Report: China’s retail growth prospects strong

In spite of short-term pressures such as inflation and heightened nationalism, China can expect double-digit retail sales growth in the next five years, according to a report from TNS Retail Forward. The consultants see the retail market in China to increase to $1.4 trillion by 2012, surpassing Japan as the second largest retail market in the world. The largest market is the United States.

The total retail market in the United States in 2007, excluding food service, was $4.0 trillion, according to the Commerce Department's Annual Retail Trade Survey.

“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," commented Frank Badillo, senior economist and manager of the company's Global Retailing Program. 

The findings are part of TNS Retail Forward’s latest study, China's Retail Landscape. 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.

Regardless, a continued influx of new retail banners, with particular interest among upscale apparel retailers, 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.

China's leading domestic retailers remain focused on aggressive expansion, but they are also showing the effects of competitive pressures. Some of these pressures are most evident at retail conglomerate Bailian Group and consumer electronics retailer Gome, according to the firm.

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," he added.