Overseas retailers wanting to enter the booming Chinese retail market should focus on regional expansion and not attempt a national launch, delegates were told at the World Retail Congress on Thursday.
In a session dedicated to Chinese opportunities Spar International managing director Gordon Campbell said that in a country so vast a national-based expansion plan would be hugely problematic.
“I would advise any retailer to start in a specific region and build from there,” he said, echoing Spar’s own strategy, through which it has opened in five provinces with four local partners. “The potential in China is enormous and the consumer has hardly changed during the global downturn, which has not really affected our operations there,” he said.
Campbell explained that the company’s expansion has been targeted “down the centre” of China and that it continues to be based on hypermarket stores, although he stressed: “There is still room for more food stores of every format.”
Lucy Wu Ruiling, vice-secretary general of the hugely influential China Chain Store & Franchise Association (CCSFA), also underlined the opportunities for foreign retailers in China and outlined some recent research done by the CCSFA that showed strong growth for both the food sector and department store retailing.
Food retailers dominate the top 100 retail chains operating in China - of which 19 are from outside the country - and Wu Ruiling pointed to Carrefour’s plans to open 28 stores this year and McDonald’s to add a further 175 outlets. “Sales growth is especially strong in the second and third tier cities,” she said. “Urbanisation of the population has created a broad market for retailers and there are increasing levels of consumer consumption. Sales growth has declined in the wake of the economic downturn but there is still plenty of activity.”
Dr Wu Jianzhong, chairman of Chinese-based Wumart Stores, also stressed the opportunities for e-commerce sales to grow. “Over 300 million Chinese people have access to the internet and online sales are increasing,” he said. “However, compared with Europe and the US e-commerce is in its infancy in China.”