Though retail as a whole is no longer considered an emerging sector in China, some of the sector’s sub-markets and business formats are just developing and receive strong support from the government, including funding, grants, and preferential policies. Foreign companies may find lucrative investment opportunities in these areas.
E-commerce and Online Shopping
The number of Chinese online shoppers grew 45.9 percent to 108 million, and online sales nearly doubled to 250 billion yuan during the recent years. About 90 percent of total online sales were consumer-to-consumer transactions, though the business-to-consumer model has also been successful in China’s e-commerce market. The most popular types of merchandise being sold are clothes, audiovisual products, books, cosmetics, electronic gadgets and jewelry. Online shoppers are generally satisfied with the choice of products and convenient payment methods.
The PRC government strongly supports the development of e-commerce in the retail sector and aims to have online shopping sales account for more than 5 percent of China’s total retail sales by the end of the year. There are several types of retailing that is projected to develop:
1. Online-only retailers that provide apparel, audiovisual products, books, home appliances, and home furnishings online;
2. Multi-channel retailers that have traditional stores and offer online shopping services; and
3. Third party e-commerce platforms that provide consumer-to-consumer or business-to-consumer services that help small and medium-sized enterprises and individuals conduct business online, such as Alibaba.com Ltd., Lazada, among others.
Non-Fuel Services at Fuel Stations
China opened the refined oil retail market to foreign investors in December 2004. The latest statistics show that China had more than 111,300 refined oil retailers with about 976,000 fuel stations nationwide by the end of 2008.
China’s fuel station revenues still depend heavily on gasoline sales. Non-fuel value-added services such as shopping, food, and auto maintenance are just emerging in China but could increase in popularity as car ownership rises. Major domestic oil companies are already forming business strategies to take advantage of this growing market potential.
The PRC government also hopes to transform China’s fuel stations into comprehensive service stations and has promised incentives such as a favorable business licensing process for establishing new full-service stations. Existing foreign fuel stations are encouraged to expand their business scopes such as providing convenience stores.
In 2008, China boasted more than 360,000 drug retailers, but only 491 of them had annual sales higher than ¥50 million ($7.3 million), indicating that the market is mostly made up of small enterprises.
Despite the expanded market access, foreign-invested drug retailers are still rare in China, in part because of the current healthcare system, under which 85 percent of drugs are sold directly through hospitals. As part of China’s healthcare reforms, the PRC government has announced that it will gradually separate drug sales from healthcare institutions, allowing greater market share and more freedom in drug price setting for retailers.
They also encourage chain stores that use modern logistics for urban and rural drug retail businesses. MOFCOM is working on several drug distribution services standards and has pledged to strengthen the distribution network in rural areas, which will create more favorable infrastructure conditions for chain stores.
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