The Chinese market

What is the attraction of China?

With a burgeoning economy and a huge population, China offers big growth opportunities. The country is five years into an ambitious infrastructure construction programme, under which many modern malls are being built.

Chinese shoppers are increasingly turning towards modern shops rather than traditional markets to buy goods, particularly in larger cities. Several international retailers have set up in China and shown it can work, so it is no longer thought as risky as it once was.

Who is opening there?

As well as Monsoon, China is a growth area for Mothercare, Tesco and Zara. Many of the luxury brands have been trading there for some time and Danish fashion group Bestseller has opened more than 3,000 outlets in the country in just five years.

Who has done well?

International grocers are doing particularly well, according to Planet Retail research director Robert Gregory. He says: “There is increasing urbanisation in China and living standards are rising. While growth slowed in the downturn, it has remained relatively high.”

He adds that, following the avian flu and Sars outbreaks, consumers have become more concerned about hygiene and that has encouraged shopping from stores.

Who has struggled?

French grocer Carrefour had been considered one of the most successful retailers to enter China but, according to Gregory, it has struggled in recent years. There was even speculation that it might exit the country altogether.

Kingfisher also struggled in China, but has stuck it out, taking more control where needed and reducing store numbers, and there are signs it is turning the business around. Kingfisher’s determination to stay in China shows what an important market the DIY group expects it to become in future.

What are the risks?

China can be a lot more volatile than Western economies and profit may not come immediately, according to MHE Retail chief executive George Wallace. He says: “It is quite a controlled economy and the regulatory system is bureaucratic.” Language is also an issue, on account of the many different dialects spoken in the country.

Gregory also points out that some retailers that have opened in China adopted a one-size-fits-all approach inappropriate to such a diverse country. “Each region has its own taste and customs and shops very differently,” he warns.