China Set to Become Second-largest Retail Market: Study

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China Set to Become Second-largest Retail Market: Study

In a new study, "China's Retail Landscape," consulting and market research firm TNS Retail Forward forecasts that China will sustain double-digit nominal retail sales growth in the next five years despite short-term pressures. This is expected to push the size of the retail market in China to more than $1.4 trillion by 2012, surpassing Japan to become the second-largest retail market in the world behind the United States.

The report, published in the Global Retailing Program of the Retail Forward Intelligence System, also assesses China's retail landscape, profiles the country's leading retailers, and delivers shopper insights about the Chinese shopper.

"While China's short-term retail outlook is vulnerable because of pressures ranging from inflation to heightened government regulation, the continued entry of new retail banners is evidence that China remains one of the best retail opportunities in the world, with strong growth forecast across retail categories," said Frank Badillo, senior economist and manager of the company's Global Retailing Program.

Contributing to a tougher operating environment and some consolidation in the near term are: inflation and speculative pressures, growing government emphasis on product safety and environmental regulation, and heightened Chinese nationalism, TNS Retail Forward noted.

Regardless, a continued influx of new retail banners suggests there remains opportunity for entry into China. The continuing opportunity in China also is evident in the stepped-up expansion plans by a broad spectrum of retailers.

Foreign retailers in China continue to plan for aggressive expansion but more often have fallen behind plan. "Carrefour's small-format focus has helped give it an advantage over Wal-Mart's big-format focus," according to Badillo. "While Taiwan-based RT-Mart, a partner of Auchan, has quietly built up a sizeable presence in China, Tesco is only now gearing up its expansion. Kingfisher is reorganizing and Best Buy is ramping up slowly."

TNS Retail & Shopper Insights research indicates that China's new retail formats are drawing strong interest from Chinese shoppers, but there remains room for inroads against local neighborhood markets -- which remain popular among Chinese shoppers.