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Retailers' Chinese Puzzle
The Chinese grocery market will grow by 65% to $456 billion (£240 billion) in the next five years, according to food and grocery think tank IGD. The new report 'Retailing in China' highlights the diversity of Chinese consumers and the challenges facing retailers.
The report says growth will be fuelled by the development of modern retailing, in particular growth in hypermarket and convenience formats and consumer demand for value-added, processed and ready-to-eat products. IGD says China has '32 markets, each with its own tastes and shopping habits', and that the events of the last 50 or 60 years in the country have produced three distinct generations with their own consumption habits: over 35s are more traditional and conservative, preferring to shop daily and stay loyal to local brands, while those aged 25-35 and under 25 have a higher disposable income, prefer to shop weekly, are familiar with foreign lifestyles and open to western products. Eating habits and tastes vary widely between provinces, and there is no guarantee that a product successfully introduced into one region will prove popular in another.
The urban population accounts for 41% of the total and has an average annual household expenditure twice as high as that of the rural population, says IGD. The concentration of wealth is predominantly along the east coast, although there are pockets of wealth developing in the centre and west.
China's supply chain is still in the early stages of development, due to the fragmented market and lack of scale of international retailers. IGD anticipates that suppliers will come under increasing pressure to improve their service levels, while retailers will seek to develop sophisticated automated distribution centres.
Joanne Denney-Finch, Chief Executive IGD says China's potential for growth is 'astounding' and that 'the next five years will be critical' in the race for the retail market. However 'anyone entering this market must keep very close to the consumer and be able to adapt very quickly... for example using different approaches for primary, secondary and more rural markets and ensuring that product quality and service are high'.
IGD's web site is at www.igd.com
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