David F. Miller Center For Retailing Education and Research
International Retailing Education and Training (IRET )
Current Status and Format
of China’s Retail Industry
Current Status of China Retailing
Overview
 Total volume of retail sales of consumer goods is
$1,253 Billion RMB, an increase of 15.5% (2009)
 Top 100 Chain Store Retailers in 2009
 $136 Billion in sales, an increase of 13.5%
 137,000 stores, an increase of 18.9%
 Market share, 11%
 Foreign retailers
 Sales increased 20.4%;
 Number of stores increased 15.7%
Current Retail Status Module
David F. Miller Center for Retailing Education and Research
page 2
Sales of Top 100 Chain Store Retailers in
China (Billion Yuan)
1357.9
1400
1199.9
1200
1002.2
1000
855.2
800
707.6
600
497.2
358
400
246.5
162
200
38.4
62.9
98.2
0
1998
1999
2000
Current Retail Status Module
2001
2002
2003
2004
2005
2006
David F. Miller Center for Retailing Education and Research
2007
2008
2009
page 3
Current Status of China Retailing
Overview (Cont.)
 Regional growth
 First Tier Cities
 Sales increased 5.3%
 Number of stores increased 7.2%
 Second and Third Tier Cities
 Sales increased 19.3%
 Number of stores increased 14.7%
Current Retail Status Module
David F. Miller Center for Retailing Education and Research
page 4
Types of Retailers in US
Food Retailers
(Levy and Weitz, 2004)
General Merchandise Retailers
Conventional Supermarket
Big-Box Food Retailers
(Supercenters,
Hypermarkets, and
Warehouse Club)
Convenience Stores
Nonstore Retailers
Discount Stores
Specialty Stores
Category Specialist
Department Stores
Drugstores
Off-Price Retailers
Value Retailers
Electronic Retailing
Catalog and Direct-Mail
Retailing
Direct Selling
Television Home Shopping
Vender Machine Retailing
Current Retail Status Module
David F. Miller Center for Retailing Education and Research
page 5
Characteristics of Food Retailers
Current Retail Status Module
David F. Miller Center for Retailing Education and Research
page 6
Characteristics of
General Merchandise Retailers
Current Retail Status Module
David F. Miller Center for Retailing Education and Research
page 7
Types of Retailers in China
(China’s National Standards on
Classification of Retail Industry)
Store-based Retailers
Conventional Grocery Stores
Convenience Stores
Value Retailers
Supermarkets
Hypermarkets
Warehouse Clubs
Department Stores
Category Specialist
Specialty Stores
Home Improvement Center
Shopping Centers
(Community, CBD, Suburb)
Factory Outlets
Current Retail Status Module
Nonstore Retailer
Electronic Retailing
Catalog and Direct-Mail
Retailing
Direct Selling
Television Home Shopping
Vender Machine Retailing
David F. Miller Center for Retailing Education and Research
page 8
Conventional Grocery Store
Retail Shop Format
Features
Location
Residential area or traditional business
area
Trade Area and Target Customers
Radius of 0.3km; relatively fixed resident
customers
Size
100 square meters
Commodity Structure
Mainly cigarette, soft drinks, alcohol drinks,
snack foods
Selling Form
On counter style or self-choice style or
combination of the 2
Service
Open more than 12 hours a day
Information System
None or very basic information system
Current Retail Status Module
David F. Miller Center for Retailing Education and Research
page 9
Conventional Grocery Store (Cont.)
Current Retail Status Module
David F. Miller Center for Retailing Education and Research
page 10
Conventional Grocery Store (Cont.)
Current Retail Status Module
David F. Miller Center for Retailing Education and Research
page 11
Conventional grocery store in China vs. Mom and pop stores
Mom and
pop stores
Conventional
grocery store
Privately owned
small business
Privately owned
small business
Mainly sell
cigarette, drinks,
snacks and
everyday
merchandise
Location Module
David F. Miller Center for Retailing Education and Research
page 12
Mom and pop store (US)
Location Module
Conventional grocery store
(China)
David F. Miller Center for Retailing Education and Research
page 13
Street/Open Market
Location Module
David F. Miller Center for Retailing Education and Research
page 14
Street/Open Market
Location Module
David F. Miller Center for Retailing Education and Research
page 15
Open Market
Location Module
David F. Miller Center for Retailing Education and Research
page 16
Open Market
Location Module
David F. Miller Center for Retailing Education and Research
page 17
Open Market
Location Module
David F. Miller Center for Retailing Education and Research
page 18
Open Market
Location Module
David F. Miller Center for Retailing Education and Research
page 19
Open Market
Location Module
David F. Miller Center for Retailing Education and Research
page 20
Open Market
Location Module
David F. Miller Center for Retailing Education and Research
page 21
Department stores in China
Location Module
David F. Miller Center for Retailing Education and Research
page 22
Retail Shop Format
Features
Location
Center of business area of cities;
Business districts formed in history
Trade Area and Target
Customers
Mainly flow customers who pursue fashion and taste
Size
6,000-20,000 square meters
Commodity Structure
Various categories of commodities; such as clothes, footwear,
bags and suitcases, cosmetics, appliances
Selling Form
Open-shelf self-choice style combined with on counter trade
Service
Emphasize on service;
Built in restaurant, cafeteria, and entertainment facilities
Information System
High level
Location Module
David F. Miller Center for Retailing Education and Research
page 23
2500
2197
2000
1801
1482
1500
1275
1000
930
597
500
0
2003
Location Module
2004
2005
2006
2007
David F. Miller Center for Retailing Education and Research
2008
page 24
Key Players (2008)
Retailers
Sales (100 M
RMB)
Number of Stores
Bailian
943
6418
Dashang
626
150
Chongqing Shangshe
263
294
Hefei
194
125
Yinzuo
187
164
New World
148
33
Wuhan Zhongbai
142
630
Liqun
139
866
Changchun Yatai
121
18
Wangfujing
120
17
Location Module
David F. Miller Center for Retailing Education and Research
page 25
The Market Share of Department Stores
New World Wangfujing
7%
5%
Parkson
5%
Intime
4%
Xidan
1%
Others
78%
Location Module
David F. Miller Center for Retailing Education and Research
page 26
Current Status
 Fast Growth
 30% Growth Rate
 Relatively High Profitability
 Gross margin =15.8%
 Profit = 4.4%
 Geographically Unbalanced
 Sales in Shanghai, Beijing, Tianjing, Liaoning and
Shandong comprise 46.5% of national sales.
 Industry is Relatively Fragmented
 CR4 = 21%
 Mainly Regional and No National Leaders
Location Module
David F. Miller Center for Retailing Education and Research
page 27
Current Status (Cont.)
 It has been influenced the most by the current economic
recession, but the industry is continuously growing.
 Market is further segmented
 Community Department Stores, Fashion Department
Stores, High-end Department Stores, and Shopping Mall
Department Stores
 Customer service has significantly improved
 Large scale discounts hurt the profitability
 Distribution system needs changes.
 Buying from regional agents
Location Module
David F. Miller Center for Retailing Education and Research
page 28
Location Module
David F. Miller Center for Retailing Education and Research
page 29
Retail Shop Format
Features
Location
Business area, inner city, and communities
Trade Area and Target
Customers
Radius of 2 km
Mainly residents in the trading area
Size
Less than 6,000 square meters
Commodity Structure
Mainly prepackaged food, fresh food and commodity
Selling Form
Open-shelf self-choice style
Differentiated entrances and exits
Pay at exit
Service
Open more than 12 hours a day;
Information System
Relatively high level
Location Module
David F. Miller Center for Retailing Education and Research
page 30
Retail Shop Format
Features
Location
Business district, inner city, suburb, vital thoroughfare, and
large residential area
Trade Area and Target
Customers
Radius of 2 km
Mainly residents in the trading area and traffic
Size
More than 6000 square meters
Commodity Structure
Various categories of commodities
Willing to develop self-owned brand
Selling Form
Open-shelf self-choice style
Differentiated entrances and exits
Pay at exit
Service
Open more than 12 hours a day
Information System
Relative high level
Location Module
David F. Miller Center for Retailing Education and Research
page 31
Introduced in the early 1990s
Serving International Visitors
1990s: Shifted focus to the local community.
Supermarket developments took off in big cities.
2000 to Present: Have been experiencing rapid growth
and competition became fierce.
Location Module
David F. Miller Center for Retailing Education and Research
page 32
Supermarket and Hypermarket Sales
(Billion RMB)
600
500
477
401
400
344
311
300
234
200
193
100
0
2003
Location Module
2004
2005
2006
David F. Miller Center for Retailing Education and Research
2007
2008
page 33
Number of Supermarket and
Hypermarket Stores
30000
27762
25166
25000
21066
20000
18924
15000
12877
11717
10000
5000
0
2003
Location Module
2004
2005
2006
David F. Miller Center for Retailing Education and Research
2007
2008
page 34
Key Players (2008)
Retailers
Sales (100M # of Stores
RMB)
Market share
China Resources
Vanguard
638
2,698
13.4%
Lianhua
500
3,932
10.5%
Carrefour
338
134
7.2%
RT-Mart
336
101
7.0%
Wu-Mart
302
2,010
6.4%
Wal-mart
278
123
5.8%
Nonggongshang
267
3,330
5.6%
Xinyijia
175
105
3.7%
Trust Mart
164
104
3.4%
Hualian
150
1,946
3.1%
Location Module
David F. Miller Center for Retailing Education and Research
page 35
Current Status
 Hypermarkets
 Gross margin is 13.43%, profit is 4.53%
 Supermarkets
 Gross margin is 12.32%, profit is 4.15%
 Market concentration
 CR4=40%
 CR8=60%
Location Module
David F. Miller Center for Retailing Education and Research
page 36
Current Status (Cont.)
 Fresh food is becoming the “cash cow”.
 The relationship with suppliers needs
improvement.
 Hypermarket growth is the fastest among the
various formats.
 Saturated in the first and second tier cities
 Expanding in the third and fourth tier cities
 Foreign retailers dominate the Hypermarket format.
 Innovations and Differentiations
 High-end Supermarkets, Fresh Food Supermarkets, and
Community Supermarkets.
 Supermarkets pursue regional advantages and
serve communities.
Location Module
David F. Miller Center for Retailing Education and Research
page 37
Convenience Store
Location Module
David F. Miller Center for Retailing Education and Research
page 38
Convenience Stores
Retail Shop Format
Features
Location
Business area center; vital thoroughfare and public area
(surrounding stations, hospitals, business buildings,
entertainment centers, gas stations, etc.)
Trade Area and Target
Customers
Within a five minute walk; single and young people
Size
100 square meters and highly space efficient
Commodity Structure
Mainly fast food and commodities, priced higher than market
average
Selling Form
Mainly open-shelf self-choice style
Pay at cash register at the door
Service
Open more than 16 hours a day
Provide facilities for fast food and some other services
Information System
High level
Location Module
David F. Miller Center for Retailing Education and Research
page 39
U.S. Vs. China
Convenience store (US)
Convenience store (China)
Location Module
David F. Miller Center for Retailing Education and Research
page 40
Convenience Store (Cont.)
Location Module
David F. Miller Center for Retailing Education and Research
page 41
Convenience Stores
Location Module
David F. Miller Center for Retailing Education and Research
page 42
Convenience Stores
Location Module
David F. Miller Center for Retailing Education and Research
page 43
Convenience Stores
Location Module
David F. Miller Center for Retailing Education and Research
page 44
Number of Convenience Stores
25000
20000
15000
12467
12685
Franchise store
11929
Directly-managed
store
10000
3469
1728
5000
822
3625
6027 6574 6076
8073 8874
0
2003 2004 2005 2006 2007 2008
Location Module
David F. Miller Center for Retailing Education and Research
page 45
Sales of Convenience Stores (Billion
RMB)
35
30
6.8
25
5.7
4.4
20
Franchise store
2.9
15
2.5
25
10
1.1
5
15.5
17.9
Directly-managed
store
20.9
11.3
5.6
0
2003
Location Module
2004
2005
2006
2007
2008
David F. Miller Center for Retailing Education and Research
page 46
Market Share of Convenience Stores
Meiyijia , 9.28%
Kuaike, 9.08%
Others , 38.85%
Kede, 6.49%
7-Eleven, 6.41%
Haode, 4.61%
Jinhu, 3.86%
Guoda, 3.25%
Suguo, 3.40%
Shanghao, 3.53%
Location Module
Liqun, 3.83%
Tianfu, 3.71%
Weike, 3.71%
David F. Miller Center for Retailing Education and Research
page 47
Current Status
 Convenience stores are mainly regional.




Haode, Kede and Suguo in Eastern China
Meyijia, Tianfu and Shanghao in Southern China
Liqun and Weike in Shandong
7-11 is a national store chain
 12 leading retailers own 60% convenience stores
 Domestic retailers dominate the convenience store
format, with the exception of 7-11.
 Shanghai and Zhejiang have half of the
convenience stores.
Location Module
David F. Miller Center for Retailing Education and Research
page 48
Current Status (Cont.)
 Competition with other retail formats has become
intensive.
 More attention is paid to fresh food
 Instant food and meal boxes
 Improved distribution
 Foreign convenience retailers replenish twice daily
 Chinese convenience retailers replenish once daily
 Constructed distribution centers
 Become big chain or die
 Most of the convenience stores are in the red.
Location Module
David F. Miller Center for Retailing Education and Research
page 49
Location Module
David F. Miller Center for Retailing Education and Research
page 50
Retail Shop Format
Features
Location
Center of city business areas
Inside department stores and shopping centers
Trade area and target
customers
Mainly attract customers who are shopping for certain kind of
product
Size
Differs with the products offered
Commodity Structure
Mainly specific kind of product
Professional, various kinds, plenty of choices
Selling Form
Open-shelf, self-choice style combined with on the counter
trade
Service
Emphasize on quality service
Salespeople are knowledgeable and professional
Management System
High level
Location Module
David F. Miller Center for Retailing Education and Research
page 51
# of Specialty Stores
80000
67,471
70000
68,967
63,997
60000
47,825
50000
40000
Department Stores
Specialty Stores
30000
22,132
20000
10000
2,129
3,016
3,853
5,353
6,064
0
2003
Location Module
2003
2005
2006
2007
David F. Miller Center for Retailing Education and Research
page 52
Sales of Specialty Stores (100M RMB)
12000
10,573
10000
8,868
7,782
8000
6000
Department Stores
Specialty Stores
4000
2000
1,581
1,191 930 1,275
597
1,482
1,801
0
2003
Location Module
2003
2005
2006
2007
David F. Miller Center for Retailing Education and Research
page 53
Non-Store Retailing
Source: ACMR-IBISWorld Databasen-Store
Location Module
Retailing
David F. Miller Center for Retailing Education and Research
page 54
Online Retailing - Products and Services
Segmentation-products and service
Location Module
David F. Miller Center for Retailing Education and Research
page 55
Revenue and Revenue Growth Rate
Location Module
David F. Miller Center for Retailing Education and Research
page 56
Geographic Distribution of Revenue
 About 97.4% of industry revenue was generated in
East China, North China and Middle South China
in 2009.
Location Module
David F. Miller Center for Retailing Education and Research
page 57
Online Retailing
 The number of Internet users increasing fast
 1996, 0.1 million;
 1999, 4 million
 2009, 340 million (No. 1 in the World)
 110 million internet shoppers, increased 45.9% in
2008
 2009 online sales was $248.35 billion
 31 out of top 100 chain store retailers in China had
online retailing as of 5/2010
Location Module
David F. Miller Center for Retailing Education and Research
page 58
Online Consumers
 On-line consumers are most of the age groups 1824 and 25-30,according to CNNIC (China Internet
Network Information Center)
Location Module
David F. Miller Center for Retailing Education and Research
page 59
Business Models
 Business to Business (B2B)
 E.g.: Alibaba
 Customer to Customer (C2C)
 E.g., Taobao，Paipai
 Business to Customer (B2C)
 E.g., Dangdang, Joyo, and Jingdong Shangcheng
Location Module
David F. Miller Center for Retailing Education and Research
page 60
Industry Characteristics
 Big market with great potential
 Barriers to entry are low
 Competition is increasing
 Government supports
 The level of regulation is decreasing.
 C2C dominates the market
 B2C is 1/8 of C2C
Location Module
David F. Miller Center for Retailing Education and Research
page 61
Market Share of Online Stores
(China Internet Information Center, 2009 Survey report on China Internet Market)
Yunwang, Maiwang, 0.30%
0.40%
99, 0.30%
Honghaier, 0.90%
others, 3.20%
Eachnet, 0.90%
Youa, 1.50%
Jingdong
Shangcheng, 2.20%
Joyo, 2.20%
Dangdang, 5.80%
Paipai, 6.10%
Taobao, 76.50%
Location Module
David F. Miller Center for Retailing Education and Research
page 62
Market Share of Online Stores
 Taobao
 Sales in 2008 were
$146.2 M, an increase of
131%
 Close to 100 million
registered users (by the
end of 2009).
 Age 25-32 = 48%; Age
16-24 = 35%
Location Module
David F. Miller Center for Retailing Education and Research
page 63
Sizes of Different Retail Formats (2008)
Sales
(Million
Yuan)
Growth
(%)
Acreage
(Square
meters)
Growth
(%)
# of
Employees
Growth
(%)
# of SKUs
Growth
(%)
Hypermarkets
212.9
12.4
11,275
1.8%
239
0.7
25,537
4.8
Supermarkets
72.4
11.3
2,672
1.4%
101
2.8
14,325
7.4
Department
Stores
883.97
11.1
32,531
1.4%
887
0.0
93,422
0.8
Convenience
Stores
4.73
12.3
139
0
9.1
5.8
2,614
-0.4
Home
Electronics
501.64
2.0
7,667
1.9%
289
-1.0
14,216
11.4
Drug Stores
37.06
7.1
752
0
61
0.0
6,739
4.0
Location Module
David F. Miller Center for Retailing Education and Research
page 64
Efficiency and Profitability of Different
Formats (2008)
Sales
/#
empl
oyee
(1000
Yuan)
Gro
wth
(%)
Sales/
Squar
e
Meter
(1000
Yuan)
Growt
h (%)
Sales/
# SKU
(1000
Yuan)
Growt
h (%)
Transa
ction/
day
Growt
h (%)
Sales/
custo
mer
(Yuan)
Growt
h (%)
Gross
Margi
n (% )
Growt
h (%)
Hyperma
rket
891
1.8
17.6
6.27
7
8.4
10059
1.0
58.1
12.9
12.9
0.3
Superma
rket
719
8.3
27.1
9.81
5
3.5
4554
6.5
43.6
4.5
12.9
0.9
Departm
ent Store
997
15.3
27.2
9.3
3.5
9.2
10839
-5.2
226.4
1.5
14.1
0.3
Convenie
nce Store
521
6.6
34
12.3
1.8
12.7
758
-2.7
16.2
11.1
16.4
0
Home
Electroni
c
1733
7.9
65.4
6.89
35.3
-8.5
729
-7.8
1901.0
2.3
10.8
1.0
Drug
Store
610
6.6
49
7.1
5.5
2.9
1724
-3.8
48.2
1.3
23.0
-0.7
Location Module
David F. Miller Center for Retailing Education and Research
page 65