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Retailers urged to seek intensive growth, differentiation

By Li Xiaoshu (Global Times)

08:12, May 14, 2012

Chinese retailers should seek intensive growth and differentiation instead of expansion amid a sagging economy and falling consumer confidence, analysts and insiders warned yesterday as the sector faces slumping growth.

The country's retail sales climbed 14.1 percent year-on-year to 1.56 trillion yuan ($247.8 billion) in April, the slowest increase in the past 66 months, the National Bureau of Statistics (NBS) said Friday.

Spending adjusted for inflation, known as real spending, grew 10.9 percent by the measure in April compared to the same period last year, according to the figures from the bureau.

The data indicates that the country's retail sector is facing substantial challenges at a crucial juncture, according to Zhao Ping, deputy director of the Consumer Research Department of the Ministry of Commerce.

"With GDP growth forecasted to moderate to around 7.5 percent and consumer prices remaining high, weak income expectations will continue to hold back consumer spending," Zhao told the Global Times yesterday. "April's record low exports growth at 4.9 percent also add up to uncertainties for retailers."

Zhao believes "it's unlikely that the government will unveil more stimulus packages to expand domestic demand."

Facing greater macroeconomic pressure, global and domestic retailers should move fast on adopting new profit models, said Guo Geping, president of the China Chain Store & Franchise Association.

"Retailers in the China market should gradually shift their focus from scale effect and price-based competition to intensive and sustainable development that will make each outlet profitable," Guo told the Global Times yesterday.

"It's crucial to downsize the stores, control costs of raw materials and human resources, reshape the retail brand image, upgrade retail services and offer differentiated customer experience."

Concerns over the future of the retail industry grew after Suning Appliance Co, the country's biggest electronics appliance chain by market value, reported on April 27 that its net profit in the first three months of 2012 declined by 15.3 percent to $151 million and GOME Electrical Appliances Holding Ltd on April 30 warned of a sharp drop in quarterly profit.

However, "China's retail industry still has a promising future, largely due to the country's ongoing urbanization and pent-up demand," Yuan Yue, chairman of Horizon Research Consultancy Group, told the Global Times yesterday.

China's retail industry is expected to reach 32 trillion yuan by the end of 2015, Zhang Zhigang, president of the China General Chamber of Commerce, was quoted as saying in a report by the Xinhua News Agency yesterday.


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