China's Retail Market: E-commerce Booms and FDI Increases Despite Recent Sales Dip

SHANGHAI - Feb. 24, 2023 - PRLog -- China's retail market grew by 2% in 2019 to reach CNY 41,164.9 billion, with supermarkets, department stores, and specialty stores seeing sales growth. However, online retailers faced barriers due to consumer reluctance to purchase certain products sight unseen. To address this, retailers transformed stores into entertainment hubs.

Sudden Drop in Retail
Despite a sudden drop in retail sales in December 2022, which shrank by 1.8% YoY, China remains home to the world's largest e-commerce market. In 2020, the online retail sector experienced a steep increase in demand and supply amid lockdown measures due to COVID-19, with e-commerce exports reaching CNY 1.12 trillion, a 40.1% YoY increase, and imports at CNY 570 billion, up 16.5% YoY.

FDI in China
Foreign direct investment (FDI) inflows into China have also been increasing steadily for the past three years, with many foreign-funded businesses continuing to operate in the market due to China's strong manufacturing base, favorable business environment, and mass consumption market. According to the Ministry of Commerce, China's FDI reached USD 189.13 billion in 2022, an 8% increase in US dollars from the previous year's total of USD 173.48 billion.

Autonomous Shopping Cart
Smart shopping carts are revolutionizing the supermarket industry, and one company at the forefront of this trend is JD.com-owned 7Fresh. Its first location in Beijing's Dazu Plaza Shopping Center opened in 2018 and is one of the most technologically advanced supermarkets in the world.

Key Facts of the China Retail Market

China Retail Market
China's retail market is seeing a surge in JVs that are boosting FDI. 77 M&A deals in retail and wholesale, valued at over USD 4,531 million, have been completed or are pending in the past year. For example, Thomas Meyer has partnered with E-Shine to expand internet operations in China.

Food Packaged Led Growth
During the first three quarters of 2022, the four major industries in China experienced growth led by packaged food and home care. Due to Covid-driven hoarding and increased health and hygiene concerns, packaged food alone had an average value growth of 7.4%, along with 4.6% volume growth and a 2.6% ASP rise.

High Transportation Cost
Compared to affluent nations like Japan, Europe, and North America, China's cost of shipping goods is up to 50% more.

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