Convenience stores likely to heal China's stagnant retail market

Convenience stores, which require less investment and shorter incubation periods but serve shoppers' demand on convenience and proximity, have become a new growth engine in the stagnant retail market, an industry report said.

The domestic retail market has entered a critical transition period -- from concentration toward penetration. Convenience channels thrived amid a slowdown in China's economy last year, according to a report sent to Xinhua by the UK-based market research company Kantar Worldpanel on Wednesday.

Larger groups are struggling under pressure from higher operating expenses and are finding it more difficult to maintain growth and profitability. Instead of ambitiously expanding, retailers are shifting their focus to smaller stores.

Carrefour, for instance, is diversifying its portfolio by opening its first ever neighborhood supermarket in China, Kantar said in its report.

Convenience stores, which require less investment and shorter incubation periods, have emerged as a growth engine in the stagnant retail market, it said.

The convenience-store channel has seen healthy growth in the past few years and this is expected to continue through the next decade.

The largest retail store network among modern trade channels in China is the convenience store channel. Store numbers almost doubled over the past six years, from around 13,567 in 2008 to 26,345 by the end of 2014, according to Kantar.

Meanwhile, the channel is estimated to generate 40.8 billion yuan (6.7 billion U.S. dollars) in sales in 2014, achieving an average growth rate of 14.8 percent over the past six years.

However, development has been quite unbalanced across China's provinces, as stores were originally centered around the southern area of the country.

The first 24-hour convenience store opened in 1986 in Guangdong Province.

It is more developed along coastal areas, and Guangdong and the Yangtze River Delta region are two hot spots of network distribution and maturity, it added.