China ranks No.2 on retail sales index

China is ranked second after Chile on the retail development index by consulting company AT Kearney covering 30 developing markets, according to a report released on Monday.

It is the highest ranking China has received since the launch of the index in 2010.

The index includes market attractiveness and country risks.

Retail sales in China increased by 13 percent in 2013 to $2.6 trillion, and consumer confidence rose as well, AT Kearney said in the report.

A major retail driver in China is online sales, which reached $305 million in 2013, a 42 percent growth, and now represents 8 percent of total retail in China, AT Kearney Partner Sherri He wrote in a press release.

The report said that hypermarkets and supermarkets, particularly multinationals, are facing flattening revenue growth and rising costs as labor costs surge by more than 15 percent per year and rents in some locations rise 10 percent per year.

In May, China Resource Vanguard Co, a State-owned supermarket operator, announced that it has completed the acquisition of Tesco's unit in the Chinese mainland and put it in a new joint venture, in order to forge the top retailing brand in the market.

Department stores are struggling as well, their profits slipping as their offerings don't stand out to buyers. Store sales dropped by more than 4 percent, and total revenue growth was minimal, said the report.

However, the report said that convenience stores are entering a high-growth phase.