increase, reaching RMB 25.6 billion, with a notable 45% rise in adjusted EBITA. This growth was driven by higher adoption of public cloud services and AI products.
• International Commerce: The Alibaba International Digital Commerce Group experienced a 45% revenue increase to RMB 27.4 billion, thanks to strong performance in cross-border e-commerce, particularly from AliExpress.
• Logistics: Cainiao Smart Logistics Network’s revenue surged by 30% to RMB 24.6 billion, primarily due to increased demand for cross-border fulfillment services.
• Local Services Group: Reported a 19% revenue increase to RMB 14.6 billion, driven by Ele.me and Amap’s strong order growth.
• Digital Media and Entertainment Group: Revenue slightly decreased by 1% to RMB 4.9 billion, despite growth in Alibaba Pictures and Damai.

Financial Highlights

Alibaba’s financial results for the March quarter demonstrated resilience and strategic growth:

• Revenue: The company reported a 7% year-over-year increase in revenue, totaling RMB 221.9 billion (US$30.7 billion).
• Income from Operations: Despite a 3% decline, income from operations stood at RMB 14.8 billion (US$2.0 billion).
• Net Income: Net income attributable to ordinary shareholders decreased by 96% to RMB 919 million (US$127 million), mainly due to investment losses.
• Adjusted EBITA: Non-GAAP adjusted EBITA decreased by 5% to RMB 24.4 billion (US$3.3 billion).
• Share Repurchases and Dividends: Alibaba repurchased US$12.5 billion worth of shares in fiscal 2024 and announced a US$4.0 billion dividend.

Alibaba’s Q1 2024 results highlight the success of its strategic initiatives and investments in enhancing customer experience and technological infrastructure. The company’s focus on e-commerce, cloud computing, and international expansion positions it well for future growth. As Alibaba continues to innovate and adapt, it remains committed to delivering value to shareholders and capturing new market opportunities.

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

As part of the transaction, Alibaba will acquire 70.94% of equity interest in A-RT Retail Holdings Limited from Auchan Retail International S.A. and its subsidiary valued at approximately HKD28.0 billion (USD3.6 billion).

A-RT holds approximately 51% of the equity interest in Sun Art. Following the transaction, Alibaba will consolidate Sun Art in its financial statements. Additionally, Peter Huang has been appointed Chairman of Sun Art in addition to his current role as Chief Executive Officer.

Daniel Zhang, Chairman and Chief Executive Officer of Alibaba Group, said:

Alibaba’s strategic investment in Sun Art in 2017 was an important step in our New Retail strategy. The alliance we formed with Auchan Retail and Ruentex was instrumental in building a robust infrastructure to create opportunities and value in China’s retail sector.

Led by Chief Executive Officer Peter Huang, Sun Art has achieved impressive results in its digitalization, and pursued promising synergies with businesses across the Alibaba digital economy.

As the COVID-19 pandemic is accelerating the digitalization of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience.

In November 2017, Alibaba Group, Auchan Retail, and Ruentex Group announced a strategic alliance to digitalize and introduce New Retail solutions at Sun Art stores, including omnichannel integration and more personalized customer experience.

Over the past three years, Sun Art has made significant progress in the digital transformation under a fast-changing market environment by leveraging resources and technology from the Alibaba ecosystem, to capitalize on the growth opportunities in China’s hypermarket and supermarket space.

Today, all Sun Art physical stores in China have been integrated into Alibaba’s Taoxianda and Tmall Supermarket platforms, providing one-hour and half-day on-demand delivery through deep collaboration with other key businesses across the Alibaba ecosystem, including Ele.me and Cainiao, offering consumers greater product selection and access.

As of June 30, 2020, Sun Art operates 481 hypermarkets and 3 mid-size supermarkets in China, with a focus on strengthening its position through small and offline community stores.

Alibaba opening its first Costco competitor store in Shanghai in Oct

The retail sales of consumer goods in urban areas was 35,131.7 billion yuan (US$5,129 bn) in 2019, up by 7.9% year-on-year while that in rural areas was 6,033.2 billion yuan (US$881 bn), up by 9.0% year-on-year.

The catering services in 2019 gained 4,672.1 billion yuan (US$682 bn), up by 9.4% year-on-year.

In 2019, the retail sales of supermarkets, department stores, specialty stores, and specialty stores in the retail sector above designated size increased by 6.5%, 1.4%, 3.2%, and 1.5% respectively over the previous year.

In 2019, China’s online retail sales reached 10,632.4 billion yuan (US$1,552 bn), an increase of 16.5% over the previous year.

Among them, the online retail sales of physical goods reached 8,523.9 billion yuan, an increase of 19.5%, accounting for 20.7 percent of the total retail sales of social consumer goods; among the online retail sales of physical goods, food, clothing, and other consumer goods increased by 30.9%, 15.4%, and 19.8% respectively.

Breakdown of Total Retail Sales of Consumer Goods in China: Dec vs. 2019

The turnover of post services totaled 1,623.0 billion yuan, up by 31.5 percent over the previous year.

In 2019, the number of mail delivery was 2.17 billion; that of parcel delivery was 20 million, and that of express delivery was 63.52 billion with revenue reaching 749.8 billion yuan.

eBook: Brick & Mortar Retail’s Transformation with WeChat Pay Smart Store

On September 3, the 5th day of the opening of the Hema Mini in Shanghai’s Pujiang City Life Plaza, RMB 0.99 for Hangzhou cabbages and abalone for RMB 1.99 attracted the senior residents to rush buying. A shopping guide shouted: “steak is on sale, download Hema App and you are eligible to buy one get one free.”

Hou Yi, Vice President of Alibaba Group and President of Fresh Hema Business Group, said that Fresh Hema and Hema Mini cover different areas, those areas that large stores cannot reach can be supplemented by Hema Mini.

Therefore, the mission of Hema Mini is to submerge and quickly cover the suburbs of first-tier cities, third-tier and fourth-tier cities, and even some counties. Hema Mini is expected to account for half of total Hema sales in the future.

Hema Mini is obviously more bound with the masses than Fresh Hema. How is it different?

1. Smaller in space while more refined in the products category. Located outside of Shanghai’s Outer Ring, this store is the “most remote” Hema Mini with more than 1000 square meters with about 4000 SKUs; fresh foods account for nearly 70%. The first two Hema Mini stores, one in Shanghai Zhonghai Huanyuhui and one in Shanghai Changli Road, are reported to have 50% of their order from online.

2. Affordable in price. In Hema Mini, celery is 1.99 yuan per 500g, Shanghai green vegetables are 0.99 yuan per 500g, and the lowest price of pork is 25.8 yuan per 500g. Next to Hema Mini is a CP Lotus Supermarket, whose celery is 2.98 yuan per 500g and the lowest priced pork is 24.88 yuan per 500g.

3. Products are mostly unpackaged. Different from the exquisitely packaged vegetables of Fresh Hema, there are small piles of bulk vegetables from the store’s gate. Shanghai’s senior residents are very attentive when picking the products. Some would yank off the lettuce butts and stuff the leaves into the shopping bag.

4. Less seafood, more fresh river food. Fresh Hema’s iconic seafood has been reduced to a few categories such as dungeness crab and Boston lobster in Hema Mini while there is much more common river food, such as crucian carp and king thorn fish.

Compared with the Fresh Hema stores, there are many deli foods that are produced and sold on-site in Hema Mini, such as steamed buns and rolls, dumplings and wontons, as well as marinated dishes and cold dishes.

5. Suspension conveyor chain is removed, and the dining area is reduced. Hema Mini significantly reduces the cost of hardware and renovation. Ni Xiaojun, head of the Hema Mini project, said there was no need to deploy the suspension conveyor chain as the store area is small and manual product-sorting could meet the demand.

The distribution system of large stores has also been taken out of Hema Mini. The distribution range of Hema Mini is 1.5km which can be reached within half an hour. There are only 24 chairs in the dining area.

According to Hou Yi, Hema Mini’s investment cost is less than one-tenth of Fresh Hema, which is now controlled at around 2 million yuan.

6. Cash checkout is emphasized. In the store, there are six self-service checkouts and three cash checkouts. As there is a high proportion of middle-aged and elderly consumers, there are long queues at the three cash checkouts. However, many of the offers are available only on Hema App.

Hou Yi said that every Hema Mini store’s sale is way beyond expectation. In term of submerging, the company is more bullish about Hema Mini, comparing it with Hema Station and Hema Vegetable Market. He disclosed that, by the end of the year, Hema Mini will have three or four iterations, to study the optimal product structure and cost structure.

Hema Mini is expected to expand rapidly across the country after the Spring Festival.

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Last November, Tianhong’s Junshang 3019sp@ce supermarket officially upgraded to a WeChat payment smart retail store. The number of cashiers reduced from 15-20 to only two on that day, most of which were replaced by self-checkout machines.

Now, consumers only need to open the WeChat “scan” function and scan the product QR code price tag, and the products can be automatically added to the shopping cart. Customers can even perform face recognition and complete payment using machines provided.

In April 2018, Tianhong, one of the major retailers in China, cooperated with Tencent to set up a “smart retail lab” to jointly develop products for new retail. But this is not their first cooperation.

In September 2013, Tianhong reached strategic collaboration with Tencent. In the domestic retail industry, Tianhong was the first company to cooperate with Tencent to customize the WeChat service account.

As of now, Tianhong has completed the digital transformation for most consumer scenarios. The number of Tianhong members is over 18 million, of which the digitalization ratio has reached more than 80%, and the number of digital members is nearly 16 million.

According to the logic of traditional retail, to get more customers, you need to open more physical stores, which is not the best way for Tianhong at that time. “Omnichannel” is the solution for Tianhong to expand the customer base and achieve more customer connections, that is, the online and offline integration mode.

The real beginning of the omnichannel business is cooperation with WeChat. In September 2013, Tianhong and Tencent reached a strategic partnership and jointly developed the first custom WeChat service account in China’s retail enterprises, focusing on three aspects which is instant service, selected service and interactive marketing.

This cooperation immediately caused fluctuations in the capital market. Since Tianhong and Tencent announced the collaboration, within ten days, Tianhong share price experienced five single-day 10% increase, showing full attention and recognition from the capital market.

At the consumer level, it took less than two years to go online, and Tianhong’s WeChat service account has more than 2.5 million fans.

When Tianhong is attracting the new fans through WeChat, it also improves offline business by attracting consumers visiting the physical store. For example, less than two years after the launch, through the start of the WeChat service account, member interaction, and promotion, Tianhong WeChat service account has attracted more than 2 billion people to the physical stores.

Tianhong is a retail company that has started O2O and mobile app very early. In the general perception, when offline physical retail enterprises go through digital transformation, then a large number of increments in sales shall come from the online orders, which is the strategy practiced by Alibaba’s Hema.

However, the digitalization of the Tianhong is not the case. Although Tianhong also has an online business, the current order quantity is about 10% of the total. For the future, Tianhong also said that they do not expect a substantial increase in online orders. As Tan Xiaohua said, “The digitalization transformation of our business is to expand our existing powerful physical store, but not starting a new and smaller scale online business.”

Read the complete eBook “Brick & Mortar Retail’s Transformation with WeChat Pay Smart Store” here.

Total retail sales of consumer goods in China increased to US$1,457 billion in Q1 2019 and roughly 85.3% came from urban areas. Online retail sales of goods and services totaled US$333.45bn, representing 22.9% of the total.

In March 2019, retail sales of consumer goods grew by 8.7% year-on-year to 3,172.6 billion yuan (US$472.73bn).

• About 85.7% of that came from urban areas (2,719.2 billion yuan, up 8.5%), and 14.3% from rural areas (453.4 billion yuan, up 9.4%).
• Grouped by consumption patterns, around 10.7% were from the catering services (339.3 billion yuan, up 9.5%) and 89.3% from retail sales of goods (2,833.3 billion yuan, up 8.6%)

China Retail Overview in Q1 2019

In China, retail sales of consumer goods totaled 9,779 billion yuan (US$1,457.10bn) for Q1 2019, up 8.3% from the prior year period, according to the National Bureau of Statistics of China.

• About 85.3% came from urban areas (8,340.2 billion yuan, up 8.2%) and over 14.7% from rural areas (1,438.8 billion yuan, up 9.2%).
• Grouped by consumption patterns, around 10.9% were from the catering services (1,064.4 billion yuan, up 9.6%) and 89.1% from retail sales of goods (8,714.6 billion yuan, up 8.2%)

Of the total retail sale, the supermarket, department store, and specialty store of units above-designated size went up by 7.5%, 0.9%, and 3.9% year-on-year, respectively; the exclusive shop of units above designated size declined by 0.9% year-on-year.

Online retail sales of goods and services in China amounted to 2,237.9 billion yuan (US$333.45bn) (around 22.9% of the total), increased by 15.3% year-on-year.

Specifically, the online retail sales of physical goods reached 1,777.2 billion yuan (US$264.81bn) with an increase of 21%, accounting for 18.2% of the total retail sales of consumer goods. Food, clothing, and other commodities went up by 24.6%, 19.1%, and 21.3%, respectively.

E-commerce companies investment in retail: China vs. the U.S.