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Bottom line: Never assume.
By Mary Scoviak
When you start digging down into China’s robust retail sector, it becomes obvious fairly quickly that there’s a lot of misinformation and disinformation. Think of it as a centuries-long version of the old telephone game, with each person embellishing on and interpreting some nugget of truth, and you’ll get the idea. VMSD asked experts in design and retailing for help in separating fact from fiction.
Myth: Retail in China is synonymous with gateway cities.
Reality: “Only 9 percent of China’s retail market is located in tier 1 cities, yet this is where most brands concentrate their retail. So the biggest opportunities are in tier 2 and tier 3 cities”—Rick Keller, senior partner, Vertical Retail. The caveat: Most retailers will need to establish a core presence in Beijing, Shanghai and/or one of the major urban areas.
Alternate reality: “Some first-tier cities such as Chongqing, Xi’an and Nanjing haven’t reached their full buying power for foreign luxury brands. But they’ve been perfect incubators for Chinese domestic retailers in which to build business and establish their brands for future expansion. Suning Electronic, Golden Eagle and Tonlion are just some examples”—Cho Suzumura, designer, MulvannyG2 Architecture
Myth: China’s only about luxury.
Reality: Though China’s luxury market is robust and growing (estimates are that it will surpass Japan as the world’s largest luxury goods consumer by 2015), the growing middle class is the market to watch.
What they’re buying:
• “China’s a prime location for hypermarkets and megastores. International department stores are just starting to break into the market. Domestic retailers in the household appliance and consumer electronic sectors have been expanding in secondary cities. More than 20 percent of their sales come from their outlet stores”—Song Pak, chief creative officer, AMM Asset Development
• “We see lots of opportunities for kids’ retail. Most families have only one child (maybe, two) and, as a result, parents truly dote on their kids. Because there is so much emphasis on learning in China, kids are in school six days a week. And their day off is still packed—music lessons, art classes, things like that. There is some play for play’s sake, but there is a lot of interest in incorporating a learning component into play. That carries over into retail. It’s about shopping but it’s also about doing and learning”—Gretchen Ardizzone, strategic resource coordinator, Chute Gerdeman
Myth: China’s retail sector is driven by a jumble of independent shops.
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