China Catalyst: Powering Global Growth by Reaching the Fastest Growing Consumer Market in the World

CHAPTER 5

Channels to a Growing Market

As companies strive to reach China's vast market, a gold rush dynamic has taken hold. The orderly progression of sequential, proven investment return is not the ruling order of the day. Instead, the primary driver is consumer reach. Established channels are converging. Legacies of the old state-run economy continue to thrive and grow. New entrants seek to establish distinct positions in new urban markets and defend those positions. And everyone, it seems, is moving online. Multiple channels to market rule the day, with retailers taking steps to maximize reach but clouding an already complicated, somewhat blurry market picture in the process. There are no hard lines in China, and channels to market are no exception.

With almost half a million retail enterprises, the retail market remains very fragmented.1 The top 100 retailers in China captured just 11 percent of the country's total retail expenditures in 2010. These retailers have been growing faster than the overall market and therefore taking small steps toward consolidation. In 2010, the top 100 grew more than 21 percent annually, compared with the broader market growth of 16 percent.2 Although a mature market remains distant, images of consolidation are starting to emerge and will likely accelerate. Figure 5.1 illustrates the small but growing levels of concentration in the market.

Figure 5.1 Growing Concentration in the Retail Sector

Percentages are representative of the market share ...