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Distribution

Types of Outlet

Hypermarkets and supermarkets
Located in the big Chinese cities, they have food and non food products.
Lianhua Supermarket Holdings Co, Beijing HuaLian, Wu-mart, Ren Ren Le
Specialized Hypermarkets and Supermarkets
Hypermarkets specialized in a range of products. Located in the residential areas or the pedestrian streets.
Guo Mei (home appliances), Farmácia de elefantes (pharmacy), Homejia (decorations), Ikea (furniture).
Department stores
Stores distributed in different specialized ranges. Located in the big Chinese cities.
Wing on, Sincere, Intime, Parkson
Mall centers
Located in periphery of cities, these are large set-ups.
CITIC Plaza, Grand Gateway, New Century Global Center, Eurasia Shopping Mall
Street stores and markets
Especially in the rural areas, they are replaced by stores in the urban areas.
 

Evolution of the Retail Sector

Growth and Regulation
China's retail sector offers great opportunities for food product exporters. In 2021, total retail sales of consumer goods in China reached 44,082.3 billion yuan, up by 12.5% over the previous year with an average two-year growth of 3.9%. In December 2021 the retail sales of consumer goods in urban areas was 3.52 trillion yuan (532 bn USD). However, there still are many challenges in selling foreign food products in the retail sector. Demand for imported food and beverage is expected to remain resilient, as consumers  perceive imported products to be safe and of high quality. The major drivers of China's retail growth include rapid urbanisation and an increase in the number of middle class consumers. China's consumers expect their food purchases to be easy and convenient. As a result, electronic commerce (e-Commerce) has become an important tool for businesses in the retail sector to use and to adapt to in order to reach their customers.

Many different business models within the retail industry have emerged recently. Small convenience stores and specialty stores remain the most common retail model. In recent years, however, large retailers are increasing market share as they are able to realise greater efficiencies through better supply chains and wider distribution channels. Furthermore, the industry has undergone many mergers and acquisitions (M&A) which has strengthened the large retailers' position in the market.

Traditional retailers are transitioning to include online components to their business. The era of traditional standalone retail stores is being phased out in China. Offline food retailers include hypermarkets, supermarkets, specialty stores, discount stores, community stores and convenience stores. Online food retailers, who supply food products online and deliver the items to the consumer, are the fastest-growing sector recording record-breaking figures.
In 2021, retail sales of supermarkets increased by 6%, department shops by 11.7% and specialist shops by 12% compared to the previous year. However, the upward trend in China's online retail sales can easily be seen by looking at the 2021 turnover, which reached 198.7 billion USD), an increase of 24.6% over the previous year.

High quality and premium priced food products, including imported food and beverage will remain in demand in the market, although there are some difficulties: high import tariffs, regulations and expensive shipping costs. As a result of globalisation and development, China's younger populations have become accustomed to imported food products being available at retail stores in major cities.
Market share
Mass distribution in China is dominated by large Asian groups, with Chinese distributors taking the most significant market share. According to the USDA Foreign Agricultural Service, the top ten national retailers’ combined sales reached over $88.4 billion in 2019.

Gaoxin Retail semi-annual report for the 2022 fiscal year stated a revenue of 41.534 billion yuan or 6.22 billion USD  (as of September 30, 2021) down 5.0% year-on-year, and net profit of 112 million yuan, down 87.6% year-on-year. CR Vanguard and Lianhua own more than 3,000 shops and have an average turnover of $13.6 billion and $7.8 billion, respectively. Yonghui, is also a major player in China. Among these leading retailers, there are two internationally recognized brands, Walmart and Carrefour. In 2021, Walmart's sales reached 11.43 billion USD.
Convenience stores are widespread and their numbers are increasing in response to a growing number of consumers who are looking to save time and money. The leading chain in terms of outlets is YiJie with more than 27,000. The only international convenience store is 7 eleven.
Moreover, there are five major e-commerce players: Tmall.com is considered the largest, followed by JD.com, VIP.com, Pinduoduo and Suning.

Retail Sector Organisations
China Chain Store and Franchise Association
 

E-commerce

Internet access
As of July 2017, there were 751 million internet users in China (almost 20 million more than 2016), thus the internet penetration rate in China reached 54.3%, up by 1.1% from the previous year. Nevertheless, the difference in penetration between urban and rural areas remains high, the latter recording a rate of 34% compared to 73.3% of urban areas. In terms of network usage among internet users, the urban-rural gap is smallest in instant messaging, where the rural penetration rate is only 2% lower than urban, but when it comes to business transactions, mobile payments, news, and similar applications, the gap is much higher. Beijing, Shanghai, and Guangdong are the top three regions in China with the highest internet penetration rates of over 74%. The number of mobile internet users in China rose to reach 724 million at the end of the first half of 2017. Smartphones were the top devices for internet access in China in 2016 with over 95% users, followed by desktop computers (60.1%) and laptops (36.8%). The search engines market is dominated by local players, with Baidu having a prominent role (76%), followed by Shenma (8.78%), 360 Search (7.87%) and Sogou (3.31%).
E-commerce market
China is the largest e-commerce market in the world. According to eMarketer, e-commerce sales in China are estimated to have passed US$ 1.13 trillion in 2017, accounting for nearly half of the worldwide retail e-commerce sales and 23.1% of all retail sales in China (with an expected increase to 40.8% by 2021). The growth compared to 2016 reached a spectacular 33%. The total number of e-shoppers is projected to surpass 650 million by 2018. In recent years, the online retailing growth was driven by third and fourth tier cities, and for the first time, these cities have surpassed first and second tier cities, due mostly to Alibaba’s investments in delivery infrastructure across the nation that facilitated greater access to rural and smaller urban areas. The top five categories of internet applications in China are instant messengers, news, search engines, videos, and music. In 2017, 45.3% of Chinese companies deployed online sales activities, 45.6% online purchase and 38.7% online marketing. Alibaba is the biggest Chinese e-commerce platform, with more than 500 million people using its shopping apps. The group as a whole - which includes Taobao, TMall, and Alibaba.com together with the payment platform AliPay and other businesses – had a turnover of US$ 23.8 billion and lead operations in more than 200 countries. Tmall - a Chinese-language website for B2C online retail operated by Alibaba Group and one of the world's top 20 most visited websites – is a platform for local Chinese and international businesses to sell brand name goods to consumers in mainland China, Hong Kong SAR, Macau SAR and Taiwan, China. JD.com is one of China’s largest online retailer by revenue, offering direct sales of electronics products, general merchandise, books, home appliances, digital communications, apparel, food, and other goods. Vipshop Holdings is one of China’s leading online discount retailers and distribution companies, characterised by flash sales and time-limited offers. Other platforms include Suning, Gome, Yihaodian, Dangdang, Amazon.cn, and JMei. China’s whole digital scene is mobile dominated, so that optimising store pages for mobile is of pivotal importance. Virtual reality shopping has also exploded with consumers able to explore products digitally via virtual reality simulations. Intellectual property rights infringement across e-commerce platforms is common in China.
E-commerce sales and customers
According to the U.S.-China Business Council, roughly half of all China’s e-commerce sales are made on mobile devices, nearly 16% more than the global average. The rise of m-commerce is expected to continue, with eMarketer predicting more than 75% of ecommerce sales – over US$ 1 trillion - will be transacted via a mobile device in the next future. Cross-boarder shopping is also growing, with Chinese buying abroad items that are either too expensive or too scarce at domestic vendors. Chinese consumers’ primary motivation for shopping online has moved from price, assortment and convenience to quality, value, service and experience. Thus, developing a platform with a smooth, intuitive shopping experience is evermore an important factor in the Chinese e-commerce market. The ease and security of e-payment (with mobile apps connected to a user’s banking) is also cited as a key reason for the rise of e-retail spending. China’s mobile digital payment systems via WeChat & Alipay are widely used (nearly half a billion businesses within China use Alipay and consumers are now even using it overseas when they travel). Credit card remains the main payment method, while cash on delivery, PayPal, debit card and bank transfer are less used.
Social media
China is the world's largest social network market. As of 2018, there are an estimated 911 million social network users in China (Hootsuite). Leading international social-media platforms (such as Facebook, Twitter, Instagram, WhatsApp, Snapchat, Pinterest, Tumblr etc.) as well as video/audio streaming platforms (such as YouTube, DailyMotion, Vimeo, Twitch, Spotify etc.) are all blocked in China due to the Chinese government’s restrictve internet filtering policy (also referred to as the “Great Firewall”). The majority of Chinese digital consumers use social media to do product research or get recommendations. The three biggest social media players are WeChat (963 million monthly active accounts), a social network QQ Zone (861 million monthly active accounts) and a micro blog Weibo (300 million monthly active users). WeChat allows retailers to feature online stores and has a third-party payment function.  It also features push messages to introduce new product lines or deliver promotions. In early 2018, WeChat reached 1 billion user accounts across the world. With Weibo (a hybrid between Facebook and Twitter), in addition to publishing long articles with images or short posts, hyperlinks or videos, users can also repost, comment, search and send messages on trending topics. Weibo has also had an impact with influencers: Weibo posts for brand influencers are now used for direct product promotion and sales, especially since the platform was purchased by Alibaba. QQ is a messaging platform owned by Tencent, the same company that owns WeChat. It started as a desktop app rather than a phone app, in fact users don't need a phone number to use QQ, which means younger people who don't have a phone yet can use it to send and receive messages. Youku - one of China’s top online video and streaming platforms - is more similar to YouTube, except that it contains more professionally created videos compared to the more user generated content of YouTube.

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Distance selling

Evolution of the Sector
According to the World Federation of Direct Selling Associations, China's direct retail sales in 2016 amounted to USD 33,888 million, a 1.9% increased compared to 2015. Although an official number of independent representatives is not available, deep-rooted problems such as the wealth gap and unbalanced development of urban areas vs provinces make direct selling attractive to Chinese citizens.

Euromonitor International highlights the Chinese government revised its direct selling laws in 2016 to cancel the three-year of experience requirement before companies are allowed to enter China's Free Trade Zones (Shanghai, Guangdong, Tianjin, and Fujian). On March 13, 2016, China's Ministry of Commerce restricted direct sales products to cosmetics, cleaning products, health food products, health care equipment, small kitchen implements, and household electronic appliances.

National companies have fared better than international direct selling companies; Perfect and Amway both saw lowered value in their sales while local companies improved their performance. However, Nature (NSP China) did see a 91.4% increase in net sales in 2017 compared to 2016. Best World International, a Singapore company, has also had success by introducing its products through a network of nail spas, beauty and hair salons in second-tier cities instead of taking the traditional direct selling route in top markets. This strategy allowed them to grow aggressively, with Bloomberg projecting a USD 196 million revenue stream for 2017 and its stock climbing more than 220% in 12 months.

As in other countries, e-commerce poses the greatest threat to the industry. This is especially true in younger generations that prefer to buy health and beauty products online.

 

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Latest Update: June 2022