BEIJING: Sales of consumer goods and electronics products are likely to increase rapidly in China going forward, driven in particular by rising expenditure in small cities, McKinsey has predicted.

According to the consultancy, consumer packaged goods revenues should hit RMB1.04bn in 2013, measured against RMB622m in 2008.

More specifically, it forecast that traditional outlets like outdoor markets will be responsible for 35% of category sales by 2013, declining from the total of 50% recorded in 2008.

During this period, the combined share of independent organised retailers should expand from 19% to 24%, figures standing at 31% and 41% respectively when considering major retail chains.

Overall, McKinsey pointed to a degree of consolidation in this sector, as the share of revenues attributable to the "fragmented" trade channel contracts from 72% to 59%.

By contrast, for consumer electronics – where sales should reach RMB1.3bn in 2013 compared with RMB770m in 2008 – "fragmented" outlets are only due to witness a slide from 83% to 78%.

Within this, the share of national retailers will rise to 23% from 17% in 2008. Regional chains, department stores, supermarkets and similar providers will see a fall from 55% to 53%, and traditional outlets will lose two percentage points to 25%.

"This fragmented retail environment makes market access and distribution management difficult for consumer goods companies, since they can't rely on the standardised processes and infrastructure they are accustomed to using in the US, Europe or Japan," McKinsey said.

Elsewhere, the company's analysis projected that FMCG sales would reach RMB869bn in China by 2015, having stood at RMB453bn in 2010.

While the returns generated by China's 40 first and second tier cities are pegged to rise by RMB118bn in this period, they will do so by RMB299bn in the 840 third and fourth tier cities, making them an attractive target for brand owners.

Similarly, electronics revenues are anticipated to hit RMB1.4bn by 2015, improving on the RMB846bn secured in 2010. First and second tier cities should grow by RMB201bn, behind the RMB304bn expansion posted in third and fourth tier cities.

"The most successful consumer-goods companies operating in China are navigating complex routes to market by segmenting them according to type, size and value, then developing standardised offerings, processes and routes to market to suit each segment," said McKinsey.

Data sourced from McKinsey; additional content by Warc staff