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China’s Ministry of Commerce has released preliminary details of its annual survey of the country’s top 30 retailers in 2003. Total sales for the top 30 retailers, which includes both food and non-food businesses, amounted to CNY270.4 billion ($32.6 billion) in 2003, a rise of 29.2% on 2002. Meanwhile, the number of stores operated by the top 30 retailers rose by 35.1% to 10,321. Eight companies in the top 30 increased their sales by more than 40% during the year, while nine had sales of more than CNY10 billion ($1.2 billion). The rapid expansion came despite the impact of SARS earlier in the year.

Shanghai Bailian Group, the new company that was formed by the Shanghai government in April 2003, came first in the rankings, thanks mainly to the fact that it counts Lianhua Supermarket as one of its interests. Lianhua is the largest single retail company in China with over 2,200 stores and net sales of CNY18,330 million ($2,212 million) in 2002. The second largest domestic grocer, Beijing Hualian, came fourth.

Significantly, 2003 is the first year that the Ministry of Commerce has decided to include foreign funded retailers in the ranking. Six such companies made it into the top 30 including Carrefour, China Resources Vanguard, Suguo, Wal-Mart, and Metro Group. Total sales for the six foreign funded retailers reached CNY49.5 billion during the year, representing 18.3% of the total sales of the top 30.

“The statistics indicate that local chain store operators are still dominating the industry despite challenges from foreign counterparts”, said Huang Hai, an assistant minister.

This is evidence once again of the rapid pace of development in China’s retail sector. The 29% rise in sales for the top 30 retailers during 2003 was well above the 8.5% increase in China’s retail sales in general, suggesting that consolidation is gathering pace. Moreover, this comes on top of a 52% increase in sales of the top 30 retailers in 2002. The largest retailers in China are undoubtedly getting larger, thanks in part to their ambitious expansion plans.

Figures from the China Chainstore and Franchising Association show that the top 100 retailers in China now account for over 6% of total retail sales, compared to just over 1% five years ago.

However, a word of caution must be noted. Official government statistics in China must be taken with a large pinch of salt and these figures from the Ministry of Commerce are no exception. It is unsure, for example, how the sales figures and store numbers are derived, especially as they do not seem to match the official consolidated figures given out by individual companies. The complex web of ownership amongst the state-owned retailers merely adds to the confusion and it is often impossible to pinpoint what exactly the figures include or relate to. Thankfully, with companies like Lianhua and Wu-Mart now listed on the Hong Kong Stock Exchange, the picture is at least getting clearer.

Apart from the continuing rapid growth of the top retailers in China, the other story highlighted by the survey this year is the increasing importance of the foreign businesses such as Wal-Mart. Although the Ministry of Commerce has used the survey to triumphantly promote the fact that domestic retailers are still dominant, the simple fact that it has decided to include foreign funded companies in the ranking for the first time shows that they are now too large to ignore. Moreover, although the Ministry downplays the foreign retailer’s potential to expand, stating that these companies are unwilling to expand into the west of the country while opportunities in the east are limited, the opening up of the sector as part of China’s commitment to the WTO should see more foreign retailers, such as the UK’s Tesco, enter the market. It is therefore highly likely that over the next few years, foreign retailers will gain an increasingly prominent position in the rankings. It is also probable that a number of domestic firms that have over-expanded and cannot cope with the increasing competition will be forced out of the market.
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