China’s Retail Market Forecast to Reach $5T in 2020 Amid 4% Decline

The year 2020 has been a tough year for China’s retail market, but due to global trendline changes, it might well become the world’s largest retailer.

According to the research data analyzed and published by Comprar Acciones, August 2020 was the first month of retail trade growth since the year started. Retail sales during the month rose by 0.5% from the same time in 2019.

Between January and August 2020, retail trade in China declined by -8.6% YoY. January and February had the highest drops of -20.5% each according to data from Trading Economics. The situation improved slightly in March, as the total decline for the month was -15.8%.

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As lockdown measures eased in the country, the decline eased further to -7.5% in April, -2.8% in May, -1.8% in June and -1.1 in July. Notably, the declines recorded in January and February were the worst in the period between 1993 and 2020.

Online Retail Sales Increase by 9.5% YoY with Food Sales Leading at 35.4%

In August 2020, most retail categories grew significantly in comparison to the performance recorded in July. For instance, garments went up by 4.2% compared to -2.5% in the previous month. On the other hand, cosmetics grew a massive 19% compared to 9.2%, while jewelry grew by 15.3% compared to 7.5%.

Other areas reporting considerable growth include telecoms, which rose by 25.1% compared to 11.3%, and office supplies at 9.4% compared to 0.5%. However, some continued plummeting. Building materials for instance dropped -2.9% compared to -2.5% while furniture declined -4.2% compared to -3.9%.

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Total retail sales for the month of August amounted to 3,357.1 billion yuan ($496.67B). Comparatively, total sales for the period between January and August totaled 23,802.9 billion yuan ($3,493.85B).

During the period between January and August, digital sales of physical goods went up by 15.8%. Overall online retail sales amounted to 7,032.6 billion yuan ($1,032.6B), an increase of 9.5% YoY. The figure was also 0.5% higher than the total of the previous seven months.

Food sales recorded the highest growth of 35.4%, while clothing grew by 1.1% and consumer goods by 18.3%.

China to Surpass US as Leading Retail Market with $5.1T against $4.8T

According to data from Statista, China was the second largest retail market globally in 2019 behind the US. It accounted for 21% of all retail trade worldwide. For almost a century, the US has held the title of largest retail market globally. However, China has been on track to turn the tables.

eMarketer estimates that the Chinese retail space will tumble by -4.0% in 2020. Due to the varying effects of the global pandemic on different markets, the US economy is set to take a bigger hit than that of China. According to eMarketer research, that places China on track to become the global retail market leader in 2020.

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The source estimates that China’s retail sales for 2020 will amount to $5.072 trillion. On the other hand, the US estimate is $4.894 trillion. However, the research goes on to show that the US will reclaim the title in 2021 with $5.330 trillion against China’s $5.249 trillion.

In 2022, the US will still be in the lead but by a smaller margin, $5.549 trillion against China’s $5.533 trillion. China will recover the top position in 2023 with $5.826 trillion against $5.743 trillion in the US. After that, it will hold on to the top position for several decades.

China’s eCommerce Market Revenue to Grow by 29.4% in 2020

Among the factors contributing to the fast recovery of the Chinese retail market is the ongoing battle between eCommerce giants. Alibaba, Pinduoduo and JD.com are at the helm of this billion-dollar market.

These three top eCommerce retail sites will have an 83.6% market share in 2020, up from 80.3% in 2019. In their ongoing battle for supremacy, these eCommerce giants are constantly evolving new tools and services. And in the process, they are driving the country’s retail market to a much faster bounce than in other markets.

For instance, JD.com claimed that in Q2 2020, more than 80% of its new shoppers came from lower-tier cities. It attributed that growth to its new Jingxi discount marketplace. The site’s active shoppers increased by 30% during that quarter to 417.4 million.

Alibaba claimed that it got 70% of its new users in May from lower-tier cities as well. Like JD, it attributed the growth to a new discount marketplace known as Juhuasuan. Across its marketplaces, Alibaba served over 742 million active users in Q2 2020.

Pinduoduo, on the other hand, uses a social buying approach. By piggybacking on the success of messaging app WeChat, it got access to over 1 billion people from the get-go.

Revenue in the Chinese eCommerce market alone is estimated to grow a massive 29.4% YoY in 2020 according to Statista’s data.