Chinese Market Research

Introduction

China has one of the most rapidly growing retail markets in the world and has transitioned from being a global manufacturer to service and consumption economy. China is currently the world’s second largest retail market and the largest in all of Asia (Ku, Shira & Associates, 2014). The country has exhibited an increase in household consumer power of about 15% per year for the past 6 years. In the economically advanced cities like Hong Kong, Beijing and Shanghai, the disposable per capita income is more than $3800. Thanks to the increase in wages and disposable income, Chinese citizens are demanding quality products and seek to fulfill their needs in order to live a better life. Foreign companies see this increase in retail demand as an opportunity for growth and power.

This research project will help the reader understand the best way to enter the Chinese retail market without having to go through all the market barriers. Foreign retailers have to understand that in order to succeed in the Chinese market they have to get a sense of the legal system, market environment and culture. An overview of the retail market will be provided including competition levels, market trends, procedure on how to set up a retail shop as well as to why should foreign investment be directed toward the retail industry. The logistics in the country are less efficient and cost more than in other developed countries.

The problem

Although the number of retail chain stores presented a significant growth in China in recent years, many local market barriers still exist. Companies face many competition and most markets are dominated by larger players. Only about 5% of retail companies in china are foreign invested and must go through a more strict process for licenses. Many foreign companies that offer retail services in china face many market barriers like the significant income gap in the country, legal and regulatory policies that often seem to be arbitrary, lack of effective security on intellectual property rights. Another major problem that foreign companies face is the logistics planning and infrastructure of the country.

Research Goals

• Determine the alternative market entry methods to enter the Chinese retail market without having to go through all the market barriers.

• Identify the main competitors in the market and the strategies they have used to survive in the market.

• Identify market trends.

• Advantages & disadvantages of going into the retail market in China.

Research Questions

1. Why should FDI be directed towards the retail market in China?

2. What is the major barrier in the retail market in China?

3. What is the future for the retail market in Asia?

4. Best market entry methods to access the retail market in China?

Research Design

This research paper was realized using secondary research methods that were previously conducted and certified by government and international private firms thus making the collected data credible information. This research methods where chosen because the physical distance between the researcher and the selected market make it quite difficult and expensive to conduct primary research. Considering that China is an emerging and power economy with many market opportunities, secondary research can be conducted via online websites and libraries because it contains much trustworthy information for foreign investors to analyze and draw conclusions.

In order to collect useful and trustworthy data, market industry profiles and country commercial guides or handbooks elaborated by private firms where used in order to determine the retail trends, competition levels, cultural trends and many other factors. Government websites were used to determine the legal and political aspects as well as the population demographics. With these research methods, the data collected will help evaluate and understand the retail market in china and the many market opportunities it contains.

Data Collection:

As mentioned before, China is the world’s second largest retail market after the United States of America. The countries total retail consumption sales reached $3.88 trillion in 2013. Cities in China are ranked by tiers according to their financial and administrative power. 4 tiers of cities where identified ranging from mega cities, moderately wealthy cities, poor country level cities and the extremely poor country side. Tier one and two include the 4 mega cities: Beijing, Shanghai, Guangzhou and Shenzhen, every city contains a population of more than 20 million people (Magnus Adler). By identifying and understanding the huge income gaps and consumer trends between the four kinds of tier cities, foreign retailers can elaborate effective market entry plans for their products, marketing campaigns and other strategies.

Retail trends:

A major and recent retail trend in the Chinese market is online retailing. Over recent years, online retailing has become a major key market for retail companies around the world. With over 110 million internet shoppers, and an increasing consumption power, people are beginning to shop online and have their products delivered to their doorstep or pick them up from mobile pick-up in certain metro stations. This type of trend is mainly presented in the first and second tier cities. According to China E-commerce Research Center, online Chinese shoppers tend to buy food supplements, women products, cosmetics and healthcare products, apparel and toys. A rising increase in popularity of mobile devices has set mobile commerce as a rapidly growing trend that accounts for 35% of Chinas internet users. Selling on social media platforms has also become a recent trend in the Chinese retail market. Chinese consumers are easily influenced by reviews of products and services on social media platforms.

Competition:

According to China’s National Standards on Classification of the retail industry there exist stores based retailers like convenience, department or specialty stores and non-store based retailers like vender machine retailing, direct selling, electronic retailing or television home shopping. According to China Chain Store and Franchise Association, foreign retail companies generally perform

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