According to the Blue Book of Commercial Sector, total retail sales of consumer goods is expected to grow by 20% yoy in 2010, exceeding 15 trillion yuan. In 2009,

total retail sales reached 12.5 trillion yuan, up by 15.5% yoy in nominal terms. By region, urban and rural retail sales totaled 8.5 trillion yuan and 4.0 trillion yuan respectively, with respective nominal growth of 15.5% and 15.7%.

Looking at the development of different retail formats, department stores faced great margin pressure in 2009, largely due to more aggressive discount campaigns. As predicted in the Blue Book, the performance of department stores should improve in 2010 as the operators step up expansion of stores and improve product mix by developing more private label products.

Benefited from the rally of CPI, the supermarkets have gradually picked up the same store sales growth since 3Q2009. Supermarket and hypermarket chains are penetrating into the rural retail scene; the growth potential of the whole industry is huge. However, the industry profit margin was generally low, normally below 20%. To boost margin, the operators could enhance commodity marketing and category management, streamline the supply chain and increase direct souring.

According to the World Luxury Association (WLA), Chinese consumers lavished a total of US$9.4 billion on luxury goods in 2009, taking up 27.5% of the global sales. China has overtaken the United States to become the world’s second largest luxury market just behind Japan. Hit by the financial turmoil, global sales of luxury goods have dropped since late 2008. Luxury retail sales in China held up relatively well compared with other countries. China is undoubtedly increasing in importance for luxury companies around the globe. Luxury brands have been rushing to China like bees drawn to honey and many of them have already established strong foothold in major cities. Players are now expanding fast into 2nd and 3rd tier cities as wealth trickles down into China’s interior.