China is poised to overtake the US to become the world’s largest grocery market by 2023, in value terms, a new study by IGD Asia has found.
According to the research firm, the online and convenience channels will help spearhead growth in China over the coming years, as modern retailing extends into even remote parts of the country.
Market Size
IGD’s research indicates that the total market size of the Chinese grocery market will hit 11.0 trillion yuan (€1.42 trillion) by 2023, which will make it larger than the next four largest Asian grocery markets combined.
“China will not only retain its position as Asia’s largest grocery market by 2023, it will also overtake the US to become the world’s largest,” commented Nick Miles, head of Asia-Pacific at IGD.
“The market is expected to have a CAGR of 5.5%, on par with Sri Lanka and Thailand, but slower than markets such as India, Vietnam, Indonesia and the Philippines, where the economy is growing faster,” Miles added.
Less than half of grocery sales in China go through traditional trade at present, and modern retailing is likely to garner an even bigger share of the market in the years to come.
“As the total market size expands, traditional trade will still grow, but at a much slower pace over the next five years – forecast CAGR of 0.8% – compared with the growth rate of modern trade – forecast CAGR of 8.5%,” Miles added.
“Convenience will be the fastest-growing physical store channel, driven by Alibaba and JD.com transforming traditional mom-and-pop stores, retailers opening smaller-format stores, and both local and overseas players expanding their networks through partnerships,” he furthered.
Channel Growth
The online channel is poised to contribute around 11% of grocery sales in China by 2023, according to IGD, making it one of the most mature e-commerce environments in the world. This will be driven by the increased adoption of online integration by bricks-and-mortar-based operators.
Hypermarkets are likely to see their market share decline from 23% to 18% over the coming years, IGD added, while the market share of supermarkets will remain at around 20%.
In terms of the retail banners that are likely to see the most growth in China over the coming years, JD.com and Alibaba are set to see significant growth from both online and offline channels and become the second- and third-largest grocery retailers in China, respectively, IGD reported.
Retail Winners
Elsewhere, banners such as Sun Art, Yonghui, Walmart, CRV and Carrefour are likely to benefit from expansion, partnerships with e-commerce and tech firms, and increased investment in small formats.
Other banners including NGS and Wumart will continue to focus on profitability.
“With such strong market growth to 2023, trading in China has vast potential, whether supplying directly to physical stores or via online marketplaces,” commented Miles.
“However, there are huge changes taking place that suppliers need to consider. Online giants are reshaping China’s retail landscape with their strong logistical and technical capabilities, so suppliers should understand this new path of purchase and design meaningful ways to reach their shoppers,” he said.
Miles added that while online and convenience are likely to attract more and more attention in the coming years, suppliers should not overlook traditional trade, which will still account for about one third of FMCG sales in 2023.
“As the channel modernises, it will provide new ways to reach new shoppers,” he said.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
