Supermarket Development in China

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China's 1.2 billion population is an enormous attraction to many retailers and manufacturers of consumer products that have begun to vie for this huge potential market. Not only does the number of consumers continue to grow, but China's economy has experienced an impressive growth since its reform in 1978. China's GNP grew 10 percent or more during the early 1990's. This figure is especially impressive when compared with the rest of the world which was facing an economic downward trend. Also, percapita income rose at an average rate of 10.8 percent since 1990. Chinese consumers can now afford a better quality of life with an increase in consumption.of both necessary and luxury products. However, the old system of centrally controlled distribution and retailing can no longer cope with the increasing consumption rates under the new market economy. This increasing demand has provided the proper environment as well as strong incentives for developing new supermarkets as part of China's retail industry. Since the late 80's and early 90's, in order to stay competitive locally as well as globally, many Western and Asian retailers have actively explored opportunities in China hoping to capture as much market share as possible in this attractive and dynamic market. China has been undergoing many transitions including its economic system, social structure, consumption habits, etc. It is this dynamic nature of China that makes national growth rates or income numbers insufficient in understanding the retail market as a whole. Therefore, this paper will attempt to provide the reader with an understanding of the issues regarding China's population, economic growth and development, purchasing power, development of the new wealthy, and new economic zones as a background for retail development. Next, the paper will address: ean overview of the economy ewhat defines a supermarket in China ethe stages of development in the supermarket industry edevelopment in three key regions of China egovernment involvement esummary of operational performance from store surveys eissues facing supermarket development in China eanalysis of data on four major cities from retail census Finally, the paper will provide concluding remarks on the prospects and recommendations for future supermarket development in China.

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E.B. 96-20
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Charles H. Dyson School of Applied Economics and Management, Cornell University
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