Retail in Asia

In Markets

PwC: Growth continue in 2013, but challenges ahead for retailers in Asia

Asia Pacific’s retail sales growth volume is forecast to grow 5.8pc in 2012 and 6pc in 2013, with an upward trajectory expected for the industry until 2016 when the market is estimated to be worth US$11.8 trillion. These findings are revealed in PwC’s 2013 Outlook for the Retail and Consumer Products Sector in Asia report, produced in cooperation with the Economist Intelligence Unit.

Reflecting the global economic slowdown, the growth targets are significantly lower than the 9.6pc growth recorded in 2010. However like most industries, Asia Pacific remains a top destination for global retail chains. But the path ahead is expected to be fraught with challenges, including slowing regional economies, high inflation and interest rates.

“Like everywhere else, Asia is affected by the global economy. And this will affect the retail industry in one way or other. Having said that, Asia still holds out the best opportunity for growth and profits for retailers, big and small. International retailers, however, will find it difficult to implement any large-scale expansions as sluggish markets at home is likely to constrain their investment resources,” says Carrie Yu, PwC’s Retail and Consumer Leader for China and Asia Pacific.

Cashing in on China
Not surprisingly, retailers will continue to bank on China to drive growth. Despite an economy that’s also slowing, the Chinese retail industry is still expected to grow an impressive 10.9pc in 2012. Growth is forecast to be 10.5pc in 2013 and an average of 10.4pc through to 2016. It will overtake the US as the world’s biggest retail market in 2016.    

In the recent 18th National Congress of the Communist Party of China, the country’s leadership aims to double China’s GDP and per capita income of both urban and rural household by 2020.

“Retailers operating in China are no longer just focusing on the bigger first and second-tier cities. They’re now expanding in third and fourth-tier cities as disposal incomes in these untapped markets increase.” adds Yu.

Hong Kong retail sales down but expected to rebound in 2014
In Hong Kong, the retail sales volume is forecast to grow 2.7pc in 2012. Growth is expected to drop to 1.5pc next year on the back of rising unemployment and more cautious spending from Chinese tourists. However, things are expected to get better over the medium term on hopes of a recovery in global trade and rising local incomes.

Jumping on the online bandwagon
Online retailing continues to enjoy exponential growth in Asia. According to industry estimates, Asia will account for a leading 41.4% share in global business-to-consumer (B2C) e-commerce sales by 2016. China’s slice of the pie is expected to increase to 23.4pc in 2016 from 9.9pc currently. The country’s B2C e-commerce sales are expected to reach RMB 450 billion (US$72.2 billion) this year, having already hit RMB 82 billion (US$13.2 billion) in the first quarter.

Asians are increasingly receptive to shopping online, driven by the popularity of smartphones and tablet computers. Many traditional players which have been lagging behind their online peers are now embarking on a multichannel retail strategy. This is particularly the case in China as online retail represents significant growth opportunities.

The rapid growth in e-tailing is also seeing an increasing number of foreign offline retailers and even image-conscious luxury brands jumping on the online bandwagon to capture a market that’s increasingly made up of tech-savvy consumers.