Re­tail chains made to raise man­age­ment abil­i­ties

China Daily (Hong Kong) - - BUSINESS DIGEST - By YAO JING yao­jing@chi­

Faced with slow­ing eco­nomic growth, re­tail chains in China are be­ing forced to fur­ther im­prove their man­age­ment and mar­ket­ing ca­pa­bil­i­ties to go through the slug­gish pe­riod, said a re­port re­leased on Thurs­day by Deloitte Touche Tohmatsu Ltd.

The re­port China Power of Re­tail­ing 2013 re­viewed the coun­try’s re­tail in­dus­try over the last year, and is based on a sur­vey con­ducted by Deloitte and the China Chain Store & Fran­chise As­so­ci­a­tion of 192 re­tail com­pa­nies and 108 re­tail stores in China.

The to­tal sales of listed re­tail com­pa­nies rose 12.2 per­cent year-on-year in 2012, a much slower growth rate than in re­cent years. Their net profit, which de­creased 7.7 per­cent from 2011, posted the first drop in re­cent years, said the re­port.

The sales growth of China’s top 100 re­tail chains eased to 10.8 per­cent year-on-year, the low­est point in six years.

“The re­tail in­dus­try is fac­ing chal­lenges due to ris­ing op­er­a­tional costs as em­ployee com­pen­sa­tion in­creased and lo­gis­tics spend­ing con­tin­ued to rise,” said Long Yongx­iong, a con­sump­tion and trans­porta­tion in­dus­try joint leader at Deloitte China.

At the same time, the boom­ing on­line re­tail sec­tor is grab­bing mar­ket share from tra­di­tional retailers with its ad­van­tages of lower prices, con­ve­nient pay­ment sys­tems and door-to-door de­liv­ery, Long pointed out.

Un­der a ma­jor as­sault from e-com­merce firms, the profit mar­gins of the phys­i­cal re­tail mar­ket in China fell from 5 per­cent in 2005 to nearly 2.5 per­cent last year. Tesco Plc, Car­refour SA and Wal-Mart Stores Inc have all re­mained be­low that bench­mark, a Kan­tar Re­tail re­port said.

“As for sin­gle stores, the turnover of for­eign retailers is much higher than that of lo­cal re­tail com­pa­nies in our top 100 re­tail rank­ings. I think lo­cal retailers have to im­prove their mar­ket­ing and op­er­a­tional ca­pa­bil­i­ties to catch up with for­eign com­peti­tors,” said Long.

Still, for­eign retailers are also see­ing de­clin­ing sales and are strug­gling with lack­lus­ter con­di­tions in the mar­ket­place.

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