Blog: Dean BestRetailers can no longer expect growth in China

Dean Best | 20 September 2012

It could be argued many of the reports on China's recent economic performance have been too gloomy. The economy has slowed but the country is still enjoying GDP growth Europe and North America would dream of. That said, retailers operating in China or thinking of investing in the country beware: it is no longer the case of build it and they will come.

Recent reports on China's economy, discussing how to "turn around" the country's economic prospects, seem overdone. China's GDP is still expected to reach around just under 8% in 2012, down to a level not seen for over a decade, but still dwarfing rates seen in Europe and North America.

Today, at the World Retail Congress in London, Chinese retailers and investors emphasised the country's growth but admitted retailers could no longer expect sales would be a given.

"Growth of 7.5% is very good," Lim Beng Chee, chief executive of shopping mall developer CapitalMalls Asia said. "Some people forget that slower growth is not a recession."

Amid concern over China's economic prospects, some in the FMCG sector have pointed out they still expect bumper growth from the market. Last week, Nestle told Bloomberg it expects sales in China to increase 20% this year.

However, private-equity giant Warburg Pincus told delegates at the World Retail Congress retailers must give consumers a reason to shop at their outlets to continue to thrive in China. Sales growth was no longer a given.

"Three years ago, you just had to be there and it would sell. Now it takes differentiation and innovation to drive performance," Frank Wei, MD of Warburg Pincus Asia, said.

Wei said some retailers had reported same-store sales growth of 30-40% this year; others had seen sales fall. "Chinese retailers need to learn to innovate and be creative."


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