China is set to become the world’s largest grocery market by 2023, overtaking the US
in value terms, according to IGD Asia.
China’s total market size will reach CNY11.0tn (US$1.8tn), more than the next four largest grocery markets in Asia combined.
“China will not only retain its position as Asia’s largest grocery market by 2023, it will also overtake the US to become the world’s largest,” Nick Miles, head of Asia-Pacific at IGD said.
“The market is expected to have a CAGR of 5.5%, on par with Sri Lanka and Thailand, but slower than markets such as India, Vietnam, Indonesia and the Philippines, where the economy is growing faster”.
Convenience will be the fastest-growing physical store channel, driven by Alibaba and JD.com, smaller format stores and local and overseas players expanding their networks.
“Online and offline integration will drive online growth. As the fastest-growing channel, we forecast online to contribute up to 11% of sales in 2023.”
IGD expects traditional trade to continue losing share to modern trade.
“As the total market size expands, traditional trade will still grow, but at a much slower pace over the next five years (forecast CAGR of 0.8%), compared with the growth rate of modern trade (forecast CAGR of 8.5%).”
Hypermarkets may have had their day. IGD forecasts their share of China’s total grocery retail market will reduce from 22% in 2018 to 18% in 2023, while the market share of supermarkets will remain steady, close to 20%.
“With such strong market growth to 2023, trading in China has vast potential, whether supplying directly to physical stores or via online marketplaces.”
However, Miles warns there are huge changes that suppliers need to consider.
“Online giants are reshaping China’s retail landscape with their strong logistical and technical capabilities, so suppliers should understand this new path of purchase and design meaningful ways to reach their shoppers.”
Expansion through local partners will remain a key route to market in China. IGD said customer strategies must take into account the strong alliances forming between ecommerce players and bricks and mortar retailers.