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David F. Miller Center For Retailing Education and Research
International Retailing Education and Training (IRET )
Current Status and Format
of China’s Retail Industry
page 2Current Retail Status Module David F. Miller Center for Retailing Education and Research
Current Status of China Retailing
Overview
Total volume of retail sales of consumer goods is
$1,253 Billion RMB, an increase of 15.5% (2009)
Top 100 Chain Store Retailers in 2009
$136 Billion in sales, an increase of 13.5%
137,000 stores, an increase of 18.9%
Market share, 11%
Foreign retailers
Sales increased 20.4%;
Number of stores increased 15.7%
page 3Current Retail Status Module David F. Miller Center for Retailing Education and Research
Sales of Top 100 Chain Store Retailers in
China (Billion Yuan)
0
200
400
600
800
1000
1200
1400
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
38.462.9
98.2
162
246.5
358
497.2
707.6
855.2
1002.2
1199.9
1357.9
page 4Current Retail Status Module David F. Miller Center for Retailing Education and Research
Current Status of China Retailing
Overview (Cont.)
Regional growth
First Tier Cities
Sales increased 5.3%
Number of stores increased 7.2%
Second and Third Tier Cities
Sales increased 19.3%
Number of stores increased 14.7%
page 5Current Retail Status Module David F. Miller Center for Retailing Education and Research
Types of Retailers in US (Levy and Weitz, 2004)
Conventional Supermarket
Big-Box Food Retailers
(Supercenters,
Hypermarkets, and
Warehouse Club)
Convenience Stores
Discount Stores
Specialty Stores
Category Specialist
Department Stores
Drugstores
Off-Price Retailers
Value Retailers
Food Retailers General Merchandise Retailers
Nonstore Retailers
Electronic Retailing
Catalog and Direct-Mail Retailing
Direct Selling
Television Home Shopping
Vender Machine Retailing
page 6Current Retail Status Module David F. Miller Center for Retailing Education and Research 2-6
Characteristics of Food Retailers
page 7Current Retail Status Module David F. Miller Center for Retailing Education and Research 2-7
Characteristics of
General Merchandise Retailers
page 8Current Retail Status Module David F. Miller Center for Retailing Education and Research
Types of Retailers in China (China’s National Standards on
Classification of Retail Industry)
Conventional Grocery Stores
Convenience Stores
Value Retailers
Supermarkets
Hypermarkets
Warehouse Clubs
Department Stores
Category Specialist
Specialty Stores
Home Improvement Center
Shopping Centers
(Community, CBD, Suburb)
Factory Outlets
Electronic Retailing
Catalog and Direct-Mail Retailing
Direct Selling
Television Home Shopping
Vender Machine Retailing
Store-based Retailers Nonstore Retailer
page 9Current Retail Status Module David F. Miller Center for Retailing Education and Research
Retail Shop Format Features
Location Residential area or traditional business
area
Trade Area and Target Customers Radius of 0.3km; relatively fixed resident
customers
Size 100 square meters
Commodity Structure Mainly cigarette, soft drinks, alcohol drinks,
snack foods
Selling Form On counter style or self-choice style or
combination of the 2
Service Open more than 12 hours a day
Information System None or very basic information system
Conventional Grocery Store
page 10Current Retail Status Module David F. Miller Center for Retailing Education and Research
Conventional Grocery Store (Cont.)
page 11Current Retail Status Module David F. Miller Center for Retailing Education and Research
Conventional Grocery Store (Cont.)
page 12Location Module David F. Miller Center for Retailing Education and Research
Conventional grocery store in China vs. Mom and pop stores
Privately owned small business
Mom and pop stores
Privately owned small business
Mainly sell cigarette, drinks, snacks and everyday merchandise
Conventional grocery store
page 13Location Module David F. Miller Center for Retailing Education and Research
Mom and pop store (US)Conventional grocery store
(China)
page 14Location Module David F. Miller Center for Retailing Education and Research
Street/Open Market
page 15Location Module David F. Miller Center for Retailing Education and Research
Street/Open Market
page 16Location Module David F. Miller Center for Retailing Education and Research
Open Market
page 17Location Module David F. Miller Center for Retailing Education and Research
Open Market
page 18Location Module David F. Miller Center for Retailing Education and Research
Open Market
page 19Location Module David F. Miller Center for Retailing Education and Research
Open Market
page 20Location Module David F. Miller Center for Retailing Education and Research
Open Market
page 21Location Module David F. Miller Center for Retailing Education and Research
Open Market
page 22Location Module David F. Miller Center for Retailing Education and Research
Department stores in China
page 23Location Module David F. Miller Center for Retailing Education and Research
Retail Shop Format Features
Location Center of business area of cities;
Business districts formed in history
Trade Area and Target
Customers
Mainly flow customers who pursue fashion and taste
Size 6,000-20,000 square meters
Commodity Structure Various categories of commodities; such as clothes, footwear,
bags and suitcases, cosmetics, appliances
Selling Form Open-shelf self-choice style combined with on counter trade
Service Emphasize on service;
Built in restaurant, cafeteria, and entertainment facilities
Information System High level
page 24Location Module David F. Miller Center for Retailing Education and Research
597
930
1275
1482
1801
2197
0
500
1000
1500
2000
2500
2003 2004 2005 2006 2007 2008
page 25Location Module David F. Miller Center for Retailing Education and Research
Key Players (2008)
Retailers Sales (100 M
RMB)
Number of Stores
Bailian 943 6418
Dashang 626 150
Chongqing Shangshe 263 294
Hefei 194 125
Yinzuo 187 164
New World 148 33
Wuhan Zhongbai 142 630
Liqun 139 866
Changchun Yatai 121 18
Wangfujing 120 17
page 26Location Module David F. Miller Center for Retailing Education and Research
The Market Share of Department Stores
New World 7%
Wangfujing5%
Parkson5%
Intime4%
Xidan1%
Others78%
page 27Location Module David F. Miller Center for Retailing Education and Research
Current Status
Fast Growth
30% Growth Rate
Relatively High Profitability
Gross margin =15.8%
Profit = 4.4%
Geographically Unbalanced
Sales in Shanghai, Beijing, Tianjing, Liaoning and
Shandong comprise 46.5% of national sales.
Industry is Relatively Fragmented
CR4 = 21%
Mainly Regional and No National Leaders
page 28Location Module David F. Miller Center for Retailing Education and Research
Current Status (Cont.)
It has been influenced the most by the current economic
recession, but the industry is continuously growing.
Market is further segmented
Community Department Stores, Fashion Department
Stores, High-end Department Stores, and Shopping Mall
Department Stores
Customer service has significantly improved
Large scale discounts hurt the profitability
Distribution system needs changes.
Buying from regional agents
page 29Location Module David F. Miller Center for Retailing Education and Research
page 30Location Module David F. Miller Center for Retailing Education and Research
Retail Shop Format Features
Location Business area, inner city, and communities
Trade Area and Target
Customers
Radius of 2 km
Mainly residents in the trading area
Size Less than 6,000 square meters
Commodity Structure Mainly prepackaged food, fresh food and commodity
Selling Form Open-shelf self-choice style
Differentiated entrances and exits
Pay at exit
Service Open more than 12 hours a day;
Information System Relatively high level
page 31Location Module David F. Miller Center for Retailing Education and Research
Retail Shop Format Features
Location Business district, inner city, suburb, vital thoroughfare, and
large residential area
Trade Area and Target
Customers
Radius of 2 km
Mainly residents in the trading area and traffic
Size More than 6000 square meters
Commodity Structure Various categories of commodities
Willing to develop self-owned brand
Selling Form Open-shelf self-choice style
Differentiated entrances and exits
Pay at exit
Service Open more than 12 hours a day
Information System Relative high level
page 32Location Module David F. Miller Center for Retailing Education and Research
Introduced in the early 1990s
Serving International Visitors
1990s: Shifted focus to the local community.
Supermarket developments took off in big cities.
2000 to Present: Have been experiencing rapid growth
and competition became fierce.
page 33Location Module David F. Miller Center for Retailing Education and Research
Supermarket and Hypermarket Sales
(Billion RMB)
193
234
311
344
401
477
0
100
200
300
400
500
600
2003 2004 2005 2006 2007 2008
page 34Location Module David F. Miller Center for Retailing Education and Research
Number of Supermarket and
Hypermarket Stores
11717
12877
18924
21066
25166
27762
0
5000
10000
15000
20000
25000
30000
2003 2004 2005 2006 2007 2008
page 35Location Module David F. Miller Center for Retailing Education and Research
Key Players (2008)
Retailers Sales (100M
RMB)
# of Stores Market share
China Resources
Vanguard
638 2,698 13.4%
Lianhua 500 3,932 10.5%
Carrefour 338 134 7.2%
RT-Mart 336 101 7.0%
Wu-Mart 302 2,010 6.4%
Wal-mart 278 123 5.8%
Nonggongshang 267 3,330 5.6%
Xinyijia 175 105 3.7%
Trust Mart 164 104 3.4%
Hualian 150 1,946 3.1%
page 36Location Module David F. Miller Center for Retailing Education and Research
Current Status
Hypermarkets
Gross margin is 13.43%, profit is 4.53%
Supermarkets
Gross margin is 12.32%, profit is 4.15%
Market concentration
CR4=40%
CR8=60%
page 37Location Module David F. Miller Center for Retailing Education and Research
Current Status (Cont.)
Fresh food is becoming the “cash cow”.
The relationship with suppliers needs
improvement.
Hypermarket growth is the fastest among the
various formats.
Saturated in the first and second tier cities
Expanding in the third and fourth tier cities
Foreign retailers dominate the Hypermarket format.
Innovations and Differentiations
High-end Supermarkets, Fresh Food Supermarkets, and
Community Supermarkets.
Supermarkets pursue regional advantages and
serve communities.
page 38Location Module David F. Miller Center for Retailing Education and Research
Convenience Store
page 39Location Module David F. Miller Center for Retailing Education and Research
Retail Shop Format Features
Location Business area center; vital thoroughfare and public area
(surrounding stations, hospitals, business buildings,
entertainment centers, gas stations, etc.)
Trade Area and Target
Customers
Within a five minute walk; single and young people
Size 100 square meters and highly space efficient
Commodity Structure Mainly fast food and commodities, priced higher than market
average
Selling Form Mainly open-shelf self-choice style
Pay at cash register at the door
Service Open more than 16 hours a day
Provide facilities for fast food and some other services
Information System High level
Convenience Stores
page 40Location Module David F. Miller Center for Retailing Education and Research
U.S. Vs. China
Convenience store (US)
Convenience store (China)
page 41Location Module David F. Miller Center for Retailing Education and Research
Convenience Store (Cont.)
page 42Location Module David F. Miller Center for Retailing Education and Research
Convenience Stores
page 43Location Module David F. Miller Center for Retailing Education and Research
Convenience Stores
page 44Location Module David F. Miller Center for Retailing Education and Research
Convenience Stores
page 45Location Module David F. Miller Center for Retailing Education and Research
Number of Convenience Stores
36256027 6574 6076
8073 8874822
17283469
11929
1246712685
0
5000
10000
15000
20000
25000
2003 2004 2005 2006 2007 2008
Franchise store
Directly-managed store
page 46Location Module David F. Miller Center for Retailing Education and Research
Sales of Convenience Stores (Billion
RMB)
5.6
11.3
15.517.9
20.925
1.1
2.5
2.9
4.4
5.7
6.8
0
5
10
15
20
25
30
35
2003 2004 2005 2006 2007 2008
Franchise store
Directly-managed store
page 47Location Module David F. Miller Center for Retailing Education and Research
Meiyijia , 9.28%
Kuaike, 9.08%
Kede, 6.49%
7-Eleven, 6.41%
Haode, 4.61%
Jinhu, 3.86%
Liqun, 3.83%
Tianfu, 3.71%
Weike, 3.71%Shanghao, 3.53%
Suguo, 3.40%
Guoda, 3.25%
Others , 38.85%
Market Share of Convenience Stores
page 48Location Module David F. Miller Center for Retailing Education and Research
Current Status
Convenience stores are mainly regional.
Haode, Kede and Suguo in Eastern China
Meyijia, Tianfu and Shanghao in Southern China
Liqun and Weike in Shandong
7-11 is a national store chain
12 leading retailers own 60% convenience stores
Domestic retailers dominate the convenience store
format, with the exception of 7-11.
Shanghai and Zhejiang have half of the
convenience stores.
page 49Location Module David F. Miller Center for Retailing Education and Research
Current Status (Cont.)
Competition with other retail formats has become
intensive.
More attention is paid to fresh food
Instant food and meal boxes
Improved distribution
Foreign convenience retailers replenish twice daily
Chinese convenience retailers replenish once daily
Constructed distribution centers
Become big chain or die
Most of the convenience stores are in the red.
page 50Location Module David F. Miller Center for Retailing Education and Research
page 51Location Module David F. Miller Center for Retailing Education and Research
Retail Shop Format Features
Location Center of city business areas
Inside department stores and shopping centers
Trade area and target
customers
Mainly attract customers who are shopping for certain kind of
product
Size Differs with the products offered
Commodity Structure Mainly specific kind of product
Professional, various kinds, plenty of choices
Selling Form Open-shelf, self-choice style combined with on the counter
trade
Service Emphasize on quality service
Salespeople are knowledgeable and professional
Management System High level
page 52Location Module David F. Miller Center for Retailing Education and Research
# of Specialty Stores
2,129 3,016 3,853 5,353 6,064
22,132
47,825
67,47163,997
68,967
0
10000
20000
30000
40000
50000
60000
70000
80000
2003 2003 2005 2006 2007
Department Stores
Specialty Stores
page 53Location Module David F. Miller Center for Retailing Education and Research
Sales of Specialty Stores (100M RMB)
597930
1,275 1,4821,801
1,1911,581
7,782
8,868
10,573
0
2000
4000
6000
8000
10000
12000
2003 2003 2005 2006 2007
Department Stores
Specialty Stores
page 54Location Module David F. Miller Center for Retailing Education and Research
Non-Store Retailing
Source: ACMR-IBISWorld Databasen-Store Retailing
page 55Location Module David F. Miller Center for Retailing Education and Research
Online Retailing - Products and Services
Segmentation-products and service
page 56Location Module David F. Miller Center for Retailing Education and Research
Revenue and Revenue Growth Rate
page 57Location Module David F. Miller Center for Retailing Education and Research
Geographic Distribution of Revenue
About 97.4% of industry revenue was generated in
East China, North China and Middle South China
in 2009.
page 58Location Module David F. Miller Center for Retailing Education and Research
Online Retailing
The number of Internet users increasing fast
1996, 0.1 million;
1999, 4 million
2009, 340 million (No. 1 in the World)
110 million internet shoppers, increased 45.9% in
2008
2009 online sales was $248.35 billion
31 out of top 100 chain store retailers in China had
online retailing as of 5/2010
page 59Location Module David F. Miller Center for Retailing Education and Research
Online Consumers
On-line consumers are most of the age groups 18-
24 and 25-30,according to CNNIC (China Internet
Network Information Center)
page 60Location Module David F. Miller Center for Retailing Education and Research
Business to Business (B2B)
E.g.: Alibaba
Customer to Customer (C2C)
E.g., Taobao,Paipai
Business to Customer (B2C)
E.g., Dangdang, Joyo, and Jingdong Shangcheng
Business Models
page 61Location Module David F. Miller Center for Retailing Education and Research
Industry Characteristics
Big market with great potential
Barriers to entry are low
Competition is increasing
Government supports
The level of regulation is decreasing.
C2C dominates the market
B2C is 1/8 of C2C
page 62Location Module David F. Miller Center for Retailing Education and Research
Market Share of Online Stores(China Internet Information Center, 2009 Survey report on China Internet Market)
Taobao, 76.50%
Paipai, 6.10%
Dangdang, 5.80%
Joyo, 2.20%
Jingdong Shangcheng, 2.20%
Youa, 1.50%
Eachnet, 0.90%
Honghaier, 0.90%
Yunwang, 0.40%
Maiwang, 0.30%
99, 0.30%
others, 3.20%
page 63Location Module David F. Miller Center for Retailing Education and Research
Market Share of Online Stores
Taobao
Sales in 2008 were
$146.2 M, an increase of
131%
Close to 100 million
registered users (by the
end of 2009).
Age 25-32 = 48%; Age
16-24 = 35%
page 64Location Module David F. Miller Center for Retailing Education and Research
Sizes of Different Retail Formats (2008)
Sales
(Million
Yuan)
Growth
(%)
Acreage
(Square
meters)
Growth
(%)
# of
Employees
Growth
(%)
# of SKUs Growth
(%)
Hypermarkets 212.9 12.4 11,275 1.8% 239 0.7 25,537 4.8
Supermarkets 72.4 11.3 2,672 1.4% 101 2.8 14,325 7.4
Department
Stores
883.97 11.1 32,531 1.4% 887 0.0 93,422 0.8
Convenience
Stores
4.73 12.3 139 0 9.1 5.8 2,614 -0.4
Home
Electronics
501.64 2.0 7,667 1.9% 289 -1.0 14,216 11.4
Drug Stores 37.06 7.1 752 0 61 0.0 6,739 4.0
page 65Location Module David F. Miller Center for Retailing Education and Research
Efficiency and Profitability of Different
Formats (2008)Sales
/#
empl
oyee
(1000
Yuan)
Gro
wth
(%)
Sales/
Squar
e
Meter
(1000
Yuan)
Growt
h (%)
Sales/
# SKU
(1000
Yuan)
Growt
h (%)
Transa
ction/
day
Growt
h (%)
Sales/
custo
mer
(Yuan)
Growt
h (%)
Gross
Margi
n (% )
Growt
h (%)
Hyperma
rket
891 1.8 17.6 6.27 7 8.4 10059 1.0 58.1 12.9 12.9 0.3
Superma
rket
719 8.3 27.1 9.81 5 3.5 4554 6.5 43.6 4.5 12.9 0.9
Departm
ent Store
997 15.3 27.2 9.3 3.5 9.2 10839 -5.2 226.4 1.5 14.1 0.3
Convenie
nce Store
521 6.6 34 12.3 1.8 12.7 758 -2.7 16.2 11.1 16.4 0
Home
Electroni
c
1733 7.9 65.4 6.89 35.3 -8.5 729 -7.8 1901.0 2.3 10.8 1.0
Drug
Store
610 6.6 49 7.1 5.5 2.9 1724 -3.8 48.2 1.3 23.0 -0.7