China to become world’s largest grocery market by 2023 – IGD

China will overtake the US to become the world’s largest grocery market by 2023 in value terms, according to new forecasts.

Studies from research organisation IGD Asia predict that China’s total market size will become more than Asia’s next four largest grocery markets (India, Japan, Indonesia and South Korea) combined.

IGD also found that e-commerce giants such as JD.com and Alibaba are set to see significant growth from both online and offline channels and become the second- and third-largest grocery retailers in China respectively.

Meanwhile, retailers with nationwide networks such as Sun Art, Yonghui, Walmart, CRV and Carrefour will benefit from ongoing expansion, partnerships with e-commerce and tech companies, improved efficiencies and investment in small formats. 

“Less than half of grocery sales in China currently go through traditional trade and as the market continues to mature, we expect traditional trade to continue losing share to modern trade,” said Nick Miles, head of Asia-Pacific at IGD.

“As the total market size expands, traditional trade will still grow, but at a much slower pace over the next five years (forecast CAGR of 0.8%), compared with the growth rate of modern trade (forecast CAGR of 8.5%).”

He added: “Convenience will be the fastest-growing physical store channel, driven by Alibaba and JD.com transforming traditional mom-and-pop stores, retailers opening smaller format stores and both local and overseas players expanding their networks through partnerships. Online and offline integration will drive online growth. As the fastest-growing channel, we forecast online to contribute up to 11% of sales in 2023.”

Meanwhile, IGD predicts that hypermarkets will see their share of China’s total grocery retail market reduce from 22% in 2018 to 18% in 2023, while the market share of supermarkets will remain steady, close to 20%.

Miles said: “With such strong market growth to 2023, trading in China has vast potential, whether supplying directly to physical stores or via online marketplaces. However, there are huge changes taking place that suppliers need to consider. Online giants are reshaping China’s retail landscape with their strong logistical and technical capabilities, so suppliers should understand this new path of purchase and design meaningful ways to reach their shoppers.

“Expansion through local partners will also remain a key route to market in China, so customer strategies must take into account the strong alliances forming between e-commerce players and bricks and mortar retailers.”