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Supermarkets and Hypermarkets - China - July 2012

“In trying to understand just how rapidly the modern grocery sector has grown in China, it has to be realised that all of the approximately 50,000 supermarkets and hypermarkets that now exist in China have appeared within a single generation, or less than 25 years. China is now the world’s second-largest economy, its domestic consumer economy is growing in importance within the overall economy, it is growing fast, and it is increasingly controlled by large retail chain store businesses, of which supermarkets and hypermarkets are among the most powerful. It is therefore hard to understate the significance of this sector and the companies that are coming to dominate it."

– Matthew Crabbe – Asia-Pacific Research Director


In this report we answer the key questions:

  • How fast has the market grown, is it still growing fast and where is the growth heading now?
  • How are rising incomes affecting retail consumption patterns in different regions of China?
  • How is the modern grocery sector developing its retail format to suit the changing China market?
  • Which retail brands are proving the most successful, and what is it about them that consumers like?
  • How important are non-retail services in building consumer footfall and loyalty?
  • How fast has online grocery retail grown, is it still growing fast, and will it continue to do so?

 

Report Introduction:

In trying to understand just how rapidly the modern grocery sector has grown in China, it has to be realised that all of the approximately 45,000 supermarkets and hypermarkets that now exist in China have appeared within a single generation, or less than 25 years. China is now the world’s second-largest economy, its domestic consumer economy is growing in importance within the overall economy, it is growing fast, and it is increasingly controlled by large retail chain store businesses, of which supermarkets and hypermarkets are among the most powerful. It is therefore hard to understate the significance of this sector and the companies that are coming to dominate it.

Yet the rush to penetrate wider territorial coverage, along with deeper penetration of more developed regional markets, continues. Competing retail chains are increasingly vying to beat their opposition into new regions where consumer income growth is creating new market entry opportunities, and this is driving greater innovation of formats, products and services offerings to adapt to the specific market needs in each regional market.

That innovation is leading to the rapid adoption in the use of new technologies to create greater consumer convenience, while massive investment in the supply logistics is also needed to keep up with demand, and to keep quality high and prices low. It is in these key areas that the competitors in the market continue to need to focus in order to remain ahead of the game.

 

Liqueurs - UK - January 2012

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Table of contents

  1. Introduction

      • Definition
        • Provinces of China
        • Executive Summary

          • The market
            • Figure 1: Supermarkets and hypermarkets’ number of outlets, retail sales, floor space and staff numbers, by sector, 2007-11
            • Figure 2: Supermarkets and hypermarkets’ average outlet retail sales, floor space and staff numbers, by sector, 2007-11
            • Figure 3: Supermarkets and hypermarkets’ retail market significance, 2007-11
          • The forecast
            • Figure 4: Supermarkets and hypermarkets forecast total value of retail sales, 2007-17
          • The companies
            • Figure 5: Top 20 leading chains’ supermarket and hypermarket-only annual revenues, 2008-11
            • Figure 6: Top 20 leading chains’ supermarket and hypermarket-only outlets, 2008-11
            • Figure 7: Top 20 leading chains’ supermarket and hypermarket-only average annual revenues per store, 2008-11
          • Issues in the market
            • Trolley dash: the race to reach Chinese consumers
              • Figure 8: Provincial supermarket outlet density map for the top 20 chains, 2011
            • Top shop: why certain chains have grown faster than others
              • Figure 9: Leading Supermarket/Hypermarket Chain Operators Ranked by Outlet Growth, 2008-11
            • Trading up: regional income growth drives strong variation in consumer shopping habits
              • Figure 10: Survey cities ranked, by average urban wage growth, 2008-10
            • Format adaptation: from fresh markets to hypermarkets
              • Figure 11: Food products bought at grocery shopping in the past six months, April 2012
            • Big-box label: branding and positioning grow in importance
              • Figure 12: Middle class attitudes towards shopping, April 2012
            • Project creep: non-retail services growing in value
              • Groceries to your door: online supermarkets & home delivery
                • Figure 13: Respondents grocery shopping at least once a week at online stores in the last 12 months, by city, April 2012
            • Trolley Dash: The Race to Reach Chinese Consumers

              • Key issues
                • China’s supermarket industry grew from nothing within a generation
                    • Figure 14: Total supermarket/hypermarket outlets, floor space, staff and retail sales, 2007-11
                    • Figure 15: China GDP and total retail sales growth, 2007-11
                  • The five key macro factors affecting modern grocery sector growth
                    • 1. Urbanisation
                      • 2. Personal income tax reform
                        • 3. Increased subsidies
                          • 4. Rising incomes
                            • 5. Social security system enhancement
                              • Figure 16: Financial impact of children's education, by demographics, April 2012
                              • Figure 17: Urban average household income, expenditure, savings & potential expendable income after basic outgoings, 2006-10
                            • Supermarket chains increasingly moving into lower-density provinces
                              • Wide variance in supermarket/hypermarket penetration by region
                                  • Figure 18: Supermarket outlet/population density for the top 20 chains, by province, 2011
                                • Supermarket/hypermarket density spreading from East to West China
                                    • Figure 19: Provincial supermarket outlet density map for the top 20 chains, 2011
                                  • Population density in low store density provinces helps indicate market opportunity
                                    • Figure 20: Provincial population density map, 2011
                                  • Population density alone is not enough, there needs to be growing wealth
                                      • Figure 21: Provincial average annual urban wage map, 2011
                                      • Figure 22: Percentage average urban wage growth, by province, 2007-11
                                    • Which cities in the next stage growth provinces are most ripe for development?
                                      • Figure 23: Hebei, Shanxi, Liaoning and Jiangxi cities ranked by average urban income size and growth, 2006 and 2010
                                    • Urban average incomes still rising faster than rural average incomes
                                      • Tackling the perennial problems of logistics in China
                                          • Figure 24: Daily grocery shopping, by outlet type, April 2012
                                          • Figure 25: Most important factor when deciding which supermarket/hypermarket to shop at, April 2012
                                        • Supermarket retailing moving into smaller towns and cities
                                            • Figure 26: Growth of rural organised retail chain store market, 2006-10
                                            • Figure 27: Percentage annual growth of urban and rural retail sales, 2007-11
                                          • What does it mean?
                                          • Competitive Environment: International, Local and Domestic Chains

                                            • Key issues
                                              • Greater geographical spread is leading to accelerated outlet expansion
                                                  • Figure 28: Leading supermarket/hypermarket chain operators ranked, by outlet growth, 2008-11
                                                • Carrefour, Wal-Mart and Tesco and the race to cover China
                                                  • Figure 29: Top three Western supermarket and hypermarket operators outlets, by province, 2011
                                                  • Figure 30: Top three Western supermarket and hypermarket operators’ China outlets map, 2011
                                                • Lianhua, RT-Mart and China Resources defending their “home” market
                                                  • Figure 31: Top three “domestic” supermarket and hypermarket operators outlets, by province, 2011
                                                  • Figure 32: Top three “domestic” supermarket and hypermarket operators’ China outlets map, 2011
                                                • NCS: the rising rural giant moving into the cities
                                                  • Figure 33: Cooperation Joint-stock Chain Co., Ltd.: store numbers and retail sales, 2005-15
                                                • How strong are the leading brands in each region?
                                                  • Figure 34: Leading four foreign supermarket and hypermarket chain shopping occasion response (over the past 12 months), by city, April 2012
                                                • Beijing versus Shanghai
                                                  • Figure 35: Beijing and Shanghai average urban incomes, populations and per capita GDP compared, 2010
                                                  • Figure 36: Retail chains shopped at in the past 12 months in Shanghai, April 2012
                                                  • Figure 37: Retail chains shopped at in the past 12 months in Beijing, April 2012
                                                • The Pearl River Delta
                                                  • Figure 38: Retail chains shopped at in the past 12 months in Guangzhou, April 2012
                                                  • Figure 39: Retail chains shopped at in the past 12 months in Shenzhen, April 2012
                                                  • Figure 40: Retail chains shopped at in the past 12 months in Dongguan, April 2012
                                                • The Sichuan Basin
                                                  • Figure 41: Retail chains shopped at in the past 12 months in Chengdu, April 2012
                                                  • Figure 42: Retail chains shopped at in the past 12 months in Chongqing, April 2012
                                                • The Wealthy East
                                                  • Figure 43: Retail chains shopped at in the past 12 months in Suzhou, April 2012
                                                  • Figure 44: Retail chains shopped at in the past 12 months in Qingdao, April 2012
                                                • Harbin and the Northeast
                                                  • Figure 45: Retail chains shopped at in the past 12 months in Harbin, April 2012
                                                • Where are the big chains heading next?
                                                  • What does it mean?
                                                  • Trading Up: Regional Income Growth Drives Strong Variation in Consumer Shopping Habits

                                                    • Key issues
                                                      • Income growth by region shows significant variance
                                                        • Figure 46: Survey cities ranked, by average urban wage growth, 2008 and 2010
                                                      • Weekly shop focused on supermarkets
                                                          • Figure 47: Main weekly grocery shop outlet used, by city, March 2012
                                                          • Figure 48: Main weekly grocery shop used, by demographics, March 2012
                                                          • Figure 49: Important factors ranked first when deciding which supermarket/ hypermarket to shop at (Core Retail), by income group, April 2012
                                                          • Figure 50: Frequency of grocery shopping, by outlet type, by income group, April 2012
                                                          • Figure 51: Frequency of grocery shopping, by outlet type, by region, April 2012
                                                          • Figure 52: Frequency of grocery shopping at wet markets, by income group and region, April 2012
                                                        • Foreign and domestic stores offer different experiences
                                                            • Figure 53: Ranking of service attributes of foreign and domestic retailers, April 2012
                                                          • Household income affects choice of retailer in each region
                                                            • Shanghai
                                                                • Figure 54: Shanghai retail chains shopped at occasionally in the past 12 months (domestic stores), by household income bracket, April 2012
                                                                • Figure 55: Shanghai retail chains shopped at occasionally in the past 12 months (foreign stores), by household income bracket, April 2012
                                                              • Beijing
                                                                  • Figure 56: Beijing retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                • Guangzhou
                                                                    • Figure 57: Guangzhou retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                  • Shenzhen
                                                                      • Figure 58: Shenzhen retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                    • Dongguan
                                                                        • Figure 59: Dongguan retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                      • Chengdu
                                                                          • Figure 60: Chengdu retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                        • Chongqing
                                                                            • Figure 61: Chongqing retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                          • Suzhou
                                                                              • Figure 62: Suzhou retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                            • Qingdao
                                                                                • Figure 63: Qingdao retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                              • Harbin
                                                                                  • Figure 64: Harbin retail chains shopped at occasionally in the past 12 months, by household income bracket, April 2012
                                                                                • What does it mean?
                                                                                • Format Adaptation: From Wet Markets to Hypermarkets

                                                                                  • Key issues
                                                                                    • Shifting populations changed retail market
                                                                                        • Figure 65: New car and motorcycle registrations in China (000s), 2007-11
                                                                                      • Retailers increasingly adapt outlets to suit locations
                                                                                          • Figure 66: Average store sales, size and staff number, by outlet type (for chain stores above the government statistical threshold), 2007-11
                                                                                        • Case study: Tesco
                                                                                          • Car-owning middle class create new needs
                                                                                            • Figure 67: The growth of China’s middle class, 2006-10
                                                                                            • Figure 68: The forecast growth of China’s middle class, 2011-15
                                                                                            • Figure 69: Car purchase over previous three months and plans to buy cars in next three months among middle class consumers, by demographics, April 2012
                                                                                          • Case study: Auchan Drive-through
                                                                                            • How is the modern grocery sector competing with the traditional wet markets?
                                                                                              • Figure 70: Food products bought at grocery shopping in the past six months, April 2012
                                                                                              • Figure 71: Frequency of grocery shopping, by outlet type, April 2012
                                                                                              • Figure 72: Outlets used for main weekly shop and top-up shopping, March 2012
                                                                                            • Case study: Yonghui 永辉 and the “supermarketisation” of wet markets
                                                                                              • How does product mix affect format performance?
                                                                                                  • Figure 73: Comparing purchasing of grocery items with 12 months ago, March 2012
                                                                                                  • Figure 74: Non-food products bought at grocery shopping in the past six months, April 2012
                                                                                                • Can warehouse clubs work in China?
                                                                                                  • Do hard discounters attract budget consumers?
                                                                                                    • Figure 75: Carrefour store network in China, 2007-11
                                                                                                  • How are supermarkets and hypermarkets competing with other formats?
                                                                                                    • Boutique and high-end supermarkets
                                                                                                      • High-end supermarkets are filtering into the system
                                                                                                        • What does it mean?
                                                                                                        • Big-box label: Branding and Positioning Grow in Importance

                                                                                                          • Key issues
                                                                                                            • Foreign and domestic supermarkets have different strengths
                                                                                                              • Figure 76: Ranking of service attributes of foreign and domestic retailers, April 2012
                                                                                                              • Figure 77: Middle class attitudes towards shopping, April 2012
                                                                                                              • Figure 78: Reasons for grocery shopping visits, by time of week, April 2012
                                                                                                            • Retailers begin to rebrand and refocus
                                                                                                              • How important is ambience to a store brand?
                                                                                                                • Figure 79: Important factors when deciding which supermarket/ hypermarket to shop at, April 2012
                                                                                                              • Foreign vs domestic supermarkets – brand image
                                                                                                                • Figure 80: Ranking of service attributes of foreign and domestic retailers, April 2012
                                                                                                              • How important is private label?
                                                                                                                  • Figure 81: Selected supermarket and hypermarket retailer private-label entry, 1995-2006
                                                                                                                  • Figure 82: Consumer attitudes towards private label in supermarkets/ hypermarkets, April 2012
                                                                                                                • What does it mean?
                                                                                                                • Project Creep: Non-retail Services Growing in Value

                                                                                                                  • Key issues
                                                                                                                    • Non-core retail services can help to positively differentiate retail chains
                                                                                                                      • Figure 83: Ranking of service attributes of foreign and domestic retailers, April 2012
                                                                                                                      • Figure 84: Factors ranked first when deciding which supermarket/ hypermarket to shop at (extra services), by gender and age group, April 2012
                                                                                                                      • Figure 85: Factors ranked first when deciding which supermarket/ hypermarket to shop at (extra services), by income bracket, April 2012
                                                                                                                      • Figure 86: Factors ranked first when deciding which supermarket/hypermarket to shop at (extra services), by region, April 2012
                                                                                                                    • Satellite services and retailers can help attract greater consumer footfall
                                                                                                                      • Figure 87: Middle class leisure activities, April 2012
                                                                                                                    • Other services that have the potential to draw consumer footfall
                                                                                                                      • E-checkouts and e-trolleys, are they the future in China?
                                                                                                                        • Which companies are building brand through loyalty cards?
                                                                                                                          • What does it mean?
                                                                                                                          • Groceries to Your Door: Online Supermarkets & Home Delivery

                                                                                                                            • Key issues
                                                                                                                              • Online grocery retailing is growing fast
                                                                                                                                  • Figure 88: Total e-commerce and online food sales in China, 2004-11
                                                                                                                                • Online supermarkets focus heavily on non-food SKUs
                                                                                                                                  • Figure 89: Stock keeping units (SKUs) of leading online supermarkets, 2011
                                                                                                                                • Many chains still holding back on online development
                                                                                                                                  • Online payments are a matter of consumer trust
                                                                                                                                    • Figure 90: Number of credit and debit cards in circulation and value of transactions, 2007-11
                                                                                                                                  • Increased technology penetration raises the need for online retail effort
                                                                                                                                    • Figure 91: Middle class Chinese household computer ownership, April 2012
                                                                                                                                    • Figure 92: Smartphone and mobile phone ownership, by demographics, April 2012
                                                                                                                                  • Online supermarket retail penetration differentiated by region and demographic segment
                                                                                                                                    • Figure 93: Frequency of grocery shopping online in the last 12 months, by household income bracket, April 2012
                                                                                                                                    • Figure 94: Frequency of grocery shopping at online stores in the last 12 months, by city, April 2012
                                                                                                                                    • Figure 95: Online shopping, by types of product bought in the last 12 months, April 2012
                                                                                                                                    • Figure 96: Online food and beverages shopping in the last 12 months, by demographics, April 2012
                                                                                                                                  • What does it mean?
                                                                                                                                  • The Future of The Market

                                                                                                                                      • Figure 97: Supermarkets and hypermarkets forecast total value of retail sales, 2007-17

                                                                                                                                  Companies Covered

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                                                                                                                                  Supermarkets and Hypermarkets - China - July 2012

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