China and India - Comparing the world's hottest consumer markets

Topics: Retailing, Gross domestic product, Investment Pages: 38 (7836 words) Published: January 28, 2014
Consumer Business

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China & India

Comparing the world’s
hottest consumer markets

Contents
First, the basic facts......................................................... 2 Two economic paths ready to converge............................ 4 .
Two paths toward retail modernization............................ 5 Rules of doing business................................................... 7 Risks of doing business................................................... 8 .

Retailing 2015 in China and India................................ 11

Consumer Business

China & India: Comparing the
world’s hottest consumer markets
The integration of more than one billion Chinese and Indian workers into the global economy in the past quarter century was one of the most important economic events ever. Indeed, it can be argued that their addition to the global economy has, in part, been responsible for the spectacular rise in productivity growth in the West. Yet of even greater importance for the future are the rising incomes of Chinese and Indian consumers. The addition of more than two billion consumers to the global economy will contribute to global economic growth, and certainly to the growth of global food retailers and their suppliers.

The world’s leading retailers have beaten a path to China and have spectacular plans for the future. Although in India the process started later and with more formidable obstacles, the world's leading retailers are now working hard to penetrate that market as well. Moreover, India’s cash-rich conglomerates are attempting to pre-empt the global giants by starting their own massive modern chains. All are eager to pick the low-hanging fruit of high growth and minimal competition.

What happens next? In this report Deloitte offers a point of view on the evolution and future direction of the consumer markets in China and India. In addition, it will offer:
Six rules for doing retail business in China and India
Six risks of doing business in each market
A view of the retail industry in 2015 in India and China

First, the basic facts
China
China had retail sales of $785 billion in 2006 when measured using current exchange rates. This was up a staggering 13.7% over the previous year. The Chinese government’s five-year plan anticipates retail sales growth of 11% per year until 2010 – and this figure is probably too conservative.

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Although China remains fragmented compared to more
developed markets, its retail industry is fast becoming more concentrated. In 2006, the top 100 retail enterprises in China had sales of roughly $108 billion. Of this, the top 30 accounted for 75% while the top 10 retailers accounted for 48% of the top 100 sales.

The regulatory environment for retailers in China changed
dramatically in 2004 when the government implemented new rules consistent with its obligations to the World Trade Organization (WTO). Of particular importance is that, according to these rules, foreign retailers may own a majority stake in local joint ventures, may operate in any part of the country they choose, and may

purchase goods from local operations of foreign manufacturers. In addition, the new rules enabled retailers to enter China without a massive investment. This was critical for smaller specialty chains – especially those based in neighboring Asian countries.

Many foreign retailers are now active in China, and most have very aggressive expansion plans. The world’s two biggest
retailers, Wal-Mart and Carrefour, having been active in China for a decade, are now on an aggressive expansion path. This reflects a desire to take advantage of deregulation and rapid growth. It may also reflect their desire to get a large foot in the door before the Chinese government changes its attitude toward foreign

capital. Indeed, despite deregulation, obstacles to entry continue

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP, Deloitte Consulting...
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