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Retail Market in China September 2013

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Executive summary 4

Overview 6

Competitive landscape 13

Key highlights 37

Government initiatives 44

Challenges 48

Conclusions and implications 52

Appendix 55

Table of Contents

Retail Market in China, 2013

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China is in the course of economic rebalancing, moving towards a consumption-driven

economy. This presents huge opportunities for retailers, with foreign and local firms alike

continuing to expand into the market. As China’s retail sector evolves, market players

are searching for ways to better adapt to a changing landscape. However, competition is

increasingly fierce and some unresolved problems remain.

This report provides an overview of China’s retail market and assesses competitive

prospects, offering key highlights on developments under different retail formats. We also

review the industry’s latest developments and major challenges.

1 http://usa.chinadaily.com.cn/epaper/2013-08/15/content_16896046.htm

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China is now the world’s second largest retail market. Total retail sales of consumer

goods doubled to 20.7 trillion yuan in 2012 from 10.8 trillion yuan in 2008. Furthermore,

China is expected to surpass the United States to become the world’s largest consumer

market within five years1.

The country’s retail market is evolving as quickly as it grows. With higher incomes and

increasing affluence, consumers are demanding better quality and unique products and

services. Also, new technologies are revolutionising the way retailers are running their

businesses. Key aspects of this transformative phase include:

Aggressive store expansion is replaced by improving store productivity. Some

domestic retailers used to adopt aggressive expansion strategies to boost brand visibility,

only to find that such disorganised business expansion created many problems. Hence,

a number of brand owners have started to close unprofitable stores and focus on

improving core competencies.

Retailers launch their own private labels or proprietary brands. Amid increasing

competition, retailers are looking for ways to stand out from their competitors.

Launching private labels or proprietary brands is a profitable way for retailers to underline

uniqueness, pushing up margins while improving customer loyalty. Yet, private label

penetration is still at a low level in China. A lack of experience, skills and strategies on

how to launch private labels remain significant challenges.

Mobile-commerce is increasingly popular, as is mobile payment. The mobile sales

channel has become extremely important. Transaction values have seen a tremendous

leap, up 181.0% yoy to reach 37.52 billion yuan in 2Q13. Increasing numbers of

e-payment providers have launched mobile services, making such payments increasingly

easier, safer and more popular.

Digital marketing is ever more prevalent. Social media is having an explosive impact

on consumer purchasing decisions. Influential social media websites are believed to

be increasing the sales conversion rate and encouraging more customers to purchase

goods. Many retailers have been leveraging huge SNS website user databases to

promote products and enhance profitability.

Executive summary


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Improving customer relationship management. An effective customer loyalty

programme is seen as instrumental in attracting and retaining customers. But while

retailers have been running their membership programmes for a significant period, many

simply collect data from customers without fully utilising the information. Also, many

retailers have no centralised customer database for effective management. This is an

area that is receiving increased attention.

The concept of the omni-channel emerges. The concept of the omni-channel is still

very new in China. Offline and online operations of many retailers are often separated,

with limited interaction. However, some retailers are starting to take a closer look at

numerous aspects of omni-channel strategising and their impact on business. Online and

offline integration is expected to become an inevitable industry trend.

Tier 3 and tier 4 cities become the development focus. With ongoing urbanisation

and rising incomes, consumption is growing fast in lower tier cities. Tier 3 and tier 4 cities

are expected to be the key focus for China’s retail business development over the next

few years as competition gets tougher in tier 1 and tier 2 cities.

M&A continues to be an attractive avenue fuelling growth. Mergers and acquisitions

(M&A) provide a fast route to greater market presence and penetration within different

consumer segments. Indeed, several retailers are using this approach to extend their

market presence. As a result, M&A activities are expected to continue pushing China’s

retail market growth.

Such developments paint a rosy picture for the future of China’s retail sector, but

challenges still remain. For one, increased operating costs have squeezed profit margins

for many retailers. At the same time, duplicated investment in some cities, lack of

centralised city planning and mismanagement are all giving rise to such problems as

traffic congestion, tougher competition, poor customer footfall, uneven trade mix, high

vacancies and commercial disputes. Soaring logistics costs and relatively weak transport

infrastructure add further hurdles for retailers and distributors.

Faced with the headwinds of increasing competition and more demanding consumers,

the retail winners are those which constantly innovate and improve their business

practices. Indeed, to succeed, enterprises need to anticipate – or at least keep abreast –

of the latest market developments.

%

Overview


&

China becomes the world’s second largest retail market

The total retail sales of consumer goods in China doubled to 20.7 trillion yuan in 2012,

from 10.8 trillion yuan in 2008 (see Exhibit 1). According to the Ministry of Commerce

(MOFCOM), China is the world’s second largest retail market after the United States.

Exhibit 1: Total retail sales of consumer goods, 2008 - 2012

Source: National Bureau of Statistics

Having said that, retail sales growth has seen some signs of deceleration over recent

years. In 2012, the growth of total retail sales of consumer goods was 14.3% year-on-

year (yoy), the lowest since 2007. As to the retail market in 1H13, total retail sales of

consumer goods rose nominally by 12.7% yoy to 11.1 trillion yuan, while the growth rate

was 1.7 percentage points (ppt) lower than in 1H12. However, in real terms, retail sales

increased 11.4% yoy in 1H13, 0.2 ppt higher than in 1H12.

By month, nominal retail sales growth reached 15.2% yoy in December 2012, and then

decelerated significantly to 12.3% yoy in January - February 2013. The growth rate slowly

picked up from March to June 2013 (see Exhibit 2).

'

Exhibit 2: Nominal growth of total retail sales of consumer goods by month, January 2012 – June 2013


Retail sales of consumer goods: mode of sales

Retail sales of commodities reached 9.9 trillion yuan in 1H13, up by 13.2% yoy. Retail

sales for enterprises above a designated size in the catering industry saw a significant

decline by 2.2% yoy in 1H13 to 8.7% yoy (see Exhibit 3). This is mainly attributable to

the new Chinese leadership’s increasing efforts to curb government spending on lavish

banquets.

Exhibit 3: China’s total retail sales by mode, FY12 – 1H13

yoy growth (%) FY12 1H13

Total retail sales of consumer goods* 14.3 12.7

- Commodities 14.4 13.2

of which: enterprises above a designated size** 14.8 11.7

- Catering 13.6 8.7

of which: enterprises above a designated size 12.9 -2.2


* Total retail sales of consumer goods refers to the sum of retail sales of commodities sold by wholesale retailing, catering, publishing, post and telecommunications and other service industries to urban and rural households for private consumption, and to social institutions for public consumption.

** Enterprises above a designated size refer to enterprises with annual sales of five million yuan or more and with an employee strength of 60 or more.


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Retail sales of consumer goods: commodities

The retail sales of commodities of enterprises above a designed size rose 11.7% yoy to

reach 5.2 trillion yuan in 1H13. Among various types of goods, sales of gold, silver, and

jewellery saw a 29.7% yoy jump in 1H13, driven by a drop in gold prices. Sales of home

appliances and video equipment also achieved growth of 15.3% yoy in 1H13, due partly

to the positive outcome of the government’s energy-saving product promotion project.

By contrast, growth rates for sales of clothing, shoes, hats and textiles, and cosmetics

slowed to 12.5% yoy and 12.7% yoy respectively (see Exhibit 4).

Exhibit 4: China’s nominal retail sales growth of enterprises above a designated size, by commodity, FY12 – 1H13

yoy growth (%) FY12 1H13 Change

Grain, oil, food, beverages, tobacco, and liquor 17.9 12.8 5.1

Clothing, shoes, hats and textiles 18.0 11.9 6.1

Cosmetics 17.0 12.7 4.3

Gold, silver, and jewellery 16.0 29.7 13.7

Daily use products 17.5 14.2 3.3

Sports and entertainment products 10.5 10.0 0.5

Home appliances and video equipment 7.2 15.3 8.1

Chinese and western medicine 23.0 16.3 6.7

Stationery and office accessories 17.7 11.0 6.7

Furniture 27.0 21.3 5.7

Telecommunications equipment 28.9 14.4 14.5

Petroleum and related products 16.9 8.8 8.1

Automobiles 7.3 8.8 1.5

Building and decoration materials 24.6 18.2 6.4


Retail sales of consumer goods: urban vs. rural

Retail sales are primarily driven by the urban population, which accounted for 86.5% of

total retail sales in 1H13; however, rural retail sales grew at a faster pace. Urban retail

sales increased nominally by 12.5% yoy to 9.6 trillion yuan in 1H13, 1.8 ppt lower than

in 1H12; while rural retail sales rose 14.3% yoy to 1.5 trillion yuan in 1H13, 0.2 ppt lower

than in 1H12.

)*

The sharp increase in rural incomes has been a positive driver for rural spending. The per

capita net income of rural households has grown steadily since 2010, reaching 7,917

yuan in 2012. The per capita disposable income of urban households increased 9.6%

yoy in 2012 to 24,565 yuan in real terms. However, the per capita disposable income

for urban households was still three times more than for rural households; urbanites still

remain the major contributors to national total retail sales (see Exhibit 5).

Exhibit 5: Urban and rural incomes, 2008 – 2012


Consumers and entrepreneurs turn pessimistic due to weaker economic sentiment

The consumer confidence index has declined since February 2013 and stayed below the

neutral reading of 100 for two consecutive months from May, indicating weaker economic

sentiment over the period to June (see Exhibit 6).


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2 http://www.stats.gov.cn/was40/gjtjj_nodate_detail.jsp?channelid=75004&record=31

Exhibit 6: China’s consumer confidence index, January 2012 - June 2013


Over the same period, the national entrepreneur confidence index also dropped from

125.6 in 1Q13 to 120.6 in 2Q13 (see Exhibit 7), indicating that entrepreneurs in wholesale

and retail trades were less confident about the economy. Industry players became less

optimistic about their businesses, due to weaker market demand.

Exhibit 7: China’s entrepreneur confidence index, 1Q13 - 2Q13

1Q13 2Q13

National 125.6 120.6

Manufacturing 131.7 125.0

Construction 134.4 128.9

Wholesale and retail trades 124.9 121.0

Transport, storage and postal services 113.8 110.7

Accommodation and catering trades 79.8 82.9

Information transmission, software and information

technology services 140.6 136.8

Real estate trade 115.3 113.2

Social services 122.6 114.6


73.8% of the enterprises said that profitability in 2Q13 was “normal” or “better than

normal”. The confidence index for large enterprises was higher than for mid-sized and

small enterprises2.

)!

3 Bain & Company, “2012 Luxury Goods Worldwide Market Study”, October 2012

Luxury market slows as anti-gift regulations take root

Luxury goods sales in China were projected to reach Euros 15 billion in 2012. Taking the

Greater China area as a whole, including Hong Kong, Macau and Taiwan, the total size

of the luxury market was expected to reach Euros 27.3 billion, surpassing Japan and

becoming the world’s second largest luxury goods market in 20123. The rapid increase

of household disposable incomes, fast-growing individual wealth, a more affluent middle

class, ongoing urbanisation, and rising demand for luxury goods in smaller cities – along

with a surge in the number of credit card users – all contributed to driving China’s luxury

market.

However, the growth of luxury sales has started to decelerate since 4Q11. Bain &

Company expected 2012 to show 7% yoy luxury consumption growth in China, down

from 30% yoy in 2011 and 27% yoy in 2010. The slowdown was partly attributable to

weak economic growth, as well as the increasing preference of Chinese consumers

to shop for luxury goods abroad. Moreover, the move by China’s new leaders to curb

government spending on luxury items as gifts might also have had a negative impact

on luxury sales. As shown in Exhibit 8, many global luxury brands have slowed their

expansion in China over recent years.

Recently, some luxury retailers have shifted their focus from aggressive store openings

to improving store productivity; others have started to make inroads into lower-tier cities.

In fact, luxury brands no longer see tier 1 cities as a springboard to raise their profile, but

have started to push their sales nationwide.

Exhibit 8: Number of selected luxury brand stores in China, 2011 - 2013

Change in Change in

2011* 2012** store numbers 2013*** store numbers

Burberry 49 58 +9 62 +4

Ermenegildo Zegna 60 73 +13 86 +13

Gucci 31 42 +11 58 +16

Louis Vuitton 36 39 +3 42 +3

Prada 15 18 +3 18 –

Source: Company websites; compiled by Fung Business Intelligence Centre

*As of January 2011

**AS of February 2012

***As of February 2013


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Competitive landscape

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Analysis of the Top 100 retail chain operators

The Top 100s see steady development

Early this year, the China Chain Store and Franchise Association (CCFA) released its

annual list of “the Top 100 Retail Chain Operators in China” (the Top 100s)4. Total sales

of the Top 100s in 2012 were 1,870.0 billion yuan, up 10.8% yoy. It is noteworthy that

total sales of the Top 100s increased at the slowest pace since 2007 and the growth

rate was slower than that of the national total retail sales of consumer goods over two

consecutive years. The significant slowing of Top 100 sales was due to the combined

impact of a gradually diminishing demographic dividend, changing consumer behaviour

and intensified competition from online retailers (see Exhibit 9).

Exhibit 9: Performance of the Top 100 retail chain operators, 2008 - 2012

Year Retail sales (billion yuan) yoy growth (%)

2008 1,199.9 18

2009 1,360.0 14

2010 1,660.0 21

2011 1,650.7 20*

2012 1,870.0 11

Source: China Chain Store and Franchise Association, Fung Business Intelligence Centre

*Adjusted growth rate

As shown in Exhibit 10, total sales of the Top 100s accounted for 9.0% of total retail

sales of consumer goods. China’s retail market remains highly fragmented.

Exhibit 10: The Top 100s’ share in national retail sales, 2001-2012

Source: China Chain Store and Franchise Association

4 http://www.ccfa.org.cn/viewArticle.do?method=viewArticle&id=ff8080813e0d6a70013e15f3bfcd0040&publishcid=402881e91c59dbcb011c59df8a2b0002


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According to the CCFA, the Tops 100s in tier 3 and tier 4 cities have developed and

expanded faster than those in tier 1 and tier 2 cities, mainly due to relatively saturated

retail markets in tier 1 and tier 2 cities. The average sales growth among leading Top 10

enterprises in tier 3 and tier 4 cities was 18% yoy, while the growth rate for store numbers

was 17% yoy. Both figures were higher than for tier 1 and tier 2 cities, at 6% yoy and 2%

yoy respectively.

Exhibit 11 shows the Top 10 retail chain operators ranked by total retail sales in 2012.

Suning Commerce Group (Suning), with total sales of 124 billion yuan, has overtaken

Bailian Group to become China’s number one chain retailer by total sales.

Exhibit 11: The top 10 chain retailers, 2012 (Rank by retail sales)

Sales in 2012

(million yuan, yoy

Rank Name of company pre-tax) growth (%)

1 Suning Commerce Group Co., Ltd. 124,000.0 12.7

2 Bailian Group 122,052.2 3.3

3 Gome Electrical Appliances Holding Ltd. 117,479.7 6.8

4 China Resource Vanguard Co. Ltd. 94,100.0 13.8

5 RT-Mart Shanghai Ltd. 72,470.0 17.7

6 Wal-Mart (China) Investment Co., Ltd. 58,000.0 3.6

7 Chongqing General Trading (Group) Co., Ltd. 54,494.7 14.0

8 Yum! Brands Inc., China Division 52,200.0 30.5

9 Lushang Group 49,380.7 21.4

10 Carrefour China Inc. 45,273.9 0.2


Amid intensifying competition from online retailers, many traditional retailers have set up

their own online platforms. 62 of the Top 100s have their own online stores in 2012, up

from 31 in 2009 (see Appendix 1).

Foreign retailers in the Top 100s outperform domestic players

Among the Top 100s, foreign players generally perform better than domestic players in

terms of operating efficiency and gross profit margins. In 2012, there were 20 foreign

enterprises in the Top 100 list, of which RT-Mart continued to hold the top spot, followed

by Wal-Mart and Yum!Brands (see Exhibit 12).

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Exhibit 12: Foreign retail chains among the Top 100s in China, 2012

2012 sales

Rank Rank (million yoy No. of yoy

in 2012 in 2011 Enterprise yuan) change (%) stores change (%)

1 1 RT-Mart Shanghai 72,470 17.7 219 18.4

2 4 Wal-Mart (China) Investment 58,000 * 3.6 395 6.8

Co., Ltd.

3 3 Yum! Brands Inc., China 52,200 30.5 5,200 16.9

Division

4 2 Carrefour China Inc. 45,274 0.2 218 7.4

5 5 Best Buy Co., Inc. 24,185 -12.0 252 -9.7

6 6 Tesco China 20,000 * 11.1 111 8.8

7 7 Parkson Retail Group Ltd. 19,724 20.1 48 4.3

8 10 Metro Jinjiang Cash & Carry 17,900 29.7 64 18.5

Co., Ltd.

9 9 Lotte Mart 16,318 6.7 99 8.8

10 12 Auchan (China) investment 16,305 28.4 54 20.0

Co., Ltd.

11 8 New World Department 16,000 * 3.2 39 0.0

Store China Limited

12 14 C.P. Lotus Corporation 12,493 * 6.6 57 9.6

13 13 Zhengzhou Dennis 12,200 13.0 144 45.5

Department Store Co., Ltd.

14 15 A.S. Watson & Co., Ltd. 12,000 * 20.0 1,500 36.4

(Guangzhou)

15 16 McDonald’s Corporation 9,000 * 11.1 1,500 7.1

(China)

16 18 AEON Co., Ltd. 8,083 21.3 36 20.0

17 19 IKEA China 7,634 21.2 11 22.2

18 17 Ito-Yokado Co., Ltd 7,487 0.0 13 0.0

19 20 Park’n Shop (China) 4,077 -5.1 51 10.9

20 21 Emart China 2,400 * 0.0 16 0.0

Total 433,748.53 11.3 10,027 16.2


*Note: Estimated value

Also, the gross profit margins for foreign players are usually higher than for domestic

players and the differences are becoming more significant each year. Exhibit 13 compares

the gross profit margins of domestic and foreign retailers.


)&

Exhibit 13: A comparison of gross profit margins for domestic and foreign retailers, 2010-2012

Gross profit margin 2010 2011 2012

Domestic players 14.3% 15.9% 15.9%

Foreign players 14.7% 16.7% 16.8%

Source: Deloitte, China Chain Store and Franchise Association

A comparison of domestic and foreign retailers

Domestic retailers: eager to extend their national footprint

Most domestic retailers are regionally focused, except for some consumer electronics

appliance specialty retailers such as Suning and Gome. In fact, most domestic retailers,

including Dalian Dashang Group, Wuhan Wushang Group and Shandong Yinzuo Group,

focus their operations on respective regional markets due to huge regional differences

in consumer tastes across the country, supply chain complexities and strong local

networks. This is especially true for convenience store and department store operators in

China.

Some domestic players have started to expand their footprint nationwide through

mergers and acquisitions (M&A). For instant, Wangfujing Department Store acquired

a majority stake in PCD Stores with a view to expanding its overall market share and

geographical coverage across China, while diversifying its business scope.

Then again, domestic players are making efforts to differentiate themselves from

aggressive competitors. Major initiatives include conducting market studies to understand

consumer needs; specialising in certain merchandise categories; improving supply chain

management and better engaging consumers through various social network channels.

Foreign retailers: shifting from scale expansion to improving core competitiveness

Over recent years, foreign retailers in China have encountered numerous challenges (see

Box 1). Many are reportedly losing money in the market and have slowed expansion

(see Exhibit 14). As seen in Exhibit 15, a number of renowned foreign players have even

closed some stores.

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Exhibit 14: New store openings for selected major foreign retailers, 2011 - 2012

Source: China National Commercial Information Centre

Exhibit 15: Selected examples of foreign retail store closures

Closing Opening

Store location City date date

Supermarket

Tesco Zhenning branch Shanghai May-13 Jun-05

Hugeo City branch Taizhou, Jiangsu Aug-12 Jan-11

Guangyu branch Tieling, Liaoning Sep-12 Feb-09

Tushan branch Bengbu, Anhui Aug-12 Jan-10

Huaihe branch Changzhou, Jiangsu Aug-12 Jan-10

Lotte Mart Binzhou branch Binzhou, Shandong Aug-12 Dec-07

Wal-Mart Huangshan branch Hefei, Anhui Jul-13 Jun-11

Yuanling branch Shenzhen, Guangdong Apr-13 Apr-03

Times Square branch Xiamen, Fujian May-12 Sep-05

Park’n Shop Westgate Mall branch Shanghai May-12 1998

Department stores

Isetan Taiyuan Street branch Shenyang Jun-13 2008

Ito-Yokado Wangfujing branch Beijing Jan-13 Nov-05

New World Taizhou branch Taizhou, Jiangsu Nov-12 Jan-09

Ningbo branch Ningbo, Jiangsu Feb-12 Nov-04

AEON Chaoyang branch Beijing Mar-12 Jun-10

Parkson Shijiazhuang branch Shijiazhuang, Hebei Aug-13 2008

Dashizi branch Guiyang Jun-13 2000

Jinfenghuang branch Guiyang Dec-12 2008

Hongqiao branch Shanghai Aug-12 Dec-02

Source: China National Commercial Information Centre; compiled by Fung Business Intelligence Centre


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Box 1: Major challenges encountered by foreign retailers in China

Some major hurdles facing foreign retailers:

at favourable prices to establish new stores.

retailers.

regional retailers have usually increased synergies when negotiating with regional

distributors. Also, operating in multi-format mode provides greater flexibility. So if

hypermarket growth slows a retailer can shift focus to opening more convenience

stores.

differ significantly from their original operations, a strategy which may not suit the

needs of the China market.

Facing unfavourable market conditions, foreign enterprises have adapted their China

strategies by shifting from large-scale expansion to improving core competencies.

For instance, Wal-Mart announced in April 2013 that it would invest 5 billion yuan on

revamping and upgrading 50 of its existing stores. Other foreign retailers are actively

seeking partnerships with local players. In August 2013, Tesco confirmed that it will team

up with China Resources Enterprise Ltd (CRE) to set up a joint venture in China.

Analysis of major retail formats

Overview

Among all major retail formats, Internet retailing recorded the highest sales growth for

2012. As to traditional channels, specialty stores in general saw higher growth than

grocery retailers such as hypermarkets and supermarkets (see Exhibit 16).

!*

Exhibit 16: Yoy sales growth in retailing, by retail format, 2012

yoy growth (%)

Total 12.8

Store-based retailing 10.8

Grocery retailers5 8.2

Non-grocery retailers 12.7

Apparel specialist retailers6 16.7

Electronics and appliance specialist retailers 6.8

Health and beauty specialist retailers 12.3

Home and garden specialist retailers 13.6

Leisure and personal goods specialist retailers 14.8

Mixed retailers7 14.8

Other non-grocery retailers 12.1

Non-store retailing 65.2

Direct selling 20.0

Home shopping 24.0

Internet retailing 84.4

Vending 11.5

Source: Euromonitor

In terms of gross profit, all retail formats except convenience stores witnessed negative

yoy growth in 2012. Convenience stores’ gross profits increased slightly by 0.8 ppt

compared with 2011 (see Exhibit 17).

Exhibit 17: Gross profit margin, by retail format, 2011 - 2012

2012 (%) 2011 (%) yoy change in ppt

Convenience stores 17.3 16.5 0.8

Supermarkets 14.5 15.4 -0.9

Hypermarkets 12.4 13.1 -0.7

Professional stores 13.1 14.2 -1.1

Specialty stores 17.0 18.3 -1.3

Department stores 17.5 18.6 -1.1

Average 15.6 16.8 -1.2


5 Grocery retailers: convenience stores, discounters, forecourt retailers, hypermarkets, supermarkets, independent small grocers

6 Specialist retailers: specialty stores, professional stores7 Mixed retailers: department stores, variety stores, mass merchandisers, warehouse clubs


!)

As shown in Exhibit 18, specialty stores recorded the highest net profit margin of 4.15%

in 2012, and professional stores the lowest net profit margin of 1.30%. The net profit

margin for supermarkets dropped by as much as 1.05 ppt to 2.45% last year.

Exhibit 18: Net profit margin, by retail format, 2011 - 2012

2012 (%) 2011 (%) yoy change in ppt

Convenience stores 3.35 3.65 -0.30

Supermarkets 2.45 3.50 -1.05

Hypermarkets 2.00 2.40 -0.40

Professional stores 1.30 1.50 -0.20

Specialty stores 4.15 4.35 0.20

Department stores 2.15 2.50 -0.35

Average 2.46 2.66 -0.19


Exhibit 19 and 20 show the selected retail performance indicators of sample stores by

retail format8. Department stores led in terms of operating area, number of employees,

retail sales, average sales per sqm and average customer spending. Convenience stores

had an edge in gross margin.

Exhibit 19: Performance of selected sample store by retail format, 2012

Department Convenience

store Hypermarket Supermarket store

Operating area (m!) 42,038 11,863 2,315 144

Number of employees 1,421 327 74 8

Retail sales (million yuan) 1,139 285 41 5

Average sales per m!

(yuan/ m!) 28,000 26,000 20,000 42,000

Average customer

spending (yuan/ visit) 337 81 58 21

Gross margin (%) 14.3 13.7 13.4 17.2


8 Sample stores are the stores with operational areas within 25% of the industry average; excluding outliners

!!

Exhibit 20: Performance of selected sample store by retail format, a yoy comparison with 2011

yoy change Department Convenience

in 2012 stores Hypermarkets Supermarkets stores

Operating segment 7.6% 17.8% -5.4% 33.3%

Number of employees 5.7% -1.5% -10.8% -14.0%

Retail sales -7.0% -3.8% -9.5% 5.9%

Average sales per m! -10.5% -11.6% 8.1% -1.6%

Average customer

spending -12.5% 3.8% -6.5% 28.0%

Gross margin 0.3 ppt 0.8 ppt 0.4 ppt -1.9 ppt


It is worth noting that the performance of sampled department stores showed a marked

deterioration in 2012, with retail sales, average sales per sqm and average customer

spending falling by 7%, 10.5%, and 12.5% respectively.

Department stores

China’s department store sector is heavily dominated by regional players, and the market

is highly fragmented. Many players have struggled over recent years. As well as facing

fierce competition from shopping malls, specialty stores, and online retailers, they have

also been undermined by their commission-based, concessionary model. As shown in

Exhibit 17, department stores’ gross profits from sales last year dropped by 1.1 ppt to

17.5%; the net profit margin from sales decelerated to 2.15% and was below the industry

average of 2.46%.

Exhibit 21 shows the top 10 department store operators by sales.


!"

Exhibit 21: Top 10 department store operators by sales, 2012

Country Sales yoy No. of yoy

Rank Enterprise of origin (million yuan) growth (%) stores growth (%)

1 Shanghai Friendship China 570,000.0 3.6 49 14.0

Group Incorporated (Shanghai)

Company

2 Dalian Dashang China 372,750.0 4.7 170 0.0

Group Co., Ltd. (Dalian)

3 Chongqing Department China 333,996.5 11.5 286 5.5

Store Co., Ltd. (Chongqing)

4 Yinzuo Group Co., Ltd. China 320,311.5 16.3 104 15.6

(Shandong)

5 Changchun Eurasia China (Jilin) 241,449.8 21.3 58 16.0

Group Co., Ltd.

6 Beijing Wangfujing China 215,743.9 7.4 28 12.0

Department Store (Beijing)

(Group) Co., Ltd.

7 Rainbow Department China 203,734.6 7.5 59 15.7

Store Co., Ltd. (Shenzhen)

8 Parkson Retail Group Malaysia 197,235.8 20.1 48 4.3

Ltd.

9 Wenfeng Great World China 194,905.9 0.8 995 0.5

Chain Development (Jiangsu)

Corporation

10 Golden Eagle Retail China 186,691.9 13.6 28 7.7

Group Ltd. (Nanjing)

Source: China Chain Store and Franchise Association; modified by Fung Business Intelligence Centre


Major trends

i. Integration of online and offline channels

To extend customer reach and further penetrate the market, many department stores

have launched online platforms. Currently, most department store operators outsource

their online operations to third parties. They are running at a loss. Some operators are

actively working on integrating their online and offline channels.

!#

Case: Intime Retail Group

Intime was one of the first China department store operators to set up an online virtual

store. Its online store, Yintai.com, started in late 2010. Yintai.com is operated by Zhejiang

Intime Electronic Commerce Co., Ltd. (while Intime owns 40% of the company). Yintai.

com showed a 100 million yuan loss in 2012 despite reporting a stunning yoy sales

growth of 380%. Intime’s online and offline channels target different customer groups.

The online platform targets the mass market, while the offline stores target mid- and high-

end consumers. Products offered by the online and offline platforms are not the same,

with overlapping rate lower than 50%.

Going forward, Intime is set to fully integrate its online and offline channels. It intends

to create a unified client database and offer the same merchandise and shopping

experience to its customers across all sales channels.

ii. Department store operators refine market strategies and strengthen merchandise categories

Competition is fierce in the department store segment. To distinguish themselves against

competitors, some department store operators have started to revamp stores to target

the premium segment. Wangfujing Department Store has introduced its sub-brand

hQ to target the high-end market; Dalian Dashang has opened its Mykal Department

Store to cater to higher-end consumers, while Kingson Department Store targets

trendy youngsters. Some department store operators have started to focus on certain

merchandise categories. Realising that consumers pay more attention to home products,

Wuhan Zhongbai Commercial Group has teamed up with home product designers from

Japan, Taiwan and Hong Kong to offer unique collections.

iii. Players strive to enhance customer experience

To survive the highly competitive marketplace, some department store operators

differentiate themselves by incorporating more entertainment elements and catering

services. The “department store plus shopping mall” business model is becoming more

popular. This allows operators to offer a better shopping experience and diversify income

streams.

Shopping malls

Shopping malls continue to gain in popularity. Consumers can enjoy one-stop shopping

conveniently under one roof. According to a report by Deloitte and CCFA, as at the

end of 2011 China had a total of 2,812 shopping centres open for business, with an

aggregate total commercial building floor space of 177 million sqm. It is estimated that

new commercial building floor space for China’s shopping centres will surpass 35 million


!$

and 44 million sqm in 2012 and 2013 respectively; by the end of 2013, China’s shopping

inventory will occupy 250 million sqm. Exhibit 22 shows the number of newly-opened

shopping centres in China over recent years.

Exhibit 22: Number of newly opened shopping centres in China, 2002 - 2012 (estimates)

Source: Mall China Information Centre, Deloitte, China Chain Store and Franchise Association

Major trends

i. Shopping malls spring up in key city suburb areas

Suburb areas of tier 1 cities are becoming new development targets due to high-

density shopping malls and rising rents in city centres. Also, the growth of inter-city

transportation and the popularity of automobiles make it possible to travel conveniently.

As a consequence, shopping centres in suburban areas have larger floor areas than

those in city centres.

ii. Oversupply of shopping malls is common

Due to stringent measures imposed by the government to cool the residential property

market, many property developers have diverted their attention to the commercial

property market. Local governments have offered incentives to support shopping centre

development. These policies have led to an oversupply of shopping malls. According

to Knight Frank9, the average vacancy level for tier 1 cities in China was 8.1% in 2H12,

while the average vacancy rate for tier 2 cities over the same period was 9.5%. Exhibit 23

shows the vacancy rates of prime shopping centres in selected cities.

9 http://www.knightfrank.com.hk/content/upload/files/Reports/Research_retail/Holdways_retail_2h2012.pdf

!%

Exhibit 23: Vacancy rates of prime shopping centres, 2H12

Source: Knight Frank

iii. Shopping malls scale up in size

Shopping malls are becoming larger in scale and have more extensive floor spaces to

incorporate differentiated merchandise and services. Jones Lang LaSalle expected that

the average mall size would increase from 710,418 square feet in 2005 to over 947,224

square feet in 201310.

iv. Catering and entertainment elements prevail

To enhance the consumer experience and

prolong the time customers spend in the

shopping malls, many malls have expanded

their catering and entertainment services.

For instance, Popark in Guangzhou has

undertaken extensive renovation and the mall

now features a large food court hosting some

well-known restaurants. Other shopping malls

such as Saiho Plaza and CapitaMall Jinniu

Phase II in Chengdu have invited cinema

operators to open theatres.

10 http://www.cnbc.com/id/100865667


!&

Hypermarkets and supermarkets

Intensified competition, surging rentals and labour costs and increasingly saturated

markets have all seen hypermarkets and supermarkets margins narrowed. Planet Retail

forecasts hypermarket and supermarket sales growth to fall from 16% yoy in 2012 to

12% yoy in 2013 and store number growth to drop from 11% yoy in 2012 to 10% yoy in

2013 (see Exhibit 24).

Exhibit 24: Sales growth and store number growth for hypermarkets and supermarkets, 2009 - 2013 (estimates)

Source: Planet Retail, Deloitte

Exhibit 25 shows the top 10 hypermarket and supermarket operators by sales in 2012.

China Resource Vanguard topped the list with total sales of 941 billion yuan in 2012,

followed by RT-Mart and Lianhua Supermarket.

!'

Exhibit 25: Top 10 hypermarkets and supermarkets operators by sales, 2012

Sales yoy No. of yoy

Rank Enterprise (million yuan) growth(%) stores growth (%)

1 China Resource Vanguard Co., Ltd. 941,000 13.80 4,423 11.2

2 RT-Mart Shanghai Ltd. 724,700 17.70 219 18.4

3 Lianhua Supermarket Holdings

Co., Ltd. 657,302 -3.40 4,762 -8.8

4 Wal-Mart (China) Investment

Co., Ltd. 580,000 3.6 395 6.8

5 Carrefour China Inc. 452,739 0.20 218 7.4

6 Nonggongshang Supermarket

(Group) Co., Ltd. 303,028 0.20 2,734 -19.0

7 Yonghui Superstores Co., Ltd. 279,300 37.00 249 22.1

8 TESCO China 200,000 11.10 111 8.8

9 Shandong Jiajiayue Group 181,880* 12.00 595 3.8

10 A-Best Supermarket Co., Ltd 180,000* 2.70 116 0.0



Major trends

i. Direct farm sourcing continues

An increasing number of hypermarket and supermarket operators source directly from

farmers to lower distribution costs. They can also provide cheaper, fresher and better

quality agricultural produce to consumers. A typical example is Carrefour. In the vanguard

of direct farm sourcing, the retailer has partnered with over 460 farm cooperatives since

2007. Other hypermarket operators such as Wal-Mart, RT-Mart, Tesco, Metro AG,

Wumart and China Resources Vanguard have undertaken similar initiatives and achieved

remarkable successes in direct farm sourcing. This has in turn also helped farmers

increase their annual incomes and improve the rural retailing landscape.

Exhibit 26 depicts some specific ways that hypermarket operators engage in direct-farm

sourcing.


!(

Exhibit 26: How hypermarket operators engage in direct-farm sourcing

Invest directly in planting Work with farmers’ cooperatives to

and production bases handle transportation and logistics needs

Work with agricultural production Line up with other retailers to

and processing firms source food products together

Source: Fung Business Intelligence Centre

ii. Players keen to introduce high-quality imported foods

With higher household incomes and increasing food safety concerns, many middle class

consumers are willing to pay a premium for high-quality, authentic, imported foods.

Eyeing such large opportunities, some supermarket and hypermarket operators have

opened high-end stores which specialise in selling imported foods. For example, China

Resources Vanguard launched Ole, a high-end supermarket chain to cater to the growing

demand for fresh, organic and natural products. It plans to expand the brand to cities

such as Chengdu, Nanning, Xi’an, Shenyang and Zhongshan. The accumulated store

number is expected to reach 50 by 201611.

iii. Private brands become increasingly common in hypermarkets and supermarkets

For many Chinese consumers, private brands are usually associated with low pricing and

value for money. Many hypermarket and supermarket operators have launched their own

private labels in categories such as household products and packaged foods.

However, there are already a huge number of low priced brands available at hypermarkets

and supermarkets. So, many Chinese consumers prefer to purchase branded products

that are sold at similar or slightly higher prices. To sustain their competitive advantage, it

is essential for private labels to improve on perceived quality and safety standards.

11 http://news.winshang.com/news-127181.html

!"

Convenience stores

The development of convenience stores in China is somewhat unbalanced. In some

cities such as Shanghai and Guangzhou, competition is extremely fierce. But in other

cities, especially the lower-tier ones, development is lagging to a greater extent. Exhibit

27 maps out the competitive landscape of China’s convenience stores.

The leading players by number of stores are shown in Exhibit 28. For most convenience

store players, ever-increasing rental and labour costs remain major challenges.

Exhibit 27: Competitive landscape of convenience stores in China, 2012

Source: Kantar Retail


")

Exhibit 28: Top 10 convenience store operators by number of stores, 2012

Convenience Country of No. of stores

Ranking Enterprise store brand origin in 2012

1 Sinopec Group Easy Joy China (Beijing) 20,891

2 PetroChina Co., Ltd. uSmile China (Beijing) 13,000

3 Dongguan Sugar &

Liquor Group Meiyijia Meiyijia China (Dongguan) 4,650

Convenience Store

Co., Ltd.

4 Zhejiang Gongxiao Gongxiao; China (Zhejiang) 2,115

Supermarket Ltd. Jialian

5 Shanghai Liuhua Quik Quik China (Shanghai) 2,031

Convenience Stores

Co, Ltd.

6 Nonggongshang Group Kedi; Alldays China (Shanghai) 1,780*

7 7-Eleven 7-Eleven United States 1,732*

8 China Resource Suguo Suguo China (Nanjing) 1,694

9 Guangdong Sun-high Sun-high China (Guangdong) 1,559

Convenience Store

Co., Ltd.

10 Chengdu Hongqi Chain Hongqi China (Chengdu) 1,336

Co., Ltd.

Source: China Chain Store and Franchise Association, modified by Fung Business Intelligence Centre


Major trends

i. Convenience store players extend value- added services

To differentiate from competitors, convenience store operators increasingly focus on

offering value added services. These include selling admission tickets for specific shows

or tourist sites, top-up services for mobile phone users and bill payment schemes.

Although the profit margins are slim, many convenience store players view these as

effective in increase consumer traffic and driving impulse buying, particularly at the

checkout counter.

"!

ii. More on-the-go meal services available

Convenience stores have been offering fresh, prepared foods for years, but the trend has

become more pronounced as increasing numbers of time-conscious consumers look for

on-the-go meals. Some retailers have revamped their conveniences stores and added

on-site catering to provide hot and cold food and drink. For example, some Circle K

outlets provide in-store catering to offer meals and drinks under its own Hot & In brand.

Circle K believes its Hot & In service is the main revenue driver in the Guangzhou market,

contributing approximately 40% of the sales mix in FY201212. 7-Eleven has also launched

foods under its “7-Fresh” brand13, while Family Mart has established its own store brand

“Fami”14. In general, profit margins for catering services are higher than for many other

categories of merchandise.

iii. Partnerships with online retailers for pick-up services

Given the vast network of convenience stores, more online retailers are considering

adapting their stores as pick-up points, so consumers can collect products they order

online. For example, Amazon China has teamed up with Family Mart since last March

to offer pick-up services at the latter’s outlets in Shanghai. Consumers can pick up their

online orders in designated convenience stores within a specific period of time. They can

choose to pay by cash, credit card or debit card at the store.

Specialty stores

Specialty stores are expanding aggressively, driven by both the rapid expansion of local

specialty retailers and the increasing number of international players that have entered

the China market. Some examples include Topshop, Forever 21, and Hollister.

As illustration, Exhibit 29 shows the pace of expansion for apparel specialist retailers. The

compound annual growth rate for total sales, numbers of outlets and size of sales space

have increased by 17.8% yoy, 10.6% yoy and 12.5% yoy respectively between 2007 and

2012.

12 http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0816/LTN20130816253.pdf13 http://www.7-11.cn/cn/exclusive_fastfood.aspx?catid=8|2814 http://www.familymart.com.cn/shfm/product/productlist.aspx?nodeid=52


""

Exhibit 29: Apparel specialist retailers: value sales, outlets and sales space, 2007-2012

2007 2008 2009 2010 2011 2012

Value sales (billion yuan) 214.8 257.3 292.5 354.0 417.8 487.5

Outlets (thousands) 309.5 341.3 369.7 421.4 467.9 512.8

Sales space (million sqm) 28.6 31.9 35.1 40.9 46.2 51.5

Source: Euromonitor

Exhibit 30 depicts the number of stores established by selected major fast fashion

specialty retailers over recent years. All such retailers have accelerated their expansion in

China.

Exhibit 30: Store count of fast fashion specialty retailers in China, 2010-2012

Source: China National Commercial Information Centre, Company websites

Having said that, specialty store profitability has suffered a significant slowdown over

recent years. According to CCFA, gross profits were down by 1.3 ppt to 17.0% in

2012 and net profits for specialty stores were down by 0.2 ppt to 1.3%. Specialty

store operators, similar to their counterparts in other retail format segments, are facing

increasing competition from online retailers. Also, after years of rapid expansion, many

specialty store operators, particularly in the apparel and sports specialty segment, are

now facing the challenge of holding large inventories along with higher operational, rental

and labour costs.

"#

In order to cut costs and jettison excessive inventory, some apparel retailers are closing

existing stores and opening factory outlets. For instance, Puma has announced that it will

close 90 stores in China as part of its global cost-cutting measures. Meanwhile, Nike is to

open between 40 and 50 factory outlets in China this year, with discounts of up to 70%

to clear inventory.

Similarly, despite their national presence, many 3C specialty stores remain unprofitable.

Some players are looking for ways to transform. Suning and Gome, for instance, are

gradually shifting from solely consumer electronics sales to offering a larger range of

other products such as apparel, cosmetics, books and household products. Suning’s

offline stores are set to carry more categories; the firm is introducing virtual displays of

online categories through iPad and other mobile devices. The idea is to introduce a “shop

anywhere, buy anywhere” experience.

Discount outlets

The discount outlet format continues to gain popularity among both retailers and

consumers. It is estimated that China has more than 400 discount outlets15, far

exceeding the total number in the United States.

Eyeing the booming market, more domestic and foreigner retailers are opening stores

in discount outlets. For example, Shanghai Bailian Group opened its third discount

outlet, Wuxi Mall, at the end of June this year after successfully opening two other

discount outlets since 2006. Value Retail, the European discount luxury outlet chain, is

reportedly to open its first store in a discount outlet in Suzhou in early 2014. Shopin,

China’s discount outlet chain with the majority of its stores in Beijing, has branched out

to Hangzhou, and the retailer plans to roll out its outlet stores in Eastern and Southern

China. Hunan Friendship & Apollo Commercial Co., Ltd. expects to open its second

discount outlet in 2014. Exhibit 31 lists out some major discount outlets that have

opened in 2013.

Exhibit 31: Major discount outlets open in 2013

Name of discount outlet City

Megamills Shanghai

Beijing Capital Outlets (Fangshan branch) Beijing

Changsha Globe Outlets Changsha

Tianjin Yansha Outlets Tianjin

Florentia Village TianjinSource: China Commerce Association for General Merchandise, “Commerce” Magazine, May 2013

15 http://www.zgswcn.com/2013/0815/217882.shtml


"$

For retailers, discount outlets are possibly the best channel to offload stale inventory

without slashing prices in retail stores. Consumers can buy their desired brands at a

discount. The government’s anti-corruption campaign, which may lead to an increase

in inventory for luxury brands, could further boost the outlet business, as many luxury

retailers sell off-season products through them.

On the other hand, discount outlets in China are not as mature channels as those in

many other countries where consumers can easily find first-tier brands at big bargains.

Many outlets in China can only attract lesser-known brands. Also, the problem of

counterfeit products undermines the image that discount outlets would prefer to project.

Online Retailing

Online shopping’s popularity continues to power ahead in China. According to

iResearch16, the transaction value of the online retail market increased by 66.2% yoy to

reach 1,304.0 billion yuan in 2012, accounting for 6.2% of the country’s total retail sales.

China has become the world’s second largest online market. Exhibit 32 shows total

transactions in the country’s online retailing sector by quarter.

Exhibit 32: Total transactions for online retailing, 1Q11 - 2Q13 (estimates)

Source: National Bureau of Statistics, iResearch

With Chinese consumers increasingly used to shopping online, the retail market’s growth

momentum is set to be sustainable for a number of years. iResearch expects total online

sales to reach 3,600 billion yuan in 2016 and account for 10.8% of total retail sales.

China is expected to overtake the United States for online sales in 2014.

16 http://www.iresearch.com.cn/coredata/2012q4.shtml

"%

Major trends

i. More B2C players operate as open platforms

The B2C segment is highly competitive, so many B2C retailers are transforming

themselves into open platforms in order to expand the scope of their business and

become more profitable. Third parties can sell goods on their platforms and online

tenants are usually charged various types of fees, such as credit deposits, entry fees,

annual fees, commissions, advertising and transaction fees. The platform owners provide

logistics, warehousing and after-sales services for these tenants. Hence, B2C players can

expand their product categories without needing to make a significant investment.

ii. Online retailers enrich product offerings

Many online retailers have been actively increasing their product offerings by either

adding new categories or forming partnerships with other brands on their open platforms.

Reasons for expanding product offerings are threefold: (1) to enhance consumers’

“stickiness” and cross-selling opportunities; (2) to improve overall margins and turnover;

and (3) to expand market share.

iii. Price competition is common

Competing on price to build market share remains the number one marketing strategy

in China’s online retail market, as most Chinese consumers remain largely price focused.

Many retailers have tried to squeeze out competition and increase market share by

adopting a low price strategy.

The price wars have made it difficult for smaller online retailers to compete with giant

operators. Many lack the scale and resources to provide a wide range of products

through efficient logistics, and they are also less competitive in terms of pricing and

reputation. So, for these smaller players, focusing on a specific category can help them

to secure a foothold in the market. It seems they should actively seek better ways to

differentiate themselves from competitors.

For detailed information on online retailing in China, please refer to our Online retailing in

China report published in June 2013.

(http://www.funggroup.com/eng/knowledge/research/china_dis_issue111.pdf)


"&

Key highlights

"'

From aggressive store expansion to improved store productivity

Some retail players adopted aggressive expansion strategies in the past to boost brand

visibility, but they now find that many stores undertaking this approach are unprofitable.

Faced with slowing growth in the market, some retailers have started to close unprofitable

stores and focus on improving core competencies.

Retailers are adopting various methods to do so and achieve operational excellence.

Some significant approaches include greater investment in R&D, the launch of longer-

term brand marketing campaigns, introduction of new store brands and retail concepts.

Other strategies include the launch of differentiated merchandise assortments,

accelerated format revamps and innovative schemes.

Poorly-managed business expansion by some domestic players, particularly sportswear

and fast fashion retailers, has sparked considerable concern. Many have opened too

many store outlets, causing overstocking of often obsolete inventory. As a result, some

sportswear companies have suffered a considerable slowdown in sales growth. For

instance, domestic players such as Li Ning, Anta, 361 Degree, Xtep, and Peak suffered

yoy sales declines of minus 17%, minus 18%, minus 15%, minus 12% and minus 29%

respectively in 2012.

Retailers launch own private labels or proprietary brands

Launching private labels or proprietary brands appears a feasible way for retailers to

build core competencies. Private labels or proprietary brands can also increase profit

margins and improve customer loyalty. Yet, penetration by private labels is low in China.

According to a report by Rabobank, sales of private labels account for only about 3% of

total sales17. But the share of private labels in China is expected to rise between 25%

and 30% by 2030, as Chinese consumers increasingly buy private label products and

retailers become more familiar with launching house brands18.

In the meantime, more retailers now realise the importance of direct sales. Department store

operators, in particular, are stepping up efforts to develop private brands. For instance, Intime

has increased its proportion of direct sales; total sales proceeds from direct sales increased

by 29.7% to 921.3 million yuan in 1H1319. The company also set up its own direct sales

17 http://finance.eastmoney.com/news/1355,20130820316235017.html18 https://www.rabobank.com/en/press/search/2013/20130812_Rabobank_Report-Private_Label_Goes_to_

Asia_Share_in_India_and_China_expected_to_hit_25-30_by_2030.html19 http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0819/LTN20130819383.pdf


"(

department in 2012, recruiting buyers to handle their own private label businesses20. At the

same time, Hola, the Taiwan-based home furnishing store, launched kitchenware under its

own brand last July21. Zhongnan Commercial (Group) Co., Ltd. announced the launch of a

department store stocking solely self-sourced merchandise.

Launching private labels indeed seems to be an attractive strategy for retailers seeking

differentiation; yet, there are many challenges. Private labels in China are not particularly

successful in terms of revenue generation and popularity among consumers. Many

local department store operators believe they lack professional and experienced buyers

to select appropriate products. It normally takes more than three years to nurture a

professional buyer and the turnover rate is high.

In addition, many retailers do not possess appropriate knowledge to manufacture

and market their in-house product lines. The operating model is completely different,

requiring a new range of management skills. Retailers have to hold inventory and be

prepared to incur additional risk in contrast to when they are operating under the familiar

concessionary model. Given the huge capital investment needed, many retailers are

reluctant to launch their own products.

Mobile-commerce is increasingly popular, as is mobile payment

The mobile platform has become a highly significant sales channel. According to

iResearch, in 2Q1322, the transaction value of mobile shopping reached 37.52 billion

yuan, up 181.0% yoy (see Exhibit 33).

Exhibit 33: Transaction value via mobile, 1Q11 - 2Q13 (estimates)

Source: iResearch

20 http://www.takungpao.com.hk/house/content/2012-09/26/content_1166712.htm21 http://money.chinatimes.com/news/news-content.aspx?id=2013071700203622 http://www.iresearch.com.cn/coredata/2013q2_7.shtml

#*

Increasing numbers of telecommunications and network operators have launched

mobile payment services. A typical example is Tencent. Tencent rolled out its mobile

payment service for Chinese users on WeChat, a smartphone text and voice messaging

communication service developed by the company. Bank accounts can be bundled on a

WeChat account23.

Another example is China Unicom. The mobile operator partnered with Agricultural Bank of

China to provide mobile banking and payments services to the latter’s customers24. HTC

(Beijing) has signed a strategic deal with China Merchants Bank to offer its “Mobile Wallet”

service to Chinese consumers25. Alipay, China’s largest e-payments provider, launched its

Alipay Wallet mobile app which, apart from providing online payments, also allows offline

payments at points of sales using barcodes and QR codes26 to settle payments.

The prevalence of digital marketing

As Chinese consumers become more affluent and digital savvy, retailers are starting

to recognise the importance of developing digital marketing and sales channels.

Social media is having an explosive impact on consumer purchasing decisions.

This is part icularly the case in China since shoppers general ly engage more

actively on social media platforms than their overseas counterparts. According to a

PricewaterhouseCoopers survey27, 57% of surveyed respondents follow brands or

retailers on social media, compared to 38% in the global sample.

The belief is that influential social media websites can increase the conversion rate and

encourage more customers to purchase goods. Many retailers have tried to leverage the

huge user databases of SNS websites to promote their products and enhance profitability.

Sina Weibo, with more than 500 million registered users, is one of the most popular SNS

websites in China. WeChat, the instant messenger with more than 400 million registered

users, is another tool for brands to interact with consumers. Many department stores also

develop mobile apps equipped with interactive features, such as QR code. App users can

download exclusive coupons by simply scanning the QR code with their smartphones and

tablets. Retailers hope they can generate more sales via such e-initiatives.

However, the majority of companies still believe that they are not yet adequately prepared

to convert growing online interactions into a sales advantage28.

23 http://thenextweb.com/asia/2013/08/05/tencents-wechat-mobile-messaging-app-gets-payments-game-center-and-stickers-in-long-awaited-update/

24 http://www.mobilepaymentsworld.com/china-unicom-partners-agricultural-bank-of-china-for-m-banking/25 http://english.cmbchina.com/CmbInfo/News/DetailInfo.aspx?guid=6d7584f3-1023-43d6-9e3d-

d9e3e6652df226 http://www.alizila.com/alipay-introduces-mobile-wallet-app#sthash.9ekNbwiR.dpuf27 PWC, "Demystifying the online shopper. 10 Myths of multichannel retailing", January 201328 http://www.amcham-shanghai.org/AmChamPortal/MCMS/Presentat ion/Template/Content.

aspx?Type=32&Guid={EDFDF671-E699-42E8-AF46-7F99B6C51793}


#)

Improving customer relationship management

Although many retailers in China have been running their membership programmes

for a long time, most simply collect data from customers but do not fully utilise the

information. It is common that members of a particular branch of a department store

cannot enjoy membership discounts in other branches. This is attributable to the fact

that many retailers do not have a centralised customer database for effective customer

management.

An effective customer loyalty programme is considered instrumental in attracting and

retaining customers. Retailers now realise the need for creating a centralised database

for ease of data analysis and customer management. For example, Joycity is trying

to combine the membership programmes of its five shopping malls to allow members

to accumulate “points” when they purchase in any malls owned by the same group.

They can enjoy the same discounts in each mall using the same card29. Meanwhile, as

mentioned earlier, many retailers use various types of social media to reach out to their

members30.

The concept of the omni-channel emerges

The omni-channel is a seamless approach to providing customer experience through

different shopping channels. Retailers seek to pull together multi- and cross-channel

offerings, including physical stores, online platforms and social media, to create a highly

convenient and impactful shopping experience.

The concept of the omni-channel is still very new in China. The offline and online

operations of many retailers are often separate. Retailers usually target different consumer

segments online and offline, while their online and offline pricing strategies do no match.

Also, distribution centres for online and offline markets are usually different; customers

can only return products to the channel where they purchased them. Also, many

retailers have separate customer databases for offline and online purchases. In short, the

interaction between online and offline businesses is very limited.

At the moment, there is no fully integrated onmi-channel player in China. However, some

retailers are starting to take a closer look at various aspects of omni-channel strategies

and the impact on their businesses.

29 http://www.bbtnews.com.cn/news/2013-08/16000000153923.shtml30 http://economists-pick-research.hktdc.com/business-news/article/%E5%9C%8B%E9%9A%9B%E5%B8

%82%E5%A0%B4%E7%B0%A1%E8%A8%8A/%E5%85%A7%E5%9C%B0%E7%99%BE%E8%B2%A8%E6%A5%AD%E7%86%B1%E8%A1%B7%E5%BE%AE%E4%BF%A1%E8%A1%8C%E9%8A%B7/imn/tc/1/1X000000/1X09U8LR.htm

#!

For example, in February 2013, Suning announced the change of the company’s name

from Suning Appliance Co., Ltd. to Suning Commerce Group Co., Ltd.; its future retail

business model in China is described as “physical stores, e-commerce, plus retail service

provider”31. From a long-term perspective, the company has the opportunity to make a

transition from a conventional retail channel of household appliance and 3C to a “Wal-

Mart + Amazon” model which runs an all-category and all-form business both online

and offline, providing consumers with a “shop anywhere, buy anywhere” omni-channel

experience. Since June 2013, Suning has also unified its online and offline pricing

strategy. Intime Department Store has also been striving to offer a multi-channel shopping

experience by building an interactive online platform. For example, this offers free in-

store WiFi services. Another example is the footwear company, Belle. The company

is reportedly to launch in-store pick up services within two years aimed at consumers

purchasing from its online platform, yougou.com32.

Industry experts believe that online and offline integration will become an inevitable retail

trend.

Tier 3 and tier 4 cities become the focus for development

Thanks to ongoing urbanisation and rising incomes, consumption in lower tier cities is

growing fast. Tier 3 and tier 4 cities will be the key focus for development of China’s retail

business over the next few years as competition gets tougher in tier 1 and tier 2 cities.

Many hypermarkets have already shifted focus to lower-tier cities. For instance, Sun Art

Retail Group, the owner of RT-Mart and Auchan, has approximately 10.9% of its stores

located in tier 1 cities, 18.7% in tier 2 cities, but with 43.7% in tier 3 cities, 20.0% in tier 4

cities and 6.7% in tier 5 cities, as of 30 June 201333.

M&A continues to be an opportune avenue fueling growth

M&A is a fast way to expand market presence and penetrate different consumer

segments. One prominent case recently was the partnership between China Resources

Enterprise (CRE) and Tesco. CRE announced that it will team with Tesco to establish a

joint venture (JV) for the food retail business on the Chinese mainland, in Hong Kong and

Macau34. CRE will own an 80% stake in the JV with the remaining 20% owned by Tesco.

31 http://www.cnsuning.com/snsite/sn_contentFront.do?method=contentDetail&id=220632 http://www.chinawuliu.com.cn/zixun/201308/19/248576.shtml33 http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0814/LTN20130814323.pdf34 http://www.cre.com.hk/announ/e-20130809A-1.pdf


#"

Another case was the acquisition of PCD Stores by Wangfujing Department Store (WFJ)

last January. WFJ acquired PCD Stores, which operates 18 department stores and three

outlets in China, with a view to expanding market share and geographical coverage

on the mainland, diversify its retail business activities by engaging in discount outlet

businesses, and increasing the proportion of self-owned properties.

Exhibit 34 shows some recent M&A cases in China’s retail sector.

Exhibit 34: Selected M&A cases in China’s retail sector, July 2012 - August 2013

Announced Amount

Company Target date (million USD)

Shandong Commercial Yinzou Group Co., 30-Mar-13 40

Group Co., Ltd. Ltd.

Beijing Wangfujing PCD Stores Ltd. 24-Jan-13 257

International Commercial

Development Co., Ltd.

Mianyang Yaoda Taiyuan Tianlong 6-Jan-13 32

Investment Co., Ltd. Group Co., Ltd.

Xizi UHC Baida Group Co., Ltd. 30-Aug-12 6

Taubman-TCBL Xian Xi’an Wangfujing 29-Aug-12 51

(Hong Kong) Ltd. Department Store

Baoji Store Co., Ltd. Hanzhong Century 28-Aug-12 21

Sunshine Building

Co., Ltd.

Parkson Retail Group Ltd. Qingdao Parkson 27-Aug-12 54

Xiamen ITG Holding Xinda Duty-free 10-Jul-12 9

Co., Ltd. Department Store

Source: China Venture

##

Government initiatives


#$

35 http://hk.lexiscn.com/latest_message.php?id=86984 http://www.gov.cn/zwgk/2013-08/14/content_2466856.htm36 http://www.saic.gov.cn/zwgk/zyfb/zjwj/scgfgls/201308/t20130802_136982.html37 http://www.gov.cn/zwgk/2013-06/05/content_2419964.htm

The Chinese government has been very supportive in promoting the development of the

retail sector. Exhibit 35 lists some major initiatives launched by the government recently.

Exhibit 35: Major government initiatives related to the retail sector, July 2012 – August 2013

Government policy/ initiative Launched by Release date DetailsOpinions on The State August 2013 In the Opinions, the main tasks for Promoting Council promoting information consumption areInformation put forward in the following aspects:

Boosting Domestic of information infrastructureDemand35

information products

consumption

services

construction of information consumptionOpinions on State August 2013 The Opinions aim to strengthen the Accelerating the Administration enforcement of market supervision and Development of for Industry create a sound market environment a the Distribution and Commerce sound market environment for the healthy Sector36 development of the distribution sector.Plan for Specifying The State May 2013 The Plan delegates specific tasks to the Division of Council various departments for implementing Work for reform of the distribution system andDeepening the accelerating the development of the Reform of the distribution industry. It ensures better Distribution System division of labour, promotes collaboration and Accelerating and strengthens coordination betweenthe Development of different departments. The plan pointsthe Distribution out the need to optimise supply chain Industry37 management, accelerate the development of e-commerce, foster the core competitiveness of enterprises, reduce distribution costs and strengthen the protection of intellectual property rights, among other measures. The Plan also calls for reducing the burden of the distribution sector by offering favourable fiscal and financial policies and preferential land policies.

#%

Government policy/ initiative Launched by Release date DetailsNDRC to deepen The National May 2013 The Opinions aim to promote economic economic reform38 Development restructuring and transformation. A total and Reform of 22 major tasks in seven fields were set Commission as priorities in 2013, including delegation of the approval authority, fiscal and financial reforms to stimulate the economy, expansion of the VAT pilot programme to lower the tax burden on companies and formulation of a development plan to promote urbanisation.Draft Amendment National April 2013 The Draft aims to further protect to the Consumer People’s consumer rights and boost domestic Protection Law39 Congress demand in the country, and has made revisions to the current Consumer Protection Law in the following five areas:

rights protection

of business operators

associations

administrative authoritiesMeasures for the State April 2013 The Measures stipulate that merchants Management of Administration on online retail platforms are required to Online Invoices40 of Taxation issue office invoices with each purchase.Circular on Further National April 2013 The Circular aims to further improve the Promoting the Development trans-departmental working coordinationSound and Rapid and Reform mechanism, boost innovation in the Development of Commission e-commerce sector, and promote a safe E-Commerce41 with 12 other and credible environment for government e-commerce transactions. departments Comprehensive The State January 2013 The Work Plan aims to reduce distrubution Work Plan regarding Council costs, improve distribution efficiency, and Cutting Distribution establish a comprehensive system for Expenses and collecting data and statistics. Improving Distribution Efficiency42

38 http://www.gov.cn/zwgk/2013-05/24/content_2410444.htm39 http://www.china-briefing.com/news/category/legal/page/12#sthash.Z1Hvu7ua.dpuf40 http://www.chinatax.gov.cn/n8136506/n8136593/n8137537/n8138502/12236582.html41 http://www.china-briefing.com/news/2013/06/11/china-further-promotes-e-commerce-development.

html#sthash.cRCsrlkY.dpuf42 http://www.gov.cn/zwgk/2013-01/15/content_2312686.htm


#&

Government policy/ initiative Launched by Release date DetailsGuiding Opinions on Ministry of December The Opinions emphasise the importance Promoting Brand Commerce 2012 of brand building and encouragesConsumption in enterprises to develop and cultivate China43 Chinese brands. Chinese enterprises are encouraged to expand their sales networks domestically, as well as consider acquiring foreign brands and sales channels to expand into overseas markets. The Opinions also call for commerce departments at all levels to work together to promote consumption of branded products domestically, as well as formulate regulations to provide better legal protection for brands.12th Five-Year Plan The State September The government set the following targets for Domestic Trade Council 2012 during the 12th FYP period:Development44

reach 32 trillion yuan, with an annual growth rate of 15%

accommodation and catering sectors to reach 7 trillion yuan, with an annual growth rate of 11%

e-commerce market to reach 18 trillion yuan, with an annual growth rate of 30%Opinions of the The State August The Opinions aim to establish a modern State Council on Council 2012 distribution system, reduce the ratio of Further Reformation total logistics cost to GDP, enhance the of the Distribution competencies of large-sized distribution Sector and enterprises, adopt modern informationAcceleration of the technology, and improve the market Development of the environment.Distribution Sector45

Regulations on the The State July 2012 As part of the anti-corruption campaign, Affairs and Council the government promulgated the Administration of regulations effective October 2012.Government According to the regulations, government Agencies46 agencies are prohibited from purchasing luxury goods.

Source: Government websites

43 http://www.mofcom.gov.cn/aarticle/b/d/201301/20130108511628.html44 http://www.gov.cn/zwgk/2012-09/10/content_2220743.htm45 http://www.gov.cn/zwgk/2012-08/07/content_2199496.htm46 http://www.gov.cn/zwgk/2012-07/09/content_2179100.htm

#'

Challenges


#(

Significant increase in operating costs

Increased operating costs in China have squeezed profit margins for many retailers. The

ever-escalating rental and labour costs have particularly troubled many retailers over

recent years. Rental costs have been debilitating particular for retailers whose contracts

ended in 2012. On average, rental costs increased by between 3% and 5% yoy in

201247. For leading retailers, average rental costs in prime locations increased by 21%

yoy in 2012.

At the same time, labour costs have increased by between 5% and 10% since 2012 due

to rising minimum wages across the country in the wake of labour shortages and surging

inflation. Some 13 cities and provinces have raised their minimum wage levels this year,

with an average increase of around 17% (see Exhibit 36).

Exhibit 36: Minimum wage levels in 13 cities and provinces that raised the minimum wage in 2013*

Minimum wage Minimum wage

after increase before increase yoy Effective

City (yuan/month) (yuan/month) change (%) date

Shanghai 1,620 1,450 11.7 1 Apr 2013

Shenzhen 1,600 1,500 6.7 1 Mar 2013

Guangdong 1,550 1,300 19.2 1 May 2013

Tianjin 1,500 1,310 14.5 1 Apr 2013

Zhejiang 1,470 1,310 12.2 1 Jan 2013

Beijing 1,400 1,260 11.1 1 Jan 2013

Shanxi 1,290 1,125 14.7 1 Apr 2013

Henan 1,240 1,080 14.8 1 Jan 2013

Jiangxi 1,230 870 41.4 1 Apr 2013

Guangxi 1,200 1,000 20.0 7 Feb 2013

Gansu 1,200 980 22.4 1 Apr 2013

Shaanxi 1,150 1,000 15.0 1 Jan 2013

Guizhou 1,030 930 10.8 1 Jan 2013

Source: China Briefing

* Amounts are based on minimum wage levels in Class A Districts.

47 Deloitte, "China power of retailing 2013", August 2013

$*

Unstructured development of retail properties and lack of centralised city planning

China’s commercial property sector has experienced significant growth over the past

decade. In some key cities, duplicated investment, lack of centralised city planning

and mismanagement are giving rise to problems such as traffic congestion, increased

competition, poor customer footfall, an uneven trade mix, high vacancy levels and

commercial disputes.

On the other hand, the development of large-scale retailers is seen as more rapid than of

smaller retailers mainly serving local neighborhoods. There is also a lack of large-scale,

modern retailers in smaller cities and local communities. So, China’s retail scene remains

unbalanced.

Logistics bottlenecks are here to stay

As China’s retail market continues to become increasingly sophisticated, the efficient

movement of goods is proving to be a key success factor for retailers. However, China’s

logistics sector is less efficient than in many other developed countries, reflecting

the relatively higher ratio of total logistics cost to GDP. High logistics costs and weak

transport infrastructure pose hurdles for both retail and distribution companies.

Furthermore, in many lower-tier cities, there are a lack of logistics and distribution

centres. The technology for distribution is often not advanced enough to support China’s

rapidly developing retail market.

To better control logistics costs and enhance competitiveness, some large-scale

retailers have put greater emphasis on retail logistics management. One key approach

is to partner with reliable and capable logistics service providers to improve delivery

capabilities and enhance customer experience and satisfaction.

For detailed information on retail logistics in China, please refer to our Retail logistics in

China report published in April 2013.

(http://www.funggroup.com/eng/knowledge/research/china_dis_issue110.pdf)


$)

Integrating online and offline businesses remains a challenge

Online retailers offering low priced products and convenient shopping have posed

increasing challenges to traditional retailers. Seeing the huge growth potential of the

online market, an increasing number of traditional retailers have started to go online too.

However, as mentioned, the operating models for online and physical stores are very

different. Supply chains for online stores are generally more complicated than for physical

stores. The lack of qualified staff to operate the online business is another key challenge.

$!

Conclusions and implications


$"

Facing the headwinds of an increasingly competitive retail landscape, together with the

growing affluence and sophistication of Chinese consumers, the real retail winners are

those which constantly innovate and improve business practices. To succeed in China’s

rapidly evolving retail market, enterprises need to keep abreast of the latest developments

in the market.

Understand the paradigm shifts in consumer behaviour

With increasing wealth and rising consumer sophistication, the consumer market in China

is undergoing fundamental changes. Most significant is their abiding interest in trading

up – more Chinese consumers are willing to pay a premium for higher quality products

and services. These consumers also demand unique products and services. To win in

the market, retailers need to understand the changing needs of consumers and take

appropriate action. At the same time, changing shopping preferences have transformed

the competitive landscape. In particular, the prevalent of online shopping has forced

retailers to rethink their strategies in response to the new retail environment.

Seamless cross-channel experience

Chinese consumers today are becoming accustomed to optimising their shopping

experience across different channels, including physical stores, online platforms and

social media. More retailers are stepping up efforts to pull together multi- and cross-

channel offerings, and explore various aspects of omni-channel strategies in the hope of

enhancing customer experience. The challenge for retailers is to ensure that all channels

complement one another and provide accurate, consistent and current information.

From Big Data to actionable insight

Advances in information technology and increasing access to information through

the Internet and mobile connectivity, have impacted consumers’ buying habits and

preferences across all channels. The appropriate use of Big Data allows retailers to

spot trends and better adapt to consumers’ changing needs. The key is to successfully

transform all such customer information and business intelligence into actionable insight,

and to adjust product and service offerings to suit the changing needs of customers.

$#

New technologies revolutionise the future of retail

Retailers need to closely monitor the development of new technologies such as data

analytics and 3D printing, which may have a revolutionising impact on how a business is

run; they should embrace change accordingly. Optimising performance and improving

competitiveness are crucial factors leading to success in China’s highly competitive

marketplace.

Unique brand positioning

In today’s competitive world, uniqueness is the key to standing out from the competition.

Retailers and brand owners need to develop strategic brand positioning, based on

the company’s value proposition. They have to take account of the rapidly evolving

retail landscape and consumer preferences. Differentiated positioning and continuous

improvements of products and services are needed for an enterprise to stay ahead of

its competitors. Moreover, Chinese consumers are becoming increasingly brand loyal,

making it essential for retailers to establish and maintain a strong brand image.

Sustainable development

China is stepping up efforts to develop a sustainable economy. Likewise, an increasing

number of retailers are pursuing green initiatives as a means of building a socially

responsible corporate image. A number of global retailers, such as Wal-Mart and Tesco,

are stepping up efforts to be more eco-friendly by focusing on sustainable procurement

and opening “green stores” with low power lightning systems. With sustainability

increasingly perceived as a competitive factor, retailers should take account of green

issues when formulating their business strategies.


$$

AppendixAppendix 1: List of enterprises among the top 100s that have launched their own online purchasing platforms, as of April 2013

Enterprise Website1 Suning Commerce Group http://www.suning.com http://redbaby.suning.com/ http://binggo.suning.com/2 Gome Electrical Appliance Group http://www.gome.com.cn/ http://www.dzelec.com/ http://www.coo8.com/ 3 Wal-Mart (China) Investment Co., Ltd. http://www.yihaodian.com/ http://www.samsclub.cn4 Intime Retail (Group) Co., Ltd. http://www.yintai.com/5 Yum! Brands Inc., China Division http://www.4008823823.com.cn/kfcios/ index.htm http://www.4008123123.com6 McDonald’s (China) Co., Ltd. https://www.4008-517-517.cn/7 Bailian Group Co., Ltd. http://www.blemall.com/ http://www.jaja123.com Lianhua Supermarket Holdings Co., Ltd. http://www.lhok.com/index.html8 ShenZhen Nepstar Chain Drugstore Ltd. http://www.star365.com/9 Guangzhou Watson’s. Food & Beverage Co., Ltd. http://www.watsons.com.cn/ http://watsons.tmall.com/10 Metro Group Co., Ltd. (China) http://www.metromall.com.cn/11 Beijing Wangfujing Department Store (Group) Co., Ltd. http://www.wangfujing.com/12 Carrefour China Inc. http://www.carrefour.com.cn13 Rainbow Department Store Co., Ltd. http://www.myrainbow.cn/14 New World Department Store China Ltd. http://www.xinbaigo.com/15 Liqun Group Shareholding Co., Ltd. http://www.liqunshop.com/ http://www.lqyaopin.com/16 PCD Stores (Group) Ltd. http://www.saite.com/17 Shandong Commercial Group Corporation (Yinzuo Group) http://www.yinzuo100.com18 Wuhan Zhongbai Group Co., Ltd. http://www.zon100.com/19 Guangzhou Grandbuy Co., Ltd. http://www.igrandbuy.com/ 20 Ito-Yokado Co., Ltd. http://www.yiteng365.com/21 Hisap High Technology Corporation http://huimai100.com/ 22 Nonggongshang Supermarket (Group) Co., Ltd. http://www.chblt.com/23 Dalian Dashang Group Co., Ltd. http://www.66buy.cn/24 Easy Joy Convenience Store of SINOPEC http://www.ejoy365.com/25 Auchan (China) Investment Co., Ltd. http://www.auchan.com.cn/26 Liaoning Xinglong Happy Family Business Group http://www.xlgoo.net27 Beijing D-phone Commercial & Trade Co., Ltd. http://shop.dixintong.com/28 Parkson Retail Group Ltd. http://www.parkson.com.cn/emall/ index.html29 Chengdu Hongqi Chain Co.,Ltd. http://www.hqwg.net/30 Hefei Department Store Group Co., Ltd. http://www.bdemall.com/31 Shijiazhuang Beiguo Renbai Group Co., Ltd. http://www.ruyigou.cn/32 Guandong Jiarong Supermarket (SPAR Guangdong) http://www.sparlala.com 33 Renrenle Commercial Group Co., Ltd. http://www.rrlgou.com/34 AEON Group http://eshop.qdaeon.com/

$%

Enterprise Website35 Qingdao Weekly Group Co. http://www.diandian.com/36 Sanjiang Shopping Club Co., Ltd. http://www.sanjiang.com37 Shandong Weifang Department Store Group Co., Ltd. http://www.92xmf.com/ http://www.zbasw.com/38 Chongqing Peace Chain Drugstore Co., Ltd. http://www.hp1997.com/39 China Zhenhua Group Science & Technology Co., Ltd. http://eshop.zhenshang.com/40 Guangzhou Friendship Group Co., Ltd. http://121.8.125.2:6080/41 Hunan Friendship & Apollo Holding Co., Ltd. http://www.9448.com.cn/newjrdshop/ index.php42 A-Best Supermarket Co., Ltd. http://www.xyj-shop.com/ http://huichaoshi.taobao.com43 Changchun Eurasia Group Co., Ltd. http://www.oysd.cn/44 Chongqing New Century Department Store Co., Ltd. http://www.sjgo365.com/ http://www.cbmall.cn/45 Eading Group Co., Ltd. http://www.itu4.com/46 Changsha Tongcheng Holdings Co., Ltd. http://www.dolton.cn/47 Jiangsu Wenfeng Great World Chain Development http://www.wfdsj.com.cn/shop Corporation48 Beijing Capital Retailing Group Co., Ltd. http://www.igo5.com/49 Anhui Huishang Group Co., Ltd. http://www.hsnjf.com/ http://www.hzsmall.com/ 50 C & U Group Co., Ltd. http://www.rbcs.cn/51 Wuhan Wushang Group Co., Ltd. http://www.wssmgc.com52 China Resources Vanguard Co., Ltd. http://www.crvmore.com 53 Shandong Newstar Group Co., Ltd. http://www.xinxing001.com/54 Qingdao Likelai Co.,Ltd. http://www.shoplikelai.com/index.html55 New Cooperation Joint-Stock Trade Chain Co., Ltd. http://www.csckl.com/56 Wuhan Zhongnan Commercial Group Co., Ltd. http://www.aizsw.com/zs/default.html57 Handan Sunshine Department Store. (Group) Co. Ltd. http://www.ygttg.com/ http://hdyg.taobao.com/58 Shandong Quanfuyuan Commercial Group Co., Ltd http://www.sgbhdl.com:8080/ehdshop/ webshop/index/index.jsp59 Beijing Funtalk Century Telecommunications Equipment http://funtalk.tmall.com/ Retail Chain Co., Ltd.60 Xiongfeng Group http://hopeful.tmall.com61 Nanjing Central Emporium Co., Ltd. http://njzysc.tmall.com62 Guangdong Dashenlin Chain Drugstore Co., Ltd. http://www.800pharm.com/


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