Retail in China: unprecedented opportunity, in a battleground. March 21, 2007 Form The Economist special report: Retailing in China. " Enormous numbers are luring global retailers to set up shop in China and take on a growing band of local operators. China's retail sales are set to expand by 13% to the equivalent of $860 billion this year, making the mainland the world's seventh-largest retail market. Annual compound growth rates of 8-10% will push this to an enormous $2.4 trillion by 2020. There are more than one million affluent urban households, earning more than 100,000 yuan a year, who regularly buy luxury goods. But their spending power is rapidly being dwarfed by a vast emerging middle class. These households earn between 25,000 yuan (the threshold for becoming a serious consumer in China) and 100,000 yuan, says McKinsey. The consultancy estimates that the number of such households will rise from 42m in 2005 to 200m by 2015 “ […] “ Apart from Wal-Mart, other successful giants have set up shop, including France's Carrefour, Britain's B&Q and Malaysia's Parkson. Foreign firms now account for 23% of the sales of the top 100 food retailers in China. More are arriving with the lifting of rules restricting foreign chains to a handful of big cities.” According to the report, China is indeed an opportunity but it has become a brutally competitive market in which only the strong will survive: local competitors restore to dirty tactics, commercial-property prices are soaring, marketing expenses are growing, severe overcapacity keeps product prices low, average spending per visit is tiny, store productivity is declining, sales per square foot are falling and profit margin are shrinking, distribution and logistic within China is poor, Chinese consumer are brand conscious but not loyal, with huge variations of taste, in sourcing products retailer have to deal with many layers of middle-men and a huge number of suppliers, local supermarket are rapidly introducing improvements and catching up with the best of foreign chains, making competition even more intense. “ But there will be handsome rewards for those that can survive this battle of hypermarket proportions.” You can access the full article here