china - emis · china's wholesale and retail trade sector amounted to over rmb 49.6tn and...

- 1 - Any redistribution of this information is strictly prohibited.

Copyright © 2014 EMIS, all rights reserved.

Produced by:

Any redistribution of this information is strictly prohibited.


Retail Sector China

December 2014



Table of Contents

I. Sector Overview

1. Sector Highlights

2. Economic Importance

3. GDP growth

4. Sector Forecast

5. Main Sector Indicators

6. Profit and Costs

7. Prices Development

8. Wages

9. Investments

10.E-Commerce

11.Government Policy

12.Major Regulations List

II. Wholesale Trade

1. Main Subsector Indicators

2. Turnover

3. Commodity Exchange Markets

4. Turnover of Commodity Exchange Markets in 2012

III. Retail Trade

1. Main Subsector Indicators

2. Industry Segments of Retail Trade

3. Chain Retail Trade

4. Indicators by Business Category

5. Industry Segments of Chain Retail Trade

IV.Major Players

1. Suning Commerce Group

2. Suning Commerce Group (cont’d)

3. Shanghai Bailian Group

4. GOME Electrical Appliances Holding Limited

5. GOME Electrical Appliances Holding Limited (cont’d)

6. Sun Art Retail Group Ltd

7. Sun Art Retail Group Ltd (cont’d)

8. Alibaba Group

9. Alibaba Group (cont’d)

IV.Regional Distribution

1. Regional Distribution of Wholesale and Retail Trade, 2013



I. Sector Overview



Sector Highlights

More than 25 of the word's leading retail chain operators are present on the Chinese market, operating on a limited basis or through joint ventures. According to data from the National Bureau of Statistics, there were 3,624 foreign-funded enterprises and 2,819 enterprises from Hong Kong, Macao and Taiwan, operating in the wholesale and retail trade sector in China in 2013. This number was 2,358 and 1,299 in 2009, respectively. The sector has become attractive to foreign investors after its deregulation in 2004, despite the unofficial barriers and complicated administrative, registration and operational procedures reported by companies and industry analysts. One of the easiest ways for a foreign company to enter the market is by forging various partnerships with local companies.

Online trade is gaining popularity with a fairly good pace and in 2013 online commodity retail sales were almost RMB 2tn, fostering competition on

the market and forcing the classic brick-and-mortar stores to explore new channels such as online sales, mobile shops, coordination of prices,

payment options, services and discounts and integration of payment and membership systems. Another trend is the rising popularity of

convenience stores. They are gaining market share as retailers are trying to cope with the rising price of land and real estate, the competition from

the online trade, the slowing economy and the government anti-corruption measures. It is expected that the competition between convenience

stores will intensify in the next years stimulating them to offer good customer services, strong product offerings and extended working hours.

China's wholesale and retail trade sector amounted to over RMB 49.6tn and accounted for 85% of the country's GDP in 2013, up from just 66% in 2008. The sector has posted a double-digit growth since 2000 - a clear indication of the fast economic growth and rising consumption power of the Chinese population. Despite a recent slowdown in GDP growth, affecting the dynamics of retail sales, the sector still has ample development opportunities and is expected to continue growing in double digits over the next five years. Its development will be supported by the ongoing urbanisation and the rising disposable income of households that will stimulate the demand for more modern and high-end goods. Additional stimulus is expected to come from the booming online trade that provides lower prices, diversity and convenient delivery even for remote lower tier cities.

Sector Development

Trends

Foreign Players



Source:

Comments

Economic Importance

The total wholesale and retail trade sales in Chinа were valued at RMB 49.7tn in 2013, growing by 21% from the previous year despite the slowing down of

the Chinese economy in the past few years. The share of sales in GDP went up to 85% while per capita sales stood at RMB 36,496, increasing steadily and

serving as evidence for the bright prospects for the sector. Online trade is gaining popularity with a fairly good pace and in 2013 online commodity retail

sales were almost RMB 2tn, fostering competition on the market. This, coupled with the rising operating costs such as wages and rents, affected the profit

growth.

Economic Importance of the Wholesale and Retail Trade

National Bureau of Statistics of China, CEIC

2008 2009 2010 2011 2012 2013

Number of corporation enterprises, units 100,935 95,468 111,770 125,223 138,865 171,973

Engaged persons, eop, mn persons 7.4 7.5 8.5 9.0 9.9 11.4

Total purchases, RMB bn 18,404 17,920 24,804 32,816 37,831 45,127

Imports, RMB bn 1,447 1,331 1,960 2,723 3,152 n/a

Total sales, RMB bn 20,823 20,117 27,664 36,053 41,053 49,660

% of GDP 66% 58% 69% 76% 78% 85%

Per capita, RMB 15,680 15,074 20,631 26,757 30,320 36,496

Exports, RMB bn 1,384 1,117 1,442 1,780 2,000 n/a

Total stock, eop, RMB bn 1,537 1,602 1,982 2,498 2,900 3,242

Cost of sales, RMB bn 17,131 16,592 22,866 29,674 33,821 40,956

Profit tax, RMB bn 110 108 131 169 179 n/a

Total profit, RMB bn 580 548 702 798 802 n/a



Source:

Comments

GDP growth

The growth of the Chinese economy remained stable at 7.7% y/y in 2013, reflecting the ongoing structural changes, the withdrawal of the government

stimulus packages and the wobbly recovery of the world economy In 2009 and 2010 the investments, which were largely supported by government

measures, were the driver of the economy and offset the external shocks. In the last several years, the government has taken steps to curb domestic

imbalances while preserving economic growth. Supply-side rebalancing moved forward – over 2011-2012 period the contribution to growth from real

consumption exceeded that of GFCF, the services sector grew faster than manufacturing and there were rapid increases in urban and rural household

incomes. In 2013 the contribution of investments exceeded that of final consumption.

Real GDP Growth and Main Components Contribution

CEIC

5.1 5.6 4.3 4.6 4.5 5.3

4.2 3.9

5.5 6.0

4.5

8.1

5.5 4.4

3.6 4.2

2.0

2.6

0.8

-3.4

0.4

-0.4 -0.1 -0.3

12.7

14.2

9.6 9.2 10.5

9.3

7.7

7.7

-6

-4

-2

0

2

4

6

8

10

12

14

16

2006 2007 2008 2009 2010 2011 2012 2013

Final Consumption Expenditure Gross Capital Formation Net Export of Goods and Service GDP growth



Source:

Sector Forecast

Main Retail Segments Forecasts

The retail sector in China will continue to grow at stable albeit historically lower rates.

Its development will be shaped by the overall economic slowdown, the growing popularity of online trade, the development of new trade channels and the supplant of giant retail shops by smaller convenience stores.

The retail sector has strong fundamentals with relatively low consumption rate, which will continue driving the sector's growth in the future.

Growth is expected to slow down in the next five years, from an average of 24% to an average of 16% for the years up to 2018, reflecting China's overall economic slowdown.

Retail Trade Turnover Forecasts, RMB bn

EMIS Insight

2014f 2015f 2016f 2017f 2018f

Total Retail Sales of Consumer

Goods, RMB bn 26,397 29,301 32,524 36,101 40,072

Retail Trade Sales, RMB bn 11,621 13,481 15,638 18,140 21,042

Commodity Exchange Markets

Turnover, RMB bn 11,256 12,381 13,620 14,982 16,480

Chain Stores Sales, RMB bn 4,143 4,433 4,743 5,075 5,430

11,621 13,481

15,638

18,140

21,042

2014 2015 2016 2017 2018



Source:

Comments

Main Sector Indicators

The growth of the trade sector is related to the fast urbanisation and growing consumer purchasing power, resulting in high consumer demand over the past

years. The retail trade sales went up by 18% y/y in 2013, speeding up from 16.2% in 2012 but still slower than the 21.7% annual growth of wholesale trade

sales. Chain retail sales faced competition from the other retail companies as well as the online shopping and their growth was just 7.2% y/y. Many of them

work only in specific regions, while enterprises with nationwide networks are few. Despite the fact that the sector is broadly open for foreign players and

some of the world's top players such as Metro, Carrefour, Tesco and Walmart operate in the country, the majority of the enterprises are domestically funded.

The share of the foreign enterprises is less than 4% of all companies but they employ 13.5% of the workers in the sector.

Wholesale and Retail Trade Main Indicators (cont’d)


2007 2008 2009 2010 2011 2012 2013

Total Retail Sales of Consumer Goods, RMB bn 9,357 11,483 13,268 15,700 18,392 21,031 23,781

as % of GDP 35.1% 36.3% 38.0% 39.0% 38.9% 39.7% 40.5%

Commodity Exchange Markets Turnover, RMB bn 4,409 5,246 5,796 7,270 8,202 9,302 n/a

as % of GDP 16.5% 16.6% 16.6% 18.0% 17.4% 17.6% -

Retail Trade Sales, RMB bn 2,712 3,797 4,333 5,751 7,182 8,344 9,849

as % of GDP 10.2% 12.0% 12.4% 14.3% 15.2% 15.8% 16.8%

Chain Retail Sales 1,775 2,047 2,224 2,836 3,370 3,546 3,801

as % of GDP 6.7% 6.5% 6.4% 7.0% 7.1% 6.7% 6.5%

Operating Area of Commodities Exchange Markets, eop, mn sq m 198.1 212.3 232.3 248.3 262.3 279.0 n/a

Business Area of Retail, eop, mn sq m 160.9 190.8 227.3 261.9 212.3 251.3 n/a

Operating Area of Chain Retail Stores, eop, mn sq m 100.4 102.0 118.1 127.6 136.7 147.7 n/a



Comments

Source:

Profit and Costs

Profit from the main business soared by 28.3% y/y in 2013 to RMB 3.23tn. Such strong growth has not been recorded since 2008. In 2011, the government

imposed macroeconomic control and limited the growth of the local real estate market. This slowed down the overall demand for consumer goods and

profits growth reduced to 10.2% in 2012. Costs of sales also picked up in 2013, rising by over 21% y/y to RMB 41tn, mainly as a result of wages dynamics

and real estate rents and prices.

Profits, RMB bn Costs, RMB bn

EMIS Insight, CEIC

349 58

0

548 70

2

798

802

850

1,53

3

1,48

6 1,82

0 2,28

5

2,51

8

3,23

0

2007 2008 2009 2010 2011 2012 2013

Total profit Profit from main business

10,8

41 17

,131

16,5

92 22

,866

29,6

74

33,8

21 40

,956

238

366

359

442

531

624

2007 2008 2009 2010 2011 2012 2013Cost of sales Admin expenses



Source:

Prices Development

CPI and Retail Price Index, PY=100

Retail Price Indices for Urban and Rural Households, PY=100

CEIC

104.5

103.2 103.6 103.4

103.0

102.2 101.8 102.0 101.9 101.7

102.0 102.5

102.0

103.2

102.1 102.4

102.1 102.7 102.7 102.6

103.1 103.2 103.0 102.5 102.5

102.0 102.4

101.8

102.5 102.3 102.3 102.0

101.6 101.6

104.1

102.9 103.5

103.1 102.5

101.4 100.8 101.0 100.9 100.9 101.1

101.5 101.3

102.1

100.8 100.9 100.7

101.4 101.7 101.6

101.9 101.9 101.7 101.2 101.1

100.8 101.2

100.8

101.6 101.6 101.6 101.2

100.7 100.6

Jan-

12

Feb

-12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb

-14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

CPI Retail Price Index

103.9

102.8 103.4

103.0 102.4

101.3

100.7

101.0 100.9 100.9 101.1 101.4

101.1

101.9

100.6 100.8 100.6

101.3 101.5 101.4 101.7 101.8 101.6

101.2 101.1 100.8

101.3 100.8

101.6 101.6 101.6 101.2

100.7 100.6

104.5

103.0

103.7 103.3

102.7

101.5

100.8 101.1 101.0 101.0

101.4 101.9 101.7

102.6

101.3 101.3 101.1

101.8 102.1 102.1

102.4 102.2 102.0 101.5

101.2 100.7

101.1 100.8

101.7 101.6 101.6 101.2

100.6 100.7

Jan-

12

Feb

-12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun-

13

Jul-1

3

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb

-14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Urban Rural



Source:

Comments

Wages

The average annual wage of people employed in the wholesale and retail sector rose steadily over the past decade and averaged RMB 50,308 in 2013.

Wages in the private companies went up by 12.4% y/y or faster than the average. Since private enterprises provide most of the employment in the

wholesale and retail sector, this pressure will eventually be transferred to the operating costs of the sector.

Average Wage in Wholesale and Retail Sector, RMB

CEIC

21,074

25,818 29,139

33,635

40,654

46,340 50,308

16,813 17,775 19,928

22,791

27,233 30,604

2007 2008 2009 2010 2011 2012 2013

Urban non-private units Private enterprices



Comments

Source:

Investments

Fixed assets investments in wholesale and retail trade sector stood at RMB 1.27tn in 2013, up by 30% y/y. Utilised FDI also soared by 21.7% y/y,

speeding up from 2012. Investments in the sector relate mainly to the expansion of large retailers to lower tier cities, the development of new trade

channels (online and mobile services besides the classic brick-and-mortar trade) and the transformation of large scale retail outlets to formats suitable for

small communities in big cities.

Fixed Assets Investments, RMB bn Utilised FDI, USD mn

EMIS Insight, CEIC

288 374

513 603

744

981

1,272

2007 2008 2009 2010 2011 2012 2013

2,677

4,433

5,390

6,596

8,425

9,462

11,511

2007 2008 2009 2010 2011 2012 2013



Source:

E-commerce

Development of online trade, RMB bn

Over the past several years, online trade in China enjoyed

a boom supported by encouraging government policies

and consumer preferences for on-line shopping. The

online trade provided opportunities for small companies to

be better presented but also diversified the trade options

for consumers in remote areas.

The per capita retail sales rocketed to RMB 1,385 in 2013

from just over RMB 39 in 2007. They accounted for 3.8%

of the total sales of the wholesale and retail.

The development of online trade intensified competition

and forced all participants to develop new business

models such as integrating online and offline trade. For

example, most major retailers are developing their retail

trade sites or introduce various channels to be better

presented online. In addition, the expansion of the online

trade supports the development of logistics, call center

services and various payment schemes (for example

instalment payments and factoring) that further facilitate

trade.

According to EnfoDesk, Tmall.com, the Alibaba Group

B2C online commerce platform, was a market leader in

B2C market in 2013 with a 49.08% share, followed by

Jingdong with 18.16%.

EMIS Insight, CEIC

52 13

0

260

514

802

1,23

5

1,88

5

54 12

1

250

523

757

1,31

1

1,84

8

2007 2008 2009 2010 2011 2012 2013

Commodity e-commerce retail sales

Business turnover of internet shopping



Source:

Government Policy

Sector

Liberalisation

The distribution sector as a whole was fully restricted to foreign companies until 1992, when it was opened only on a trial basis in

specific cities and economic zones, with series of restrictions and limitations to ownership, product range and business formats. The

sector was opened to a larger extent after China's entry to the WTO in 2001, with the first decrees allowing foreign companies'

operations in the wholesale and retail business being issued in 2004. The government opened the sector gradually, in order to let local

enterprises learn from foreign operators and gain enough competitive advantage and retain leading positions on the market. In the last

two years, the market was opened further to foreign retailers, and they are now allowed to operate in previously prohibited segments

such as e-commerce, fuel stations and drug retailing.

E-commerce

Regulations

The e-commerce segment is developing fast, supported by encouraging government policies and consumer preferences for on-line

shopping. According to the government's 12th Five Year Plan (2011-2015), e-commerce sales are set to account for over 5% of

China's total retail sales by 2015. Online sales channels have been aggressively developed by local players in particular and to

standardise the segment, the government introduced two voluntary standards for the business models and transaction services

SB/T10519-2009. The State Administration for Industry and Commerce also issued Administrative Measures for Online Commodities

Trading and Related Services that specify the criteria and procedures for online business registration, trademarks and company

names protection. The State Administration for Industry and Commerce is in charge of monitoring online goods and services

transactions.

Anti-pricing

Monopoly

Regulations

The National Development and Reform Commission has issued a Regulation on Anti-Pricing Monopoly to prohibit business operators

from reaching agreements with each other on fixing prices or set minimum prices, from selling commodities at unfairly high prices or

buying commodities at unfairly low prices, or offering different prices to different sellers or buyers, or asking for illegal surcharges.

Regulations also concern administrative organisations and organisations that are authorised to administer public affairs. These are

prohibited from forcing business operators to fix prices and from making regulations that eliminate or limit price competition.



Source:

Major Regulations List

Major Regulations List

China Ministry of Commerce

Year Legislation Highlights 1992 Trial Procedures Relating to Foreign Invested Commercial

Enterprises

Allowing JV of foreign investors to open one or two JV retail outlets in six cities and 5 Special Economic Zones

Sep 1996 Trial Procedures on the Establishment of Pilot Sino-foreign

Trade Equity Joint Venture (JV)

A pilot scheme for import and export of JV foreign trade companies in Shanghai and Shenzhen. The scheme

allows only wholesale and not retail, with requirements for Chinese majority stake in the JV and minimum capital

of RMB 100mn for the JV.

1999 Measures Concerning Pilot Projects for Commercial

Enterprises with Foreign Investment

Expansion of the pilot areas to all provincial and autonomous regional capitals, municipalities and independent

planning cities, with no more restrictions on wholesale operations.

June 2004 Administrative Measures on Foreign Investment in Commercial

Areas

These measures replaced the pilot projects of 1999 and opened the sector to foreign investors.

Oct 2006 Administrative Measures on Retailers’ Promotion Activities Regulate retailers’ promotional activities in areas such as pricing, advertising content, return or exchange of

goods, after-sales services and safety issues, etc.

Nov 2006 Management Rules on Fair Transaction between Retailers and

Suppliers

The rule is applicable to retailers with annual sales over RMB 10 million and their respective suppliers. Under the

management rules, retailers could not charge suppliers additional fees unless agreed by the parties in concern

and specified in the contracts. Moreover, retailers should also pay for all ordered items, even if they are not sold;

and the payment must be made no later than 60 days upon receipt of goods. On the other hand, there are

provisions to protect retailers’ interests; for instance, suppliers are prohibited from practicing tie-in selling. The

management rules mark a key step towards building healthier relationship between retailers and suppliers; and

may even enhance the supply chain efficiency in China in the long run.

May 2007 Commercial Franchise Management Regulation The regulation stipulates the rights and responsibilities of both franchisors and franchisees, and establishes a

comprehensive legal framework for franchise contract. Moreover, it also reinforces information disclosure

requirements for franchisors; and regulates marketing and advertising activities during franchisee recruitment.

May 2007 Administrative Measures on Information Disclosure for

Franchise Business

specifies further in detail the information disclosure requirements as stipulated in the regulation

May 2007 Administrative Measures on Filing Franchise Business spells out clearly the filing requirements, filing procedures as well as filing regulations for franchise business.

May 2007 Administrative Measures on Food Safety clarify food wholesalers and retailers’ responsibilities for safeguarding food safety.

Aug 2008 Anti-monopoly Law Forbid market monopolistic conducts and Curb administrative monopolies



II. Wholesale Trade



Source:

Comments

Main Subsector Indicators

There were 91,607 enterprises operating in the wholesale trade in China in 2013. They generated a turnover of RMB 39.8tn, up by 21.7% over 2012.

Despite the rise of costs, the profit from the main business of the companies soared by 28.7% y/y to RMB 2.2tn. The development of the sector was

supported by the stable macroeconomic environment and the revival of the investment activity in the country. Although the economic growth in China

slowed down in 2012 and 2013 against its historical average, the prospects for the country are still for a relatively fast development.

Main Wholesale Trade Indicators


2007 2008 2009 2010 2011 2012 2013

Enterprises, units 29,046 59,432 52,853 59,464 66,752 72,944 91,607

Employees, th persons 2,496 3,154 3,123 3,509 3,735 4,104 4,842

Total assets, RMB bn 3,870 5,874 6,582 8,400 10,744 12,750 15,669

Total purchases, RMB bn 10,483 15,256 14,301 19,915 26,608 30,429 n/a

Total sales, RMB bn 10,562 17,026 15,783 21,912 28,870 32,709 39,812

Total stock, eop, RMB bn 665 1,168 1,185 1,471 1,833 2,127 n/a

Cost of sales, RMB bn 8,808 14,238 13,193 18,348 24,082 27,362 33,373

Profit from main business, RMB bn 634 1,141 1,067 1,284 1,605 1,743 2,244

Total Profit, RMB bn 299 476 435 543 623 640 n/a



Source:

Comments

Turnover

Sales revenue went up in all segments of the wholesale trade in 2013. Sales of metals, which is the main segment with a 24% share, hiked by 25% y/y to

RMB 7.6tn, after a modest 6% growth in 2012. The second largest group, petroleum products with a 20% share, soared by 15% over the year, the same as

in 2012 but below the pre-crisis rates.

The growth of machinery and hardware and motor vehicles sales accelerated significantly to 17% and 15%. Sales in the segment of textiles and garments

were the only ones to actually slow down to 23% over the year from 59% in 2012.

Sales Revenue by Main Segments in Wholesale Trade, RMB bn


2007 2008 2009 2010 2011 2012 2013

Food, Beverage & Tobacco 979 1,294 1,394 1,704 2,095 2,460 3,086

Textile, Garment & Daily Article 700 958 905 1,138 1,455 2,320 2,863

Medicines & Medical Appliances 378 527 613 720 933 1,077 1,350

Petroleum & Related Product 2,166 2,809 2,673 3,625 4,877 5,558 6,410

Coal & Related Product 403 976 958 1,534 2,045 2,456 2,983

Building Material 236 405 404 544 799 899 1,057

Metal Material 1,770 3,609 2,924 4,389 5,775 6,123 7,672

Machinery, Hardware & Electrical Product 1,450 2,357 2,291 3,154 3,996 3,721 4,369

Motor Vehicle, Motorcycle & Parts 335 727 677 1,033 1,284 1,333 1,539

Other Wholesale 349 510 355 512 655 662 801



Source:

Comments

Commodity Exchange Markets

Commodity exchange markets are typical for China and are a special subsector that cannot be underestimated. In the past, markets were outdoors in open

spaces, but most of them, particularly the registered ones with retail value over RMB 100mn, are now located in modern buildings and are actually the low-

end version of shopping centers. Wholesale trade makes up the larger portion of the turnover on these markets. However, the retail turnover is also

significant – in 2012 it amounted to RMB 1,288bn or almost 14% of total turnover, gradually declining from the 18.6% share registered in 2007.

Nevertheless, there are some segments and groups of goods were the retail trade accounts for almost or more than 50% of the turnover.

Main Indicators of Commodity Exchange Markets

National Bureau of Statistics of China

2007 2008 2009 2010 2011 2012

Number of markets, units 4,121 4,567 4,687 4,940 5,075 5,194

Number of booths, th units 2,682 2,839 2,995 3,193 3,335 3,494

Operating area, mn sq m 198 212 232 248 262 279

Turnover, RMB bn 4,409 5,246 5,796 7,270 8,202 9,302

Wholesale, RMB bn 3,587 4,312 4,831 6,095 6,939 8,014

Retail, RMB bn 821 934 966 1,175 1,263 1,288



Source:

Turnover of Commodity Exchange Markets in 2012

Turnover of Commodity Exchange Markets of Transaction above RMB 100mn, 2012


Turnover, RMB bn Wholesale, RMB bn Retail, RMB bn Share of retail in

total turnover, %

Total 9,302 8,014 1,288 14%

Food, Beverages, Tobacco and Liquor 2,320 2,012 307 13%

Clothing, Shoes, Hats and Textiles 1,390 1,224 166 12%

Cosmetics 31 24 7 23%

Gold, Silver and Jewellery 50 42 8 16%

Articles for Daily Use 287 244 43 15%

Hardware & Electrical Materials 204 178 26 13%

Sports & Recreational Articles 17 14 3 18%

Newspapers and Magazines 7 6 2 23%

E-journal and Video Products 22 17 5 23%

Household Appliances and Video Equipment 68 47 21 31%

Traditional Chinese and Western Medicine 88 84 4 4%

Cultural and Official Goods 132 58 74 56%

Furniture 171 92 79 46%

Communication Appliances 26 14 12 46%

Coal and Related Products 68 68 0 0%

Wood and Wooden Products 93 90 3 3%

Petroleum and Related Products 226 226 0 0%

Raw Chemical Materials and Related Products 308 306 2 1%

Metal Materials 2,312 2,310 2 0%

Building and Decoration Materials 435 336 99 23%

Mechanical & Electrical Products 133 127 5 4%

Automobile 579 202 377 65%

Seed and Feedstuff 13 13 1 4%

Cotton and Hemp 50 49 1 2%

Others 271 231 41 15%



III. Retail Trade



Source:

Comments

Main Subsector Indicators

There were 80,366 enterprises engaged in retail trade in 2013. The growth of retail sales speeded up to 18% y/y against 16.2% in 2012 despite the cautious

consumer demand. However, since the growth of sales costs was kept at bay, the profit from the main business of the companies jumped by 27.3% y/y to

RMB 986bn. The retail trade has bright prospects in the coming years. Some of the main retailers that operate in the country have announced plans to

expand their business. For example, Walmart, that operates some 400 stores in China, said it will open 110 new stores by 2019. Another trend that is

evident in the market is the rising popularity of convenience stores. They are gaining market share as retailers are trying to cope with the rising price of land

and real estate, the competition from the online trade, the slowing economy and the government anti-corruption measures.

Main Indicators of Retail Trade Sector


2007 2008 2009 2010 2011 2012 2013

Enterprises, units 26,691 41,503 42,615 52,306 58,471 65,921 80,366

Employees, th persons 3,553 4,221 4,367 5,013 5,276 5,752 6,553

Total assets, RMB bn 1,181 1,638 1,952 2,456 3,084 3,773 4,444

Total purchases, RMB bn 2,408 3,148 3,619 4,889 6,208 7,403 n/a


Total stock, eop, RMB bn 254 369 418 510 665 774 n/a

Cost of sales, RMB bn 2,032 2,892 3,399 4,518 5,592 6,459 7,583

Profit from main business, RMB bn 217 392 419 537 680 775 986

Total Profit, RMB bn 50 104 113 160 175 163 n/a



Source:

Comments

Industry Segments of Retail Trade

In 2012, the profit from the main business went up for all industry segment of the retail trade. Profit of retail trade in motor vehicle and fuels went up by 41%

y/y to RMB 292bn after it collapsed by 4% in 2012. the other main segment, integrated retail, enjoyed RMB 296.6bn of profits from the main business, up by

11%. The high growth of profits in some segments such as hardware and furniture (50%), computer and software (34%), cultural and sport equipment

(32%) shows consumer interest in durable goods. It may be a signal that consumers see the economic slowdown as temporary and remain confident in the

future.

Main Indicators by Industry Segments, 2012


Number of

Enterprises,

units

Employees, th

persons

Total Purchase

Value, RMB bn

Total Sales

Value, RMB bn

Total Stock,

eop, RMB bn

Profit from

Principal

Business, RMB

bn

Integrated Retail 10,726 2,433 1,851 2,165 196 266

Food, beverage and tobacco 4,374 239 218 241 23 36

Textile, garment & daily article 3,779 435 268 338 58 73

Cultural & sport equip 3,155 214 193 208 53 36

Medicine&Medical appliance 3,762 376 353 386 38 37

Motor vehicle, fuel & parts 24,396 1,306 3,474 3,829 307 208

Computer, software & appliance 9,127 460 619 690 63 63

HFDM 3,660 151 180 207 13 31

Stalls, Non-shop and Other Retails 2,942 139 246 281 22 25

Retails on the Internet 148 45 93 112 11 5



Source:

Comments

Chain Retail Trade

The subsector of chain stores has experienced a significant growth in China in the past few years, and continues to grow fast driven by strong market

fundamentals. The number of chain stores rose from 2,411 in 2011 to 2,542 in 2012. The number of stores went up by 5.8% in 2013 after a 2.3% fall in the

previous year. There was some optimisation of operations in the sector since the number of people working in chain retail stores went down 4,000 despite

the rising operating area and stores. The growth of total sales accelerated to 7.2% y/y in 2013, but remained below the double-digit growth rates over 2008-

2011. The share of this segment in the sector's total sales is falling, which shows faster overall growth and a trend towards smaller community stores in the

past few years. In 2013, the retail sales value of chain stores accounted for 38.6% of the retail trade value, down from 65% in 2007.

Chain Retail Trade Main Indicators


2007 2008 2009 2010 2011 2012 2013

Number of head stores, unit 1,729 2,457 2,327 2,361 2,411 2,524 n/a

Number of stores, units 145,366 168,502 175,677 180,825 197,428 192,870 204,090

Employee, eop, th persons 1,862 1,971 2,109 2,242 2,524 2,564 2,559

Operating area, eop, mn sq m 100 102 118 125 143 148 156


Total purchase, RMB bn 1,592 1,719 1,934 2,456 2,938 3,083 3,226

Centralized purchase and delivery, RMB bn 1,254 1,378 1,472 1,741 2,292 2,398 n/a



Source:

Comments

Indicators by Business Category

Chain stores in China operate in various formats with department stores and supermarkets being the most popular ones. Gas stations also take share in this

segment with 31,073 outlets. Convenience chain stores form the fastest growing segment in 2013 – the growth rates of the operating area and the number of stores

exceeded the chain retail average and the performance of supermarkets, department stores and hypermarkets. Convenience chain stores are developing in first

and second-tier cities. It is the segment with more investment from foreign companies, together with supermarkets. However, industry analysts from China Chain

Store and Franchise Association said that there is one convenience store per 5,000 people in mainland China against saturation of 2,000 in Japan and Taiwan. It is

expected that the competition between convenience stores will intensify in the next years stimulating them to offer good customer services, strong product offerings

and extended working hours.

Chain Retail Trade by Business Category, 2013

EMIS Insight, National Bureau of Statistics of China, CEIC

Number of

Stores, unit

Operating Area,

eop, mn sq m

Employeee, eop,

th persons

Total Purchase,

RMB bn

Total Sales, RMB

bn

Specialty Store 104,054 68.5 935 1,872.2 2,249

Gas Station 31,073 40.8 286 1,217.8 1,479

Hypermarket 9,380 31.1 556 384.8 473

Department Store 4,514 18.6 277 302.9 370

Supermarket 33,835 18.5 467 259.4 289

Franchised Store 26,113 4.8 161 180.2 158

Convenience Store 14,680 1.3 74 25.5 31

Warehouse Club 107 0.6 16 24.1 23

Building Material Store 62 0.4 4 3.8 5

Factory Outlet Center 232 0.0 1 0.8 1

Other 10,705 12.3 66 169.2 196



Source:

Comments

Industry Segments of Chain Retail Trade

Integrated retail, which refers to supermarkets and stores selling general merchandise, accounted for over 32% of the total retail sales of chain stores

operators in 2012. The next large segment represents retailers of cars and car parts as well as fuel retailers. Special retail of household electric appliances

and electronic products generated sales of RMB 341bn in 2012, making up 10% of the total retail value of chain stores operators.

Main Indicators by Industry Segments, 2012


Number of

Head Stores,

units

Number of

Stores, unit

Employeee,

eop, th

persons

Operating

Area, eop, mn

sq m

Total Sales,

RMB bn

Total

Purchase,

RMB bn

Centralized

purchase and

delivery, RMB

bn

Integrated Retail 790 62,948 1,383 65.9 1,145 1,005 690

Food, beverage and tobacco 139 9,047 49 0.6 26 22 20

Textile, garment & daily article 148 10,507 67 1.5 37 30 21

Cultural & sport equip 83 1,732 36 1.0 27 24 24

Medicine & Medical appliance 632 35,835 255 4.4 64 56 50

Motor vehicle, fuel & parts 179 11,999 137 18.5 623 518 373

Computer, software & appliance 214 6,886 273 14.9 341 314 228

Hardware, Furniture, Decorating Materials 16 147 7 0.4 6 4 3

Stalls, Non-shop and Other Retails 6 132 1 0.0 1 1 1



IV. Major Players



Highlights

Source:

Suning Commerce Group

Revenue and Total Assets, RMB bn

Total Profit, RMB mn

Suning Commerce Group (previously Suning Appliances Co.) is China's biggest retailer operating franchised stores for home appliances, 3C products, books, general merchandise, household goods, cosmetics and baby care products, and content products. Suning also has a licence to conduct express deliveries. The company has 180,000 employees.

Suning has over 1,600 chain stores in over 600 cities in mainland China. Additionally, the company runs over 40 retail stores in Hong Kong and Japan.

Suning plans to have 3,500 brick-and-mortar stores by 2020. The company intends to enter other Southeast Asian markets in 2014 and Western markets in 2016.

In mid-2013, the policy of “same price for same commodity” was realized for all commodities sold at Suning.com and Suning stores, a step that provided consistency in the multi-channel practice of the company.

In 2013, the company opened a R&D centre in the USA. The centre will work on search, big data and high-performance computing, and future business model exploration. The company expects that by the end-2020 the centre will employ 200 people that will provide analysis and research on global advanced technologies and commercial technology trends.

Company Annual Report, EMIS

40 50

58

76

94 98 105

16 22

36 44

60

76 82

2007 2008 2009 2010 2011 2012 2013

Revenue Total Assets

2,241

2,951

3,926

5,402

6,473

3,242

144

2007 2008 2009 2010 2011 2012 2013



Source:

Suning Commerce Group (cont’d)

Number of Stores by Type Number of Stores by Region in 2013

Company Annual Report

762 777 737

437 433 428

333 336 330

134 104

76

1 8

12

17 6

0

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2011 2012 2013

Boutiques

Tescostore

Townshops

Flagshipstore

Centralstore

Communitystore

East China 1 335

East China 2 251

South China 261

North 203

Southwest 189

Central 152

Northeast 101

Northwest 93



Highlights

Source:

Shanghai Bailian Group Co., Ltd.

Revenue and Total Assets, RMB bn

Operating Income and Net Profit, RMB mn

Shanghai Bailian Group, formerly Shanghai

Friendship Group, operates department stores,

supermarkets, hypermarkets, convenience stores,

shopping malls, discount stores and speciality stores

in China. The company is a subsidiary of China's

biggest retailer Bailian Group.

Most of Shanghai Bailian’s operations and store

networks are located in Eastern China regions. The

company operates some of the biggest department

stores and malls in the city of Shanghai.

Shanghai Friendship Group's business has recently

been growing through a series of mergers and

acquisitions. In December 2011, the group set up a JV

with Bailian Group for financial business, investing in

40% of the new JV with RMB 200mn. In April 2012,

the group set up a wholly-owned subsidiary for the

construction of a RMB 320mn shopping centre in

Pudong New District in Shanghai. In October 2012,

the group paid RMB 4.1mn for the 51% stake in a

Taizhou-based shopping centre.

EMIS

26 29 31

47 49 52

16 19 21

37 39 41

2008 2009 2010 2011 2012 2013


637 956

1,106

2,518

1,974 1,725

468 613

829

1,947

1,536 1,248

2008 2009 2010 2011 2012 2013

Operating Income Net Profit



Highlights

Source:

GOME Electrical Appliances Holding Limited

Revenue ad Total Assets, RMB bn

Profit from operating activities, RMB mn

GOME Electrical Appliances Holding (GOME) is a

leading chain-store retailer of home appliances and

consumer electronic products in China.

By mid-2014, GOME owned 1,088 stores, with its

sales network spanning 264 large and medium-sized

cities nationwide and total store retail space of

approximately 3,589,000 sq. m. The average retail

space per store was approximately 3,299 sq. m. With

the inclusion of the 517 non-listed GOME Group

stores managed by the group, the total number of

stores being operated by GOME and the non-listed

GOME Group reached 1,605. Additionally, GOME

actively promoted the strategic alliances with various

channels including department stores, supermarkets

and local chain stores.

In 2013, as a result of the increase in revenue and

gross profit, while maintaining operating expenses at a

reasonable level GOME’s profit from operating

activities increased significantly from a loss of RMB

812mn in 2012 to a profit of approximately RMB1bn.

Company annual report

47

56

64

51 56

38 38 39 38 39

2009 2010 2011 2012 2013


2,014

2,985 2,599

-812

1,015

2009 2010 2011 2012 2013



Source:

GOME Electrical Appliances Holding Limited (cont’d)

Number of Stores

Sales Revenue of the Group by Region in 2013, %

Network Development, 2013

Revenue Breakdown by Product Category in 2013, %

Company annual report

777

885

1,142 1,108 1,075

2.9

3.3

4.0 3.9

3.6

0.0

1.0

2.0

3.0

4.0

5.0

0

200

400

600

800

1,000

1,200

Number of Stores, eop Sales Area, eop, mn. sq.m.

Group

Total GOME

China

Paradise Dazhong CellStar

Flagship Stores 212 150 35 27 0

Standard Stores 327 273 38 16 0

Specialized stores 536 399 82 13 42

Total 1,075 822 155 56 42

First-tier markets 683 482 112 52 37

Second-tier markets 392 340 43 4 5

Net increase in store

number -33 -20 -6 -3 -4

Beijing 18% Guangzhou

9%

Shanghai 9%

Shenzhen 8%

Chengdu 6%

Xian 6% Tianjin 5%

Others 39%

AV 24.45

Air-conditioner 15.23

Refrigerator and washing

machine 19.62

Telecommunication 14.75

Small White Appliances

11.77

IT 9.99

Digital and Others 4.19



Highlights

Source:

Sun Art Retail Group Ltd

Profits, RMB bn

Revenues and Assets, RMB bn

Sun Art Retail is among the largest and fastest

growing hypermarket operators in China in terms of

sales. The company’s market share has been rising

since 2008 and was 14% in 2013, according to

Euromonitor. Sun Art Retail is a JV between Taiwan’s

RT-Mart and France’s Groupe Auchan S.A.

Sun Art Retail Group covers first tier cities, suburban

areas in first tier cities, as well as populous second

and lower tier cities. The company operates its

business under two brands Auchan and RT-Mart. As

of end-2013, Sun Art Retail employed 130,097 people.

At the end of 2013, Sun Art had 323 hypermarket

complexes with a total gross floor area of

approximately 8.93mn sq. m., of which approximately

66% were operated in leased spaces, 33% were in

self-owned properties and 1% were contracted stores.

Company annual reports

56.17

68.08 77.85

86.20

29.85

41.35 44.59 49.91

2010 2011 2012 2013

Turnover Total assets

10.97

13.86 16.15

18.61

1.61 1.99 2.53 2.94

2010 2011 2012 2013

Gross profit Profit for the year



Source:

Sun Art Retail Group Ltd (cont’d)

Turnover Decomposition, RMB mn

Number of Hypermarkets by Region, 2013

Expansion of Retail Network

Gross Floor Area by Region, mn sq m, 2013

Company annual reports

54,924

66,540 75,936

83,958

1,244 1,544 1,915 2,237

2010 2011 2012 2013

Sales of goods Rental income

230

273

323

6

8

9

6.00

6.50

7.00

7.50

8.00

8.50

9.00

9.50

10.00

150

200

250

300

350

Number of hypermarkets Total gross floor area, mn sq m

41

6 1 2 5 4

100

34 30

50 39

11

141

40 31

52 44

15

Eastern Northern Northeastern Southern Central Western

Auchan RT-Mart Total

1.65

0.20 0.02 0.04 0.17 0.18

2.50

0.81 0.82 1.24

1.02

0.26

4.15

1.01 0.85

1.29 1.19

0.44

Eastern Northern Northeastern Southern Central Western

Auchan RT-Mart Total



Highlights

Source:

Alibaba Group

Profits, RMB bn

Revenues Decomposition, RMB mn

Alibaba Group and its related companies operate wholesale and retail online marketplaces, as well as, Internet-based businesses offering advertising and marketing services, electronic payment, cloud-based computing and network services and mobile solutions. Alibaba was established in 1999 and is the largest online and mobile commerce company in the world, by 2013 GMV according to IDC.

The company started as a B2B portal connecting Chinese manufacturers with foreign buyers. The service expanded in 2003 with Taobao marketplace, a C2C site and with Tmall, a B2C online commerce platform in 2008. Alibaba Group also owns a group shopping site, online payment services and online wholesale platform.

As of end-September 2014, the group had 307mn active users, up from 231mn in end of 2013.

In September 2014, Alibaba Group raised USD 25bn in its NYSE IPO, the largest US-listed initial public offering. In November 2014, the group issued USD 8bn bond debt and generated orders for over USD 55bn.

Company website

6.1

6.5

11.2

6.9 8.

6

8.5

16.6

30.7

4.6 5.9

10.5

6.7

7.3

6.8

13.9

27.6

2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 FY 2013 FY 2014

Non-GAAP EBITDA Non-GAAP net income

2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 FY 2013 FY 2014

Total

revenue 10.8 11.0 18.7 12.0 15.8 16.8 34.5 52.5

China

commerce

9.2 9.2 16.8 10.0 13.3 13.6 29.2 45.1

Internation

al

commerce

1.1 1.2 1.3 1.3 1.5 1.6 4.2 4.9

Cloud

computing

and

Internet

infrastructu

re

0.2 0.2 0.2 0.2 0.2 0.3 0.7 0.8

Others 0.3 0.4 0.5 0.6 0.7 1.4 0.5 1.7



Source:

Alibaba Group (cont’d)

China Retail Market GMV, RMB bn

Mobile GMV as % of Total Retail GMV

Mobile GMV, RMB bn

Retail Market Revenues, RMB mn

Company website

42 49 91 71 88 99

183 135

159 176 167 179

255 223

257 275

346 295

342 380

Tmall GMV Taobao Marketplace GMV

10 13 26 32 41

55

104 118

164

199

4.8% 5.7% 7.5%

10.9% 11.9% 14.7%

19.7%

27.4%

32.7% 35.8%

2012

Q2

2012

Q3

2012

Q4

2013

Q1

2013

Q2

2013

Q3

2013

Q4

2014

Q1

2014

Q2

2014

Q3

5,028 5,600

9,588

6,754 8,667 8,645

16,149

9,371

12,639 12,769

42

60

140

147

240

332

1,17

1

1,16

2

2,45

4

3,71

9

Revenues Mobile revenues



V. Regional Distribution



Source:

Regional Distribution of Wholesale and Retail Trade, 2013

CEIC

Southcentral China

Total Sales: RMB 10.30n

Total Purchase: RMB 9.50 1tn

East China

Total Sales: RMB 20.10tn


Northeast China



North China


Total Purchase: RMB 10.61tn

Northwest China



Southwest China

Total Sales: RMB 3.19n




Contact:

Corporate Headquarters

Nestor House

Playhouse Yard

London EC4V 5EX

UK

Voice: +44 207 779 8471

Fax: +44 207 779 8224

Americas Headquarters

225 Park Avenue South

New York, New York 10003

US

Voice: +1 212 610 2900

Fax: +1 212 610 2950

Asia Headquarters

Eucharistic Congress Bldg. No.

III

4th Floor, 5 Convent Street

Mumbai 400 001

India

Voice: +91 22 22881123

Fax: +91 22 22881137

Disclaimer:

The material is based on sources which we believe are reliable, but no warranty, either expressed or implied, is provided in relation to the accuracy or completeness

of the information. The views expressed are our best judgment as of the date of issue and are subject to change without notice. EMIS and Euromoney Institutional

Investor PLC take no responsibility for decisions made on the basis of these opinions.

Any redistribution of this information is strictly prohibited. Copyright © 2014 EMIS, all rights reserved. A Euromoney Institutional Investor company.

About EMIS Insight

EMIS Insight is a unit of EMIS that produces proprietary strategic research and analysis. The service features market overviews, industry trend analysis, legislation

and profiles of the leading sector companies provided by locally-based analysts.

About EMIS

Founded in 1994, EMIS (formerly known as ISI Emerging Markets) was acquired by Euromoney Institutional Investor PLC in 1999. EMIS works from over 15 offices

around the world to deliver electronic information products, by subscription, to institutional customers globally. EMIS provides hard-to-get information covering more

than 100 emerging markets. Its flagship products are EMIS Intelligence and EMIS Professional.

EMIS clients include top investment banks, corporations, law firms, consultants, investment and insurance companies, universities and libraries, multilateral

organisations, and others.

china - emis · china's wholesale and retail trade sector amounted to over rmb 49.6tn and...

Documents