Further activity from overseas retailers is expected in China following the relaxation of trading restrictions and the intense levels of urbanisation and economic growth in localised areas. Consolidation of this fragmented market is expected with a move away from traditional, independent stores to more modern formats such as convenience stores, hypermarkets and discount stores.

Market size and structure

IGD estimates the size of the Chinese grocery retail market to be in the order of $409 billion – around 65% of the total retail market by value. The grocery retail market is extremely fragmented with around 68% of the market accounted for by sales through traditional independent grocery retailers.

Rapid growth in grocery retail

Today, China’s grocery sector is seeing rapid year-on-year growth which exceeds the rate of GDP expansion. This growth is due, in part, to key changes in the country’s trading environment. In 2001, China joined the World Trade Organisation and since then the Chinese government has relaxed protective measures and encouraged foreign investment.

Emergence of foreign retailers

Until December 2004, international grocery retailers were required to form joint ventures with domestic operators and were limited by restrictions on the location of stores. However, these restrictions have since been lifted, giving rise to more activity from international players. Today, the traditional domestic retailers such as the Bailian Group dominate the fragmented market. However international retailers such as Auchan, Carrefour, Metro, Seven & I Holdings, Spar International, Tesco and Wal-Mart are increasing their market share through the development of hypermarket, discount and convenience formats. TNS predicts a share for hypermarkets of 35% by the end of the decade – compared to just 19.7% in 2001. Geographically, much of the activity has focused along the east coast of China, in the major cities such as Beijing, Shanghai, Guangzhou and Zhengzhou, where economic growth is strong and consumer demand is high.

Private label in its infancy

The concept of private label is relatively new to Chinese consumers and is generally perceived as a cheap alternative aimed at budget-conscious shoppers. However, as the presence of international retailers expands so consumer awareness and familiarity with retailer brand names increases and significant opportunity for growth exists.