China is poised to replace Japan as the world’s second-largest retail market by 2012, even as inflation takes some of the fire out of the awakening consumer dragon, according to a new report by TNS Retail Forward.
Fashion is set to be a cornerstone of that growth, with homegrown and international names looking to tap into the market. By 2012, apparel and footwear sales in the Middle Kingdom are expected to weigh in at 4 billion, a 71.2 percent rise from the 5 billion sold in 2007, said the study, “Strategic Focus — China’s Retail Landscape.”
By comparison, U.S. apparel and footwear sales are expected to swell 20.7 percent to 1 billion in 2012, from 7 billion last year.
“China remains one of the best retail opportunities in the world, despite inflation pressures weighing on near-term growth,” said the study, written by Frank Badillo, VP and senior economist at Retail Forward. “Much of the continued entry into China is skewed toward apparel retailers, particularly strong brands and upscale retailers,” he wrote.
Retailers recently setting up shop in China, or planning to, include Hennes & Mauritz, Topshop, Galeries Lafayette, Dockers and American Apparel.
Compared with last year, the country’s retail sales, excluding automobiles, are projected to expand 68.1 percent by 2012, to .43 trillion. The U.S. is expected to remain the king of the consumer hill, with retail sales growth of 25.6 percent over the next five years, to .46 trillion. Japan is projected to slide to the No. 3 slot with an increase of 3.5 percent, to .2 trillion.
In addition to higher prices, which are especially apparent in the food area, retailers face growing government attention to product safety and environmental regulation. Foreign companies also find themselves operating in an era of heightened Chinese nationalism.
To tap into the market, fashion companies are learning some new tricks. Adidas, for instance, is churning out polo shirts featuring the Chinese “lucky cloud” symbol.
Learning to speak the local language, both literally and in the fashion sense, isn’t the only problem facing transplants. There are also good old-fashioned competitive pressures.
“Foreign retailers in China continue to plan for aggressive expansion, but more often have fallen behind plan,” said the report. “In some cases, the slow expansion is a result of their struggle to acclimate to the market, but in other cases, the slow movement is a result of local red tape.”
Carrefour’s emphasis on a small format for its 387 stores in the country has given it an advantage over Wal-Mart’s bigger boxes, said the study.
Wal-Mart, which opened its 100th store in the country last year, plans to double its store count there in five years and also has a 35 percent stake in the 101-door Trust-Mart hypermarket chain |
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