China To Leapfrog Japan In Retail Sales By '12

GOME store frontChina, which is expected to register double-digit sales, will surpass Japan to become the second-largest retail market after the U.S., according to a new forecast from TNS Retail Forward.

The Columbus, Ohio-based consulting company says China's retail spending is expected to reach $1.4 trillion by 2012.

"While China's short-term retail outlook is vulnerable because of pressures ranging from inflation to heightened government regulation, the continued entry of new retail banners is evidence that China remains one of the best retail opportunities in the world, with a strong growth forecast across retail categories," it says in its new report, China's Retail Landscape.

It's not that there aren't plenty of problems on the horizon, including speculative pressures, product safety issues and heightened Chinese nationalism. But the "continued influx of new retail banners, with particular interest among upscale apparel retailers, suggests there remains opportunity for entry into China."



It's not an easy market, as demonstrated by the struggles of China's domestic retailers, including retail conglomerate Bailian Group and consumer electronics giant Gome. And outsiders have also fallen short in the expansion plans.

"Carrefour's small-format focus has helped give it an advantage over Wal-Mart's big-format focus," it notes, "while Taiwan-based RT-Mart, a partner of Auchan, has quietly built up a sizeable presence in China." Both Tesco and Best Buy are "ramping up slowly."

One of the primary issues is that the typical Chinese shopper remains committed to shopping from local stores. "The continued popularity of local neighborhood markets in China suggests that local independent retailers and longstanding shopping habits remain strong," it finds.

Yet at the same time, "high shopping frequency at hypermarkets, convenience stores and traditional department stores shows strong interest among Chinese shoppers for the new modern retail formats that are fast entering the marketplace."

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