Modern retail gains ground in China

14 December 2012

BEIJING: Urban consumers in China are spending increasing amounts of time and money at hypermarkets and supermarkets, with ecommerce also gaining ground, a report has revealed.

Bain & Company, the consultancy, allied with Kantar Worldpanel, the research group, to assess the shopping behaviour of 40,000 households in 373 cities, recording their purchases in real time.

"More than half of all urban FMCG sales in China now take place within the high-ceilinged walls of modern trade," the study stated.

Shoppers from 141m homes were found to buy goods at hypermarkets, up from 140m last year. These figures hit 117m and 120m for hypermarkets, and ecommerce posted totals of 35m and 25m in turn.

In terms of expenditure, the typical household spent RMB2,131 at hypermarkets over the last 12 months, as well as RMB1,639 at supermarkets and RMB396 online, all rising by double digits year on year.

Despite this, the number of trips to hypermarkets undertaken over the year fell from 27.1 to 26. Supermarkets also logged a decline from 25.9 to 23.7 here, as the web logged exactly three visits per category consumer, up from 2.6 on an annual basis.

The typical customer bought eight products per visit in hypermarkets versus 7.6 in the last research round. Supermarket customers purchased 7.2 items on average, up from 6.8 last year, and ecommerce sites saw a modest gain to 3.8 goods.

Within the overall data, differences did emerge by category. While 40% of facial tissues are purchased in hypermarkets, this slid to 15.8% for cosmetics. Beauty, skincare and babycare also delivered 60% of online acquisitions in the FMCG sector.

Similarly, households in tier one cities bought biscuits 21 times a year and chose 8.4 brands, but their tier five peers made 10.7 purchases and picked 4.7 brands, as they had fewer choices available.

Equally, while promotions yielded 23% of sales in repertoire categories – where shoppers pick from a broad range of products – this fell to 10% in segments where loyalty was high.

Elsewhere, detergents were cited as one example of market concentration, a common trend throughout China, as five brands supplied 65% of returns.

"Despite the extensive choices offered by modern trade, just a few brands deliver the majority of all revenue," the study argued. "Such findings suggest that retailers should aggressively prune their shelves, devoting space only to top sellers."

Data sourced from Bain & Company; additional content by Warc staff