20151018-Bain-How_Retailers_Adapt_to_China_s_New_Normal_28页_5mb

Report Summary: Winning Over Shoppers in China's "New Normal"

1. Offline Retail Market (5.4% Growth)

• Slowdown in traditional formats: Large hypermarkets face saturation, leading to mixed growth. Convenience stores and small supermarkets show healthier growth (9.1%).
• Regional focus: Top retailers like Yonghui and Wumart achieve success by concentrating in specific cities/provinces and building high penetration in key markets (e.g., Chongqing for Yonghui).
• Store optimization: Closing underperforming stores and adopting smaller formats (e.g., easy stores like Carrefour Easy) are key to efficiency and addressing urban convenience needs.
• E-commerce competition: Increased delivery options from online retailers pressure physical stores, but offline heavy users still favor in-store purchases.

2. Online Retail Market (34% Growth)

• Dominance of platforms: Taobao and Tmall control ~80% of online FMCG sales. Pure-play e-commerce continues to grow, but multichannel strategies (e.g., JD.com's investment in Yonghui) are emerging.
• Consumer Behavior:
  • Online shoppers show higher category breadth (purchasing more product types) but more loyalty to specific platforms (e.g., Tmall).
  • Premium products (higher ASP) and imported goods are increasingly popular online (40% value share online vs. 10% offline).
  • Consumers favor promotions (e.g., Double 11, Double 12) and are influenced by free delivery, driving larger orders and higher frequency purchases.
  • Offline purchases remain strong, with 60% of online growth from new demand rather than channel substitution.

3. Key Strategies for Retailers

• Adopt O2O Integration: Large retailers (e.g., JD.com, Alibaba, Walmart) invest in digital partnerships to combine offline presence with online engagement.
• Focus on regional concentration: Success depends on dominating one area before expanding, building local customer loyalty and store penetration.
• Emphasize smaller store formats: Hypermarkets and large supermarkets are no longer the primary growth drivers; smaller retail formats better serve consumers’ convenience needs.
• Optimize pricing and promotions: Striking the right balance between inbound marketing (promotions) and outbound logistics (delivery) is critical for online sales. Offering larger pack sizes and bundled products stimulates purchase frequency.
• Data-driven personalization: Leverage shopper data to refine product assortment and tailor offerings to evolving consumer preferences.

4. Overall Market Outlook

• China’s FMCG market growth is decelerating (5.4% in 2014), but online channels remain dynamic. The future belongs to retailers with strong local execution and seamless digital-physical integration.