MOFCOM Speaks on China’s Retail and Wholesale Industries

July 10, 2013 Posted by China Briefing Reading Time: 4 minutes

Jul. 10 – China’s Ministry of Commerce (MOFCOM) recently held a special press conference on the current situation of the country’s retail and wholesale industries.

MOFCOM’s press spokesman, Yao Jian, representatives from the Department of Circulation Industry Development Wang Desheng and Wang Xuanqing, head of the China Chain Store & Franchise Association (CCSFA) Guo Geping and deputy president of the China Federation of Logistics & Purchasing Cai Jin were in attendance and spoke at the press conference.

According to Wang Desheng, the development of the retail industry in 2012 presented four trends:

Online retail is rapidly growing, currently at a year-on-year rate of 67.5 percent;
Distribution channels have expanded massively into 3^rd and 4^th tier cities due to market saturation in the 1^st and 2^nd tier cities;
Competition between department stores and supermarkets is intensifying, but the performance of specialty stores is staying steady; and
Many retail enterprises have reformed their business models by creating their own brands, enhancing cooperation with suppliers and enforcing fine management.

Guo Geping added that convenience stores have greatly grown in number throughout the country, posting 28 percent year-on-year growth in 2012. He attributed the growth to the fact that instant meals, such as instant noodles and microwaveable meals, are now getting more popular among young consumers, especially in 1^st and 2^nd tier cities.

He also noted that the actual convenience factor of using a convenience store’s service functions (which range from the ability to pay electricity, utility and mobile phone bills, to being able to buy train or cinema tickets in-store) have helped spike the increase in the number, and usage, of local convenience stores.

The press conference also touched on the state of current Chinese shopping centers, which have recently begun to expand the amount of restaurant and entertainment areas to upwards of 60 percent of a center’s total space – leaving little room for space for retail stores. Wang Deshang concluded that as the amount of space for physical retail stores starts to diminish, the future of the retail industry will evolve into a combination of physical and online stores with an emphasis on online sales.

According to research conducted by Deloitte and CCSFA, China is estimated to house a total number of 4,000 shopping centers by 2015 (up from the current number of 3,000).

Yao Jian also reiterated that the Shanghai pilot free trade zone scheme has been adopted by the State Council and will be implemented in the near future. The free trade zone will be located in Pudong, and will provide a more comprehensive range of tax friendly facilities in addition to offering foreign-denominated offshore banking, financial leasing, cross-border financing and international trade settlements.

Foreign invested retail enterprises grew by over 6 percent last year. However, domestic firms have been able to catch up due to the relatively low market shares that these foreign enterprises have in China (despite the foreign firms having more regulated and efficient operations).

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