BEIJING: Convenience stores now form the largest part of modern retail in China and are set to drive growth in a flat market a study has said.

A report from market researcher Kantar Worldpanel highlighted the benefits of this channel for large retail groups: it requires less investment, has shorter lead times and meets the demands of consumers for convenience and proximity.

International giants are consequently diversifying their portfolios, with Carrefour, for example, opening its first ever neighbourhood store in the country.

The development has not taken place evenly across the country, however, being concentrated in the southern, coastal areas. Guangdong and the Yangtze River Delta region were identified as two hot spots of network distribution and maturity, Xinhua reported.

Convenience store numbers have almost doubled over the past six years, from around 13,567 in 2008 to 26,345 by the end of 2014, the report said.

And over the past year the channel has generated an estimated 40.8 billion yuan ($6.7 billion) in sales, representing an average growth rate of 14.8% over the past six years.

Overall, modern trade – including hypermarkets, supermarkets, mini-markets as well as convenience stores – now accounts for 42% of FMCG sales in National Urban China, according to Kantar.

Some 96% of the population use modern trade but its overall growth rate has slowed in the past year, from 8.6% in 2013 to 5.1% in 2014.

While convenience store sales are growing comfortably faster than modern trade generally this is still less than half the rate of ecommerce, which grew 34% in 2014.

Kantar expected that lower tier cities would be the key driver for China's growth in 2015 and beyond. Modern trade remains small in these locations, with many shoppers attracted to the choice available online.

It advised that "building economy of scale by region is critical to establish a strong growth map".

Data sourced from Xinhua, Kantar Worldpanel; additional content by Warc staff