AsiaDistributionRetail July14

Issue 1 | July 2014
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Asia at a glance
Overview p4
In the news p7
Statistics p7
GDP of the Asia Pacific to grow 4.3-4.5% in 2014-18
Asia Pacific retail market to grow 4.7% in 2014
Retail in general p7
Asia Pacific is the fastest-growing region in terms of private
financial wealth
Tourists from Asia Pacific to become worlds top spenders by
2023
Airport retail to boom in Asia
Global retailers regional strategy in Asia Pacific remains
focused on China
E-commerce p8
Asia Pacific to become worlds largest regional B2C ecommerce market in 2014
Mobile shopping set to boom in Asia
Asia to drive growth of global FMCG e-commerce
Department stores p8
M&S announces Asia expansion plans
Aeon to expand in Asia
Convenience stores p8
FamilyMart in rapid expansion in Asia
Duty-free shops p8
Dufry acquires Nuance
Accessories p9
Radley enters Asia
Apparel p9
Marimekko to continue Asia expansion
Antony Morato to further expand in Asia
Beauty and personal care p9

Sephora to expand online presence in Southeast Asia through
ZALORA
Nature Republic further expands in Asia
Consumer electronics p9
Radioshack expands its Asian presence
In this issue
Food and beverage p9

The Cheesecake Factory to hit Asia
Famous Brands plans more Asian stores
Ihop further expands in Asia
China
Overview p10
In the news p12
Statistics p12
GDP growth slows to 18-month low in 1Q14
Retail sales grow 12.5% yoy in May 2014
CPI rises 2.5% in May 2014
Consumer confidence index falls to 102.3 in May 2014
E-commerce p13
iResearch: total transaction of e-commerce reaches 9.9
trillion yuan in 2013
iResearch: total transaction of online shopping up 42% in
2013
Tencent partners with ChinaAMC to sell financial products
on WeChat
Tencent invests HK$1.5 billion in China South City
WeChat targets U.S. users
Tencent buys 15% stake in JD.com
Tencent buys 20% stake in 58.com
Alibaba and Tencent to enter banking sector
Alibaba starts US IPO process
Alibaba rolls out its first wealth management product via
Alipay
Alibaba invests US$15 million in 1stdibs
Alibaba launches 11 Main in the U.S.
Alibaba invests in TutorGroup
Alibaba to buy 60% stake in ChinaVision Media
Alibaba invests in Intime Retail
Alibaba invests in messaging app Tango
Alipay adds Rakuten to list of clients
Stripe and Alipay reach a deal
Jack Ma and partners to pay US$1.05 billion for 20% Wasu
Media
Alibaba to pay US$1.22 billion for stake in Youku Tudou
ShopRunner to partner with Alibaba
Alibaba taps mobile search
Alibaba signs deal with Australia Post
Alibaba agrees US$249 million deal with Singapore Post
Alibaba buys 50% stake in Guangzhou Evergrande Football
Club
Alibaba to develop logistics network with China Post
Alipay ties up with Lotte.com
Burberry teams up with Tmall
Muji opens on Tmall
King Power debuts on Tmall
Zara to open store on Tmall
Weibo debuts on NASDAQ
Suning launches investment service Ling Qian Bao
Asia Market Update Issue 1 July 2014 p1
Suning to enter supermarket business

Dangdang, Yihaodian join forces
JD.com raises US$1.8bn after pricing US IPO
Meituan considers US IPO
Jumei files for US IPO
Vipshop invests in Ovation
Amazon injects US$20 million into Yummy77
Tmall heads China top 100 retailers
Weibo payment is open to all merchants
Baidu enters Chinas online payment market
Dianping considers US IPO
Yiwu launches online marketplace in Hungary

Sanpower takes control of House of Fraser
Sanpower buys bankrupt Brookstone
Marks & Spencer seeks partnerships to drive growth in China
Ito Yokado shuts down Beijing store
COSCIA Department Store opens first store in China

Yosen enters the U.S.
Best Buy considers sale of China business

Costa Coffee to make China its second home
Caffe Bene in China expansion
Mister Pizza to expand in China
Bright Food buys a controlling stake of Tnuva
PizzaExpress debuts in China
Caf De La Don Manuel to enter China
Orange Leaf Frozen Yogurt to expand into China
FMCG p21
China fines Johnson & Johnson and others for price fixing
Luxury p21
BCG: China riches fuel Asia
Shopping malls p18

Ikea opens its first shopping mall in China
Value Retail opens its first luxury outlet shopping centre in
China
CBRE: Global retailers stay focused on China
Japan

Chinas first City Convenience Store Index released
SF Express to add 30,000 O2O stores
FamilyMart to open 200 new stores in China
E-commerce p25
Rakuten acquires Viber
Rakuten ties with Alipay
Rakuten opens a caf in Tokyo
Rakuten launches credit card service in the U.S.
Rakuten Wuaki and Microsoft link on app
Yahoo Japan accepts Alipay as a payment option
MasterCard adds Japan online payment option
Muji opens on Tmall
Supermarkets p18
METRO Cash & Carry to expand in China
Walmart to open 30 new stores in China in 2014
JV between CRE and Tesco receives green light
Aeon ramps up China expansion
Apparel p19
Marisfrolg buys Krizia
Cache-Cache goes online in China
Oroton to add 30 stores in China
A&F in rapid Chinese expansion
Pringle enters China
Old Navy enters China
H&M eyes Chinas smaller cities
Ann Demeulemeester debuts in China
Antony Morato to enter China market
Peine Group teams up with Shandong Ruyi
Giordano eyes 1,000 new stores under new brand in 5 years
MK Trend to enter China
Jo Malone London enters China
Estee Lauder opens on Tmall
In this issue
Overview p22
In the news p24
Statistics p24
GDP growth registers 1.5% in 1Q14
Consumer price index in April 2014 rises to 23-year high
Retail sales drop in May 2014
Consumer confidence index in April 2014 drops to the lowest
level since August 2011

H2O Retailing to acquire an udon chain
Aeons fresh expansion spree
Aeon introduces dog care home at shopping mall
Supermarkets p26
Supermarket sales mark the first rise in 17 years

FamilyMart cooperates with agricultural cooperatives
FamilyMart in rapid expansion
FamilyMart exits South Korea
Seven & I teams up with West Japan Railway
7-Eleven unveils expansion plans at home

7-Eleven to enter Dubai
Lawson to enter the Philippines
Apparel p27
Fast Retailing debuts on Hong Kong Stock Exchange
Fast Retailing to take GU to Taiwan
Uniqlo enters Germany
Uniqlo to enter Indian market
Shiseido sells Carita and Declor to L'Oreal
Kose acquires Tarte
Sony to enter real estate business
Asahi acquires Etika Dairies
Doc Popcorn enters Japan
Dongsung Pharmaceutical enters China

LG Household & Health Care seeks to buy Elizabeth Arden
LG Household & Health Care affiliate to merge with R&Y
Corporation

Samsung to boost sales in India
Samsung and Barnes & Noble produce a co-branded tablet
Mister Pizza scales up in China
Subway eyes growth in South Korea
McDonalds to ramp up presence in South Korea
Caffe Bene to ramp up China presence
Juan Valdez Caf enters South Korea
Burger King to expand to 300 outlets by 2018
References p35
South Korea
Overview p29
In the news p31
Statistics p31
Real GDP growth rises to 3.9% in 1Q14
CPI hits 19-month high in May 2014
Composite consumer sentiment index rebounds to 107 in
June 2014
Retail sales fall by 1.7% mom in April 2014
Sales of department store and discount store chains rebound
from a 3-month low
E-commerce p32
Lotte.com ties up with Alipay
Ticket Monster acquired by Groupon
Kakao acquires Daum at US$3 billion

Hyundai Department Store taps into discount outlet
Apparel p32
LG Fashion renamed to Life in Future
Handsome to launch more new brands
Van Heusen to make debut in South Korea
Joe Fresh enters South Korea

Shilla Duty Free to open stores in Singapore
Shilla Duty Free plans Cambodia store
Nature Republic opens debut store in Hong Kong
In this issue
Asia, accounting for more than 50% of the worlds

population1, is a diverse region comprising
economies of various sizes, levels of economic
advancement, cultures and standards of living.
According to the Economist Intelligence Unit,
GDP of the Asia Pacific region amounted to
US$22.6 trillion in 2013, contributing to almost
one third (31.8%) of the worlds total. It is
expected to grow at a rate of between 4.3% and
4.5% over the coming five years (2014-18), higher
than the global average of between 2.8% and
2.9%2. Exhibit 1 shows the basic data of
selected economies in the Asia Pacific in 2012.
The retail market in the Asia Pacific will grow
at a rate of 4.7% in 2014, up from 4.3% in 2013,
according to Euromonitor International3.
Exhibit 2 shows retail sales and year-on-year
(yoy) growth rates of selected economies in the
Asia Pacific region in 2013. Among these, China is

the largest retail market with a yoy growth rate of
11.0%. According to industry experts in China,
retail sales are expected to see double-digit
growth for 2014. In a survey conducted in 2013
by CBRE, a leading real estate services company,
China is the most sought after market in Asia for
retailers to open new outlets. 22% of more than
130 surveyed retailers based in Europe, the
Americas and Asia are looking to open new stores
there in 2014. Singapore, Hong Kong and Vietnam
are also retail hotspots in Asia among those
surveyed4.
While Asia is becoming increasingly attractive as a

fast-growing retail market for brands, it is a
diverse and highly fragmented market where
brands cannot apply a single formula to all
countries. Japan is a mature retail market, with
sales growth of just 0.7% growth for 2013. That
contrasts with China whose retail market grew at
a stellar pace of 11.0% over the same period.
Retail markets across Southeast Asia tend to be
focused on single cities rather than be country
Asia, the worlds fastest-growing economic region for over two decades, accounted for 31.8% of
total global GDP in 2013. It contains more than 50% of the worlds population.
Asia Overview
Exhibit 1 | Basic Data of selected economies in the Asia Pacific region, 2012
Population
(million)
GDP
(US$ billion)
1,344.6
8,384.3
23.3
475.3
China
Japan
126.1
South Korea
50.0
Taiwan
Thailand
66.8
Malaysia
29.2
Singapore
5.3
Asia & Australasia
3,758.1
Source: Economist Intelligence Unit
GDP per head

(US$)
Real GDP
growth (%)
Consumer price
inflation (av.%)
6,236
7.7
2.6
20,386
1.5
1.9
5,939.1
47,098
1,129.6
1.4
22,592
366.0
2.0
5,480
304.7
6.5
10,421
276.5
5.6
52,052
22,308.3
1.3
5,936
4.0
0.0
2.2
3.0
1.7
4.6
3.3
Exhibit 2 | Retail sales of selected economies in the Asia Pacific region, 2013
China
Japan
South Korea
Taiwan
yoy growth (%)
Internet sales
(US$ billion)
yoy growth (%)
Share of
Internet sales in
retail sales (%)
1,791.1
11.0
100.3
43.4
5.6
92.2
2.7
6.5
11.0
Retail sales
(US$ billion)
1,021.5
Thailand
Malaysia
Singapore
222.7
80.8
51.5
24.6
0.7
3.3
28.8
6.1
0.8
3.8
0.4
4.7
specific in their distribution. For market entry,

retailers regard Hong Kong as a gateway for North
Asia, especially China, while Singapore is often the
first entry point for Southeast Asia.
Asians are becoming more affluent. According to
Boston Consulting Group, the private financial
wealth5 of the Asia Pacific region (excluding
Japan) reached US$37.0 trillion in 2013, up by
30.5% yoy, well above the global average of
14.6%. As the worlds fastest-growing region, the
Asia Pacific (excluding Japan) will contribute over
half the growth of global private financial wealth
by 20186.
Luxury brands, eyeing Asian consumer
potential, have set foot in numbers in the region
for some years, looking for growth. According to
Bain & Company, worldwide spending on luxury
goods grew by 2% yoy to 217 billion euro in 2013
at current exchange rates. By region, the Asia
Pacifics share of global luxury sales stood at 29%
in 2013, up from 24% in 2007 ( see Exhibit 3)7.
However, the consulting firm warns that global
luxury sales growth will continue to slow in 2014,
followed by an 8 ppt drop in growth in 2013,
Asia Overview
42.7
0.8
9.6
4.2
10.0
12.9
14.4
0.7
18.0
12.3
7.0
1.0
3.1
largely due to weaker demand in China, Russia

and Europe.
Exhibit 3 | Asia Pacifics % share of global luxury sales,

2007-2013E
30%
28%
26%
24%
22%
20%
2007 2008 2009 2010 2011 2012 2013E
Source: Bain & Company
In coming years, the growth of modern grocery

retailers (such as convenience stores,
hypermarkets and supermarkets) will play an
integral part in reshaping the landscape of grocery
retailing in the Asia Pacific region, according to
Euromonitor International8.
The growth of convenience stores (CVS) will be
the most significant development among modern
grocery retailers. The three largest CVS chains in
the Asia Pacific region are Seven & I, Family Mart
and Lawson, all based in Japan. They opened
almost 5,000 new stores across the Asia Pacific in
2013, with over 2,000 located outside Japan.
Euromonitor International predicts that China,
Indonesia and Thailand will take the lead in the
development of CVS over the coming years9. The
rapid expansion of modern grocery retailers has
put tremendous pressure on traditional grocery
retailers (such as mom and pop shops). As a
result, the number of traditional grocery retailers
is expected to fall significantly in the years ahead.
The expansion of non-grocery retailers is also
impressive in the Asia Pacific region. Among
these, apparel specialists led by H&M, Zara and
Uniqlo are the best performers10. The fast fashion
retailers continue to expand aggressively
throughout the region. In fact, Uniqlo has a still
wider strategy, planning to open between 200 and
300 stores per year globally and aiming to become
the world's top apparel retailer by 202011.
Pure-click Internet retailers are leading the
online market in the Asia Pacific region. Major
players include China-based Tmall, Japan-based
Rakuten, and South Korea-based Gmarket12.
According to eMarketer, a research company
specialising in digital marketing, worldwide B2C
e-commerce sales will hit US$1.5 trillion this year,
with a yoy growth rate of 20.2%. Widening online
and mobile user bases in emerging markets
remain major contributors to this trend.
Worldwide B2C e-commerce sales are set to reach
US$2.4 trillion by 2017 ( see Exhibit 4). By
region, the Asia Pacific will surpass North America
to become the worlds largest regional B2C ecommerce market in 2014. By country, the U.S.
still leads the league, but not for long; by 2016,
China will likely overtake the U.S. to become the
largest B2C e-commerce market in the world,
eMarketer predicts13.
Asia at a glance Overview
Exhibit 4 | Worldwide B2C e-commerce sales,

2013-2017
2.5 trillion (US$)
2.0
1.5
2.357
20.2%
18.3%
2.053
25.0%
20.0%
1.771
17.7%
15.9%
1.505
15.0%
14.8%
1.251
1.0
10.0%
0.5
5.0%
0.0
2013
2014
2015
2016
2017
0.0%
B2C ecommerce sales (US$ trillion)

% change
Source: eMarketer
Retail in general
Asia Pacific is the fastest-growing
region in terms of private financial
wealth
Statistics
GDP of the Asia Pacific to grow 4.34.5% in 2014-18
According to the Economist Intelligence Unit, GDP
of the Asia Pacific region amounted to US$22.3
trillion in 2012, contributing to over 35% of the
worlds total. See Exhibit 5. It will continue to
grow at a rate of 4.3-4.5% in the coming five
years (2014-18), higher than the global average
of 2.8-2.9%14.
Exhibit 5 | GDP and real GDP growth of selected
economies in Asia, 2012
China
GDP
(US$ billion)
8,384.3
Real GDP
growth (%)
7.7
Taiwan
475.3
1.5
Japan
South Korea
Thailand
Malaysia
Singapore
Asia & Australasia
5,939.1
1,129.6
366.0
304.7
276.5
22,308.3
1.4
2.0
6.5
5.6
1.3
4.0
Asia Pacific retail market to grow

4.7% in 2014
According to Euromonitor International15, growth
of retail market in the Asia Pacific region is
forecast to be about 4.7% in 2014, slightly higher
than that of 4.3% in 2013. Among the Asian
economies, China, which made up 41% of total
retail sales in the Asia Pacific region in 2013, is
projected to post stronger retail sales growth of
more than 8% in 2014.
Asia at a glance In the news
Asians are becoming more affluent. According to

the Boston Consulting Group, the private financial
wealth16 of the Asia Pacific region (excluding
Japan) reached US$37.0 trillion in 2013, up by
30.5% yoy, well above the global average of
14.6%. As the fastest-growing region, Asia Pacific
(excluding Japan) will contribute to over half of
the global private financial wealth growth by
201817.
Tourists from Asia Pacific to become

worlds top spenders by 2023
Spending by tourists from the Asia Pacific region
will reach nearly US$753 billion by 202318,
accounting for 40% of global tourist spending, up
from 25% in 2012, according to a report
commissioned by Amadeus, a Spain-based travel
technology firm. By then, the Asia Pacific region
will surpass Europe as the region whose tourists
spend the most money overseas.
Airport retail to boom in Asia
According to Verdict Retail, a retail consultancy

firm19, the Asia Pacific region will record the
fastest growth in retail sales at airports over the
next six years till 2019. The retail sales at airports
in the Asia Pacific region will double during the
period. Number of passengers in the region is set
to increase by 37.8% and the average spending
per passenger will rise from US$7.78 in 2013 to
US$11.37 by 201920.
Global retailers regional strategy in

Asia Pacific remains focused on
China
A survey conducted in 2013 by CBRE21, a leading

real estate services company, reveals that an
increasing number of global retailers are looking
for international growth. In the Asia Pacific
region, China is the most sought after market for
the surveyed retailers to open new outlets. 22%
of more than 130 surveyed retailers based in
Europe, the Americas and Asia are looking to
open new stores in China in 2014. Singapore,
Hong Kong and Vietnam are also retail hotspots in
Asia among those surveyed.
E-commerce
Department stores
Asia Pacific to become worlds

largest regional B2C e-commerce
market in 2014
M&S announces Asia expansion

plans
According to eMarketer, a research company

specialising in digital marketing, worldwide B2C
e-commerce sales will hit US$1.5 trillion this year,
with a yoy growth rate of 20.2%. Widening online
and mobile user bases in emerging markets
remain major contributors to the growth. By
region, the Asia Pacific will surpass North
America to become the worlds largest regional
B2C e-commerce market in 2014. Worldwide B2C
e-commerce sales are set to reach US$2.4 trillion
by 201722.
Mobile shopping set to boom in Asia
According to Euromonitor International, the

number of smartphone users in the Asia Pacific
region will increase from around 390 million in
2013 to almost 700 million by 201723. South
Korea and Australia have achieved the highest
smartphone penetration rates in the Asia Pacific
region - 69.7% and 61.2%, respectively in 201424.
Mobile shopping is clearly on the rise in the Asia
Pacific region and more retailers are optimizing
their websites for mobile devices so as to exploit
the potential of mobile commerce25.
Asia to drive growth of global FMCG

e-commerce
Kantar Worldpanel anticipates that global FMCG

e-commerce will reach US$53 billion by 2016, up
from US$36 billion at present. The consumer
research company says Asia will drive the growth
of FMCG e-commerce in the coming years with
South Korea taking the lead in terms of market
share. Taiwan and China will be the economies
registering highest growth rates in the forecast
period26.
British department store operator Marks &

Spencer (M&S) will add at least 30 stores in Asia
in 2014. Two of them will be located in Macau. It
is also considering expansions options into
Taiwan, Japan, Vietnam and Australia. M&S
currently operates over 140 stores across Asia
including Hong Kong, India, Singapore, South
Korea and Thailand27.
Aeon to expand in Asia
Japanese retail giant Aeon will spend 380 billion

yen to fund its expansion over the next three
years till 2016. Of which, 25% will be allocated to
the opening of new department stores and
shopping centres in China and Southeast Asia28.
Aeon opened its first store in Vietnam29 and
Cambodia30 in January 2014 and June 2014,
respectively. It also plans to expand its operation
in Vietnam to 20 stores by 202031.
Convenience stores
FamilyMart in rapid expansion in
Asia
Japan-based FamilyMart, the second largest
convenience store chain in the Asia Pacific region,
plans to rapidly roll out new outlets in both
domestic and overseas markets. In 2014,
FamilyMart will open 1,500 new outlets in Japan
and 1,000 overseas, including 300 in Thailand,
200-300 in China and 80 in Vietnam32.
Duty free shops

Dufry acquires Nuance
Dufry, a global travel retailer, has entered into an
agreement to acquire its rival Nuance for US$1.7
billion. Nuance is the worlds sixth largest duty
free retailer running a total of over 350 stores in
20 countries33. The deal helps Dufry expand its
presence in Asia and become the worlds largest
duty free retailer34. As of end June 2013, Dufry
operates more than 1,350 shops at airports,
cruise liners, seaports, and other touristic
locations in 48 countries35.
Accessories
Radley enters Asia
Radley, a British handbag brand, plans to expand
to Asia, Australia and the Middle East. The brand
will open a total of ten stores in the regions by
201536. The first shop in Asia was opened in June
2014 in Taiwan.
Apparel
Marimekko to continue Asia
expansion
Marimekko, a Finnish apparel company, plans to
open at least six new stores in Asia in 2014: two
in Japan, two in Hong Kong, one in mainland
China and the remaining one in South Korea. It
also plans to open five stores in Taiwan by the
end of 201837.
Antony Morato to further expand in

Asia
Italian fashion brand Antony Morato plans to
open 40 and 15 stores in China and Thailand by
2017. The brand is considering entering South
Korea, Indonesia and India in future38. Its sales
network currently covers over 50 countries in the
world39.
Beauty and personal care

Sephora to expand online presence
in Southeast Asia through ZALORA
Sephora, a French cosmetics brand, has partnered
with ZALORA, an online fashion retailer, to
distribute beauty products in Southeast Asia40.
The products are available on ZALORA Singapore
and ZALORA Malaysia earlier this year. It will
extend to ZALORA Thailand in mid 2014.
Nature Republic further expands in

Asia
Nature Republic, a South Korean cosmetics brand,

opened its first store in Hong Kong in January
2014. The company will add two to three stores
in the city within this year. Hong Kong acts as a
hub for its overseas expansion, especially China.
So far, the brand has established presence in 14
overseas markets including Japan and Malaysia. It
plans to roll out a flagship store in China within

this year41.
Consumer electronics
RadioShack expands its Asian
presence
RadioShack, an American technology products
retailer, opened two new concept stores in China
and Malaysia in early 2014. The company plans to
open at least another 15 stores over the next year
in key markets throughout Asia.
Food and beverage

The Cheesecake Factory to hit Asia
American restaurant chain The Cheesecake
Factory has partnered with Hong Kong-based
Maxims Caterers to enter Asia. They have agreed
to develop 14 restaurants over the next 10 years
in Hong Kong, Macau, Taiwan and mainland
China. They will consider expanding to Japan,
South Korea, Malaysia, Singapore and Thailand in
future. The first restaurant in Asia is expected to
open in the 2015 fiscal year42.
Famous Brands plans more Asian

stores
American company Famous Brands, parent

company of TCBY Yogurt and Mrs Fields Cookies,
is rapidly expanding its footprint in the Asia
Pacific region. It opened a flagship TCBY Yogurt
store in Shanghai in April 2014 and will add 20
stores over the next two years. Famous Brands
also plans to open an additional 25 stores in
Australia and Pakistan over the next two years43.
Ihop further expands in Asia
American restaurant chain Ihop plans to add 20

restaurants in the Philippines over the next five
years. It will enter Singapore, Malaysia, Thailand
and Vietnam later44. As of March 2014, the
company operates over 1,600 stores in different
countries such as the U.S., Canada, Mexico, the
Philippines, etc.45
With the second largest economy in the world,

Chinas GDP registered a real growth rate of 7.7%
year-on-year (yoy) in 201346, while the Chinese
government has set a target of 7.5% for the year
201447. The Economist Intelligence Unit predicts
that real GDP growth will moderate to about 6.0%
by 201848.
With the largest retail market in the Asia Pacific
region, Chinas retail sales stood at 23.8 trillion
yuan in 2013, recording a yoy nominal growth of
13.1%49. According to Euromonitor International,
the retail market will continue to grow at a
compound annual growth rate of 8.7%50 between
2013 and 2018.
The spending power of Chinese consumers is set
to increase. The Chinese government will seek to
double its per capita income of both urban and
rural households between 2010 and 202051. The
number of wealthy households and the size of
private financial wealth52 in China will also surge
in the coming years. According to the Boston
Consulting Group, the number of millionaire
households (in U.S. dollar terms) in China reached
2.4 million in 2013, up from 1.5 million in 2012.
Private financial wealth in China is expected to
almost double from US$22 trillion in 2013 to
US$40 trillion in 201853.
China is, in general, open to foreign investors.
They can set up wholly owned companies and
operate in those industries that are encouraged or
in which investment is permitted, as stipulated in
the Catalogue of Industries for Guiding Foreign
Investment54. Having said that, China is a highly
fragmented market. According to the China Chain
Store and Franchise Association, the top 100 retail
chains accounted for just 8.6% of total retail sales
in 201355. Although local players dominate in
terms of market share, foreign retailers are taking
the lead when it comes to operating efficiency and
gross profit margins.
Euromonitor International56 reports that
grocery retailers (such as convenience stores,
hypermarkets and supermarkets) in China
accounted for 37.7% of retail sales in 2013, grew
by 7.5% yoy. Among the grocery retailers,
convenience stores outperformed the others by
posting a yoy sales growth of 11.7%57. Nongrocery retailers (such as department stores and
China Overview
specialist retailers) beat grocery retailers in terms

of market share as well as growth rate. They
accounted for about 55.5% of Chinas retail sales
in 2013, with a yoy increase of 10.7%. Apparel
specialist retailers and leisure and personal goods
specialist retailers were the highest performers,
presenting yoy growth rates of 17.9% and 13.1%,
respectively58.
China has the largest online population in the
world. According to the China Internet Network
Information Centre, the number of online
shoppers totalled 302 million as from December
2013, accounting for 45.8% of the total Internet
population59. The transaction value of Chinas
online retail market reached 1,085 billion yuan in
2013, rising by 42.0% yoy60. The massive online
retail sales recorded on Chinas Singles Day on
November 11, 2013 is noteworthy. Sales on
Alibaba, the China Internet giant, shot up to 35
billion yuan that day, representing an increase of
83.4%, from 171 million total orders61.
The integration of online and physical channels
in China is gaining traction. More bricks-andmortar retailers are launching their online and
mobile platforms, while pure-click companies are
evolving from selling only online to building a
Chinas geographical position on the eastern

part of the Eurasian continent borders the
East China Sea, Korea Bay, Yellow Sea and
South China Sea. With a vast land mass of
9,600,000 square kilometres, the country
has a population of 1.36 billion. China ranks
second in the world, only after the U.S., in
terms of the size of its economy62.
physical presence. While many retailers focus on

integrating their online and offline channels,
omni-channel retailing, generally referred to as
O2O (online to offline) in China, is increasingly
being considered by some retailers: They hope to
provide a seamless shopping experience to
customers across different channels.
Despite the rapid development of the retail
sector, integrity remains an issue in China.
Commercial fraud, such as involving counterfeit
products, is a common occurance. It is imperative
for the government to provide a legal and
regulated business environment so as to boost
domestic consumption. The new consumer
protection law which came into effect in March
2014 is one of the initiatives launched to protect
consumers. Under the new law, coverage of
Chinas three warranties regime (whereby
business operators must repair, replace or accept
the return of goods) is extended, and unfair terms
imposed on consumers are abolished. The new
law has also been adapted for modern times by
including several provisions for e-commerce. For
instance, consumers can return products bought
online within seven days of purchase without
giving a reason.
E-commerce the most dynamic segment
Baidu, Alibaba and Tencent, also known as BAT,
are the best followed Internet giants in China.
Other major e-commerce players include JD.com,
Suning, Dangdang, VANCL and Amazon China,
among others.
Competition within Chinas e-commerce market
is extremely fierce. To survive, companies have to
enrich their product categories or service
offerings in order to capture a wider base of
consumers. For example, both Alibaba and
Tencent have created a mobile app for
smartphone users to locate and order a cab.
Companies also need to enhance infrastructure
such as logistics networks and payment systems.
Alipay, Alibabas online payment solution, serves
as a good example. As well as Taobao and Tmall,
Alibabas C2C and B2C marketplaces, there are
over 160,000 websites in China accepting Alipay,
making this the largest online payment solution
on the mainland63. Recently, Alipay extended its
territory overseas; Japan-based Rakuten and
South Korea-based Lotte.com, for instance, now
accept Alipay. In view of its success, Baidu has
introduced its Baidu Wallet while Tencent has
launched its WeChat payment system, aiming to
get on equal terms.
China Overview
Mergers and acquisitions have been increasingly

active in the sector, as a fast lane for companies to
create synergies or enter new businesses. For
instance, Tencent recently invested in Chinas top
restaurant review website Dazhong Dianping to
boost content for its social network apps
namely, WeChat and QQ. It also bought a minority
stake in another major e-commerce player,
JD.com, to promote the WeChat payment system.
Alibaba, on the other hand, recently bought a 50%
stake in a Chinese football club to further diverse
its business portfolio in the run-up to its IPO in
the U.S.
As described above, many Internet companies
have experienced exponential growth in their own
niche segments. Now they are making inroads into
finance. Besides payment solutions, they have
started to introduce other financial offerings such
as small loans and wealth management products
traditionally offered by banks. Since the financial
sector is among those highly regulated in China,
the rapid development of Internet finance has
attracted the central governments attention. In
March 2014, the Peoples Bank of China (PBOC)
blocked plans by Tencent and Alibaba to offer
virtual credit cards and mobile payments made by
scanning QR codes via smart devices. The move by
the PBOC is intended to regulate Internet finance
and protect consumers.
Exhibit 7 | Retail sales growth in China, Jun 2013 - May

2014
GDP growth slows to 18-month low

in 1Q14
11.5%
12.5%
Exhibit 6 | Real GDP growth of China, 1Q13-1Q14
Source: National Bureau of Statistics
Retail sales grow 12.5% yoy in May

2014
Retail sales in China rose 12.5% yoy to 2.13
trillion yuan in May 2014. The figures have been
picking up since the deep decline recorded in
January-February 2014. See Exhibit 7.
3.5%
3.0%
2.5%
3.1% 3.0%
2.7%
3.2% 2.5%
2.7% 2.6%
2.5%
2.4%
2.5%
2.0%
2.0%
1.8%
1.5%
1.0%
0.5%
0.0%
May-14
1Q2013 2Q2013 3Q2013 4Q2013 1Q2014
Apr-14
7.2%
Exhibit 8 | Consumer price index in China, Jun 2013 May 2014
Mar-14
7.3%
Feb-14
7.4%
Jan-14
7.4%
Dec-13
7.5%
Nov-13
7.5%
China's consumer price index rose 2.5% in May,

quickening from a 1.8% rise in April. Accelerated
increase in food prices is the major contributor to
the 4-month high figure64. See Exhibit 8.
Oct-13
7.6%
CPI rises 2.5% in May 2014
7.7%
Sep-13
7.7%
Aug-13
7.7%
7.8%
Jul-13
7.8%
Jun-13
7.9%
Jan-Feb 2014
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
10.5%
Jul-13
11.0%
12.8%
12.5%
11.8% 11.9%
Jun-13
Chinas economy grew 7.4% yoy in 1Q14. The 18month low reading indicates softening of the
Chinese economy See Exhibit 6.
12.0%
May-14
Statistics
13.0%
13.7%
13.6%
13.4%
13.3%
13.2% 13.3%
13.3%
Apr-14
13.5%
Mar-14
14.0%
China In the news
Consumer confidence index falls to

102.3 in May 2014
China consumer confidence index fell to 102.3 in
May, against the prior reading of 104.8, probably
due to lower expectations of future economic
growth prospects. See Exhibit 9.
Exhibit 9 | Consumer confidence index in China,
Jun 2013-May 2014
110.0
108.0
107.9
106.0
104.0
102.0
100.0
98.0
96.0
104.8
102.9
99.8
97.8
97.2
97.0
103.1
102.3
101.1
102.3
98.9
E-commerce
iResearch: total transaction of ecommerce reaches 9.9 trillion yuan
in 2013
According to iResearch, a leading market research
company in China, total transaction of Chinas ecommerce market, including online shopping,
B2B transactions and other transactions,
amounted to 9.9 trillion yuan in 2013, up by
21.3% yoy. Growth is expected to slow down in
the coming years and the total transaction is set
to reach 21.6 trillion yuan by 2017. Major growth
drivers include government support, robust
development of e-commerce companies and
rising penetration rate of online shopping65.
iResearch: total transaction of

online shopping up 42% in 2013
According to iResearch, Chinas spending on

online shopping grew 42% yoy to 1.85 trillion
yuan in 2013, making up 7.8% of total retail
spending in China. The company further predicts
China In the news
Tencent partners with ChinaAMC to

sell financial products on WeChat
Tencent, one of the leading Internet giants in

China, has teamed up with ChinaAMC, a fund
management firm, to sell financial products on
WeChat, Tencents mobile instant messaging app.
Tencent will use its online payment service
Tenpay to settle the transactions67.
Tencent invests HK$1.5 billion in

China South City
Tencent will spend HK$1.5 billion to acquire 9.9%

stake of China South City, a wholesale market in
southern China. It is expected that Tencent will
leverage China South Citys logistics and trading
network to compete with Alibaba. It will also
work with China South City to help small- and
medium-sized companies go online68.
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
90.0
Jul-13
92.0
Jun-13
94.0
that the size of total online shopping transaction

value in China will reach 4 trillion yuan by 201766.
WeChat targets U.S. users
Tencents WeChat, has teamed up with Google to

further expand in the American market through a
promotion campaign: Google users can win a
US$25 Restaurant.com gift card by getting five of
their Google contacts to join WeChat. The
promotion ends on 31 January, 201469.
Tencent buys a 15% stake in JD.com
Tencent has agreed to buy a 15% stake in JD.com,

another major e-commerce player in China.
Tencent pays US$214.7 million and transfers its
e-commerce businesses QQ Wanggou (a B2C
platform) and Paipai (a C2C marketplace), plus a
minority stake in Yixun (another e-commerce
unit) to JD.com. Tencent subscribed an additional
5% stake when JD.com listed on NASDAQ in May
201470.
Tencent buys a 20% stake in 58.com

Tencent has agreed to buy a roughly 20% in
58.com, a Beijing-based online company
providing local information on job postings and
rentals, for US$736 million. Its services will be
integrated into Tencent's platforms, allowing
users to, for example, find local merchants
through Tencent's social networks (e.g.
WeChat)71.
Alibaba and Tencent to enter

banking sector
China has launched a pilot scheme to establish
five privately-owned banks, a step to opening its
closely guarded banking sector to private
investors. A total of ten companies have been
selected as pioneers, including Alibaba and
Tencent. The first five banks, focusing on serving
small- and medium-sized businesses, will be
established in Tianjin, Shanghai, Zhejiang and
Guangdong. The operating schedule of the five
banks is not available yet72.
Alibaba starts US IPO process
Alibaba, the largest Internet company in China,

has kicked off the process for IPO in the U.S. to
raise US$1 billion73. Alibaba has revealed that it
will list on the New York Stock Exchange74. The
deal may surpass Facebooks US$16 billion-IPO in
2012.
Alibaba rolls out its first wealth

management product via Alipay
Alibabas Alipay, the largest third party payment

solution in China, rolled out its first wealth
management product on February 14, 2014.
According to Alipay, it offers investors an
annualized return of 7%, while their principal
also will be guaranteed75. The product, with the
maturity of one year, marks the continuing
proliferation and evolution of financial services
offered by the large Internet companies.
Alibaba invests US$15 million in

1stdibs
Alibaba has invested US$15 million in 1stdibs, an

American e-commerce player specializing in
luxury goods. The company hopes that Alibaba
can help them develop the Asian market in future.
1stdibs is an online marketplace with over 1,500
international dealers bringing antiques, vintage
furniture and design, fine art, jewelry, vintage
couture and fine homes76.
Alibaba launches 11 Main in the U.S.

Alibaba launched an online shopping platform in
the U.S., 11 Main, through its subsidiaries Vendio
and Auctive in May 2014. The 11 Main
(11main.com) site offers interesting, quality
products from hand-picked shop owners in
China In the news
nine key categories including fashion, jewelry and

hi-tech goods77.
Alibaba invests in TutorGroup
Alibaba, Temasek and Qiming Venture Partners

have invested nearly US$100 million in
TutorGroup, a leading online education platform
and largest English-language learning institution
in the world. The investment is an indication of
Alibaba's interest in the online education sector78.
Alibaba to buy 60% stake in

ChinaVision Media
Alibaba has agreed to buy a controlling stake

(60%) in ChinaVision Media for HK$6.24 billion,
giving it access to TV and movie content. Alibaba's
acquisition aims at retaining current users as well
as attracting new users. Alibaba launched Ali TV
operating system in July 2013 and plans to launch
a mobile gaming platform in 201479.
Alibaba invests in Intime Retail
Alibaba has agreed to invest HK$5.37 billion in a

Chinese department store operator, Intime Retail,
and form a joint venture to develop online-tooffline business in shopping malls, department
stores and supermarkets in China. Alibaba owns
about 80% of the venture, with Intime controlling
the rest80.
Alibaba invests in messaging app

Tango
Alibaba has invested US$215 million in Tango, a

mobile messaging company in China. The
investment gives Alibaba a minority stake in a
messaging business with 200 million registered
users and 70 million active users. It is believed
that, by acquiring Tango, Alibaba will be able to
improve the service offerings of its own mobile
messaging app, Laiwang81.
Alipay adds Rakuten to list of clients

Alipay has begun to offer payment services to
Chinese buyers at Japan's leading shopping
website Rakuten. Chinese buyers can place orders
on Rakuten and pay in Chinese yuan via Alipay as
the company cashes in on the growing demand to
purchase from overseas websites82.
Stripe and Alipay reach a deal

The American payment solution Stripe has
secured a deal with Alipay in a partnership that
opens up western businesses to Chinese
consumers83. From now on, Alipay users can
enter their email address and a six-digit SMS code
to buy things from companies that use Stripe to
process payments, rather than being bounced to
another site84.
Jack Ma and partners to pay US$1.05

billion for 20% Wasu Media
Jack Ma, founder and the major stakeholder of
Alibaba, and other partners will pay US$1.05
billion for a 20% stake in China's Wasu Media
(Wasu), a company that engages in the new media
and cable television business in China. Alibaba
and Wasu have signed a cooperation agreement
on online content and Internet TV85.
Alibaba to pay US$1.22 billion for

stake in Youku Tudou
Alibaba Group has agreed to buy a US$1.22 billion

stake in Chinese video website Youku Tudou. The
deal gives Alibaba access to Chinas biggest online
video operator and its customers86.
ShopRunner to partner with Alibaba

ShopRunner, an online shopping service platform
that offers members shopping deals from over
100 retailers in America, will be forming a
partnership with Alibaba at the end of 2014.
Under the partnership, more than 300 million
Alipay users will be able to order goods directly
from ShopRunners partners such as Neiman
Marcus and Toys R Us. With the help of
Alibaba's logistics capabilities, ShopRunners
products will be delivered to China in 10 days87.
Alibaba taps mobile search
Alibaba has teamed up with UCWeb, a Chinese

mobile browser service provider, and have
launched a new mobile search engine, Shenma, in
order to tap the huge population of smartphone
users in China88.
Alibaba signs deal with Australia

Post
Alibaba signed a deal with Australia Post in May

2014 to attract more Australian retailers to set up
stores on Tmall. Australia Post has launched its
China In the news
flagship store, auspost.tmall.hk, on Tmall selling

Australian products to Chinese consumers.
Australia Post also plans to provide tailor-made
logistics services to Australian retailers.
Consumers will be able to track shipping status of
the products through Australia Posts website89.
Alibaba agrees US$249 million deal

with Singapore Post
Alibaba and Singapore Post (SingPost),

Singapores major postal service provider,
entered into an agreement in May. Alibaba will
buy a 10.35% stake in SingPost for US$249
million. According to the agreement, Alibaba and
SingPost will create a joint venture (JV). The JV
will give Alibaba a quick route to SingPosts
logistics capabilities, infrastructure and delivery
networks globally. SingPost will be able to
leverage Alibaba's customer base to scale up its
regional e-commerce logistics operations90.
Alibaba buys 50% stake in

Guangzhou Evergrande Football
Club
Alibaba bought a 50% stake in Guangzhou

Evergrande, Chinas most successful soccer club,
for US$192 million in June 2014. According to
Jack Ma, the deal is part of Alibabas future
strategies in health and entertainment
industries91.
Alibaba to develop logistics network

with China Post
Alibaba will develop a logistics network with
China Post, China's dominant state-owned postal
carrier. Alibaba will integrate more than 100,000
China Posts post offices into its own logistics
system. Alibaba and China Post will also
collaborate on areas such as e-commerce, finance
and information security92.
Alipay ties up with Lotte.com
Alipay has teamed up with Lotte.com, a leading

South Korean online retailer. Chinese consumers
are able to pay in Chinese yuan for purchases via
Alipay from now on when shopping on Lotte.com.
Products will be shipped directly from South
Korea93.
Burberry teams up with Tmall

British luxury brand Burberry opened a virtual
storefront on Tmall in April 2014 to tap the
growing Chinese e-commerce market94. It is the
first international high-end luxury to open an
online store on Tmall. Products sold online are of
the same prices as those sold at physical stores95.
Muji opens on Tmall
Muji opened a Tmall store in June 2014. Although

it is running over 100 physical stores and has
launched its own e-commerce platform in April
last year, the company expects Tmall will help
them develop a better understanding of the
Chinese consumers, which is extremely important
for research and developing products and
promoting services in future96.
King Power debuts on Tmall
King Power, the largest duty free retailer in

Thailand, opened its online store on Tmall in June
2014. Currently, products such as food, cosmetics,
apparel, fashion accessories can be found at King
Powers Tmall store. The retailer plans to sell
travel packages later.
Zara to open store on Tmall
ZARA will open a flagship store on Tmall platform

this autumn or winter. This is the first time that
ZARA cooperates with a third party e-commerce
platform in China. Leveraging Tmall online store,
ZARA intends to penetrate into lower tier cities97.
Weibo debuts on NASDAQ
Sina Weibo, often described as Chinas version of

Twitter, debuted on NASDAQ in April 2014. The
company has raised a total of US$340 million.
Weibo reported revenues for 2013 of US$188
million, triple the level of 201298.
Suning launches investment service

Ling Qian Bao
Suning, Chinas leading retailer, launched the
companys first investment service in January
2014 through its e-payment affiliate, Yifubao. The
investment service, Ling Qian Bao, allows Yifubao
users to buy wealth management products99.
China In the news
Suning to enter supermarket

business
Suning plans to open 500 supermarkets in China's
first-tier cities and 1,000 across the country by
2020. Suning will leverage its online marketplace
Suning Yigou and its existing logistics
infrastructure to boost efficiency. The first
supermarket is set to open in Nanjing later this
year100.
Dangdang, Yihaodian join forces
The Chinese e-commerce company Dangdang has

partnered with Yihaodian, a B2C online grocery
retailer in China owned by Walmart. Dangdang
has opened a bookstore on Yihaodian, making its
books and media merchandise available to
Yihaodians customers; while Yihaodian has
opened a supermarket on Dangdang101.
JD.com raises US$1.8bn after pricing

US IPO
JD.com debuted on NASDAQ in May 2014. The
Chinese e-commerce firm has raised US$1.78
billion and the deal was considered to be the
biggest listing among all Chinese companies in the
U.S.102
Meituan considers US IPO
Meituan.com, a Chinese group discount website

backed by Alibaba, is considering an IPO in the
U.S. Meituan has partnered with about 400,000
merchants in China and is looking to expand to
300 cities in 2014. The online retailer may
acquire local websites that provide information
and discounts for karaoke, hotels, salons and
other service providers103.
Jumei files for US IPO
Chinas online cosmetics retailer Jumei debuted

on New York Stock Exchange in May 2014. The
Beijing-based firm raised a total of US$245.1
million. Jumei hopes to work with makeup
suppliers to offer tailored products to customers
that will pop up via smartphone notifications in
future104.
Vipshop invests in Ovation
Chinas online discount retailer Vipshop has

agreed to pay US$55.8 million to acquire a 23%
stake in Ovation Entertainment, whose business
is to develop cosmetics products under
proprietary brands and media products. The

strategic investment provides Vipshop access to a
consistent supply of Ovation branded cosmetics
products105.
Amazon injects US$20 million into

Yummy77
Amazon invested US$20 million in Yummy77, an

online grocery store based in Shanghai, in May
2014. Yummy77 has 1 million registered users as
of February 2014 and recorded total sales
exceeding 100 million yuan in December 2013.
The online grocer will use the capital to expand
into new markets and help Amazons China
site develop sales of fresh food106.
Tmall heads China top 100 retailers

According to the China National Commercial
Information Center of China (CNCIC), Tmall
ranked first among the Chinas Top 100 retailers
in 2013 in terms of turnover. Tmall surpassed
Suning for the first time and leapt to the first
place with a turnover of 347 billion yuan. In
addition to Tmall, another eight online retailers
entered the top 100 list, including
JD.com, Vipshop, Amazon China,
Dangdang, Yhd.com, Jumei and VANCL. Turnover
of the nine online retailers reached 573.3 billion
yuan, accounting for 20.7% of the total turnover
of the top 100 retailers, up from 6.2% in 2012107.
Weibo payment is open to all

merchants
Weibo payment was open to all merchants

starting end June. Previously, Weibo payment was
only open to Taobaos and Tmalls merchants.
From now on, all merchants, as long as they have
a Weibo account, are able to accept Weibo
payment108.
Baidu enters Chinas online

payment market
In view of the success of its competitors payment

solutions, Baidu, the Chinese search engine giant,
launched a third party payment solution, Baidu
Wallet, in April 2014. Baidu Wallet focuses on
payments made with mobile devices109.
Dianping considers US IPO
Dianping.com, a Tencent-backed website for

group buying and restaurant and entertainment
China In the news
reviews, is planning to file an IPO in the U.S. in

2014. It aims to raise about US$200 million110.
Yiwu launches online marketplace

in Hungary
Yiwus China Commodity City, the leading
wholesale market in China selling small
commodities, launched a Hungarian website
hu.yiwubuy.com in June 2014. The website allows
customers to place orders in English and
Hungarian. Suppliers and buyers communicate
directly with wholesalers via the online
platform111.
Department stores
Sanpower takes control of House of
Fraser
Chinas Sanpower Group, which controls
companies in a range of sectors including retail,
has agreed to buy 89% of Britain's department
store, House of Fraser. The group will bring
House of Fraser to China and introduce more
British and international brands in China. More
Chinese brands are expected to be sold at House
of Fraser in the U.K. in the future as well112.
Sanpower buys bankrupt

Brookstone
Chinese investment firm Sailing Capital and

Sanpower teamed up to buy Brookstone for more
than US$173 million at a bankruptcy auction in
June 2014113. Sailing Capital and Sanpower will
help Brookstone penetrate the China and U.K.
markets. Brookstone is an innovative product
development company and multichannel lifestyle
retailer, operating approximately 240 stores in
the U. S. and Puerto Rico114.
Marks & Spencer seeks partnerships

to drive growth in China
According to Marks & Spencer (M&S)s newly
released expansion plan, China is considered to
be one of the five important international markets
for M&S. It currently has 15 self-owned stores in
Shanghai. M&S is now evaluating the existing
store structure and will continue to focus on
flagship stores and stores at profitable locations.
The company also plans to open new flagship
stores through local partnerships. Potential sites

include Beijing and Guangzhou115.
Ito Yokado shuts down Beijing store

Japanese retailer Ito Yokado shut down its Beijing
store in April 2014 after an eight-year operation.
The company says the closure was due to its
unsatisfactory performance triggered by
increasing competition from online retailers116.
COSCIA Department Store opens

first store in China
COSCIA, Italys luxury department store brand,

opened its first store in China in June. The store,
located in Shenzhen, has its own buyers to build a
collection of merchandise. The store provides
various services such as designated fitting room
for their VIPs. COSCIA plans to open 5-10 stores
in China over the coming five years117.
Shopping malls
Ikea opens its first shopping mall in
China
Ikea opened its first shopping mall in Wuxi in
June 2014; two more malls will follow in Beijing
and Wuhan in 2015. IKEA furniture store is one of
the anchors of the Wuxi shopping mall. Other
anchors include Auchan hypermarket, Jinyi
Cinema, Suning Electronics, etc. Located in
suburbs, lower rentals and more space are
expected118.
Value Retail opens its first luxury

outlet shopping centre in China
British-based Value Retail opened its first luxury

outlet shopping centre in Suzhou in May 2014.
With an area of 35,000 square metres, the new
luxury outlet shopping centre features over 100
stores, cafes and restaurants119.
CBRE: Global retailers stay focused

on China
According to a report published by CBRE in May,

global retailers expanding into Asia Pacific
continue to regard China as their priority market
for new store openings. CBRE found that 64% of
global retailers surveyed planned to open a new
store in China in 2014. That was almost twice the
China In the news
proportion intending to open stores in Vietnam,

Hong Kong and Singapore, all of which ranked
equal second, with a vote of 33%120.
Supermarkets
METRO Cash & Carry to expand in
China
METRO Cash & Carry, an international selfservice wholesaler, plans to open two to three
new stores in China by the end of 2014 to meet
the growing demand from small- and mediumsized businesses and caterers121.
Walmart to open 30 new stores in

China in 2014
Walmart will add around 30 stores in China in

2014 as part of the company's three-year
expansion plan. It also plans to invest around 580
million yuan to renovate about 55 existing stores
in 2014 to enhance store operations and optimize
customer experience122.
JV between CRE and Tesco receives

green light
The Chinese authorities approved a joint venture

(JV) formed between the state-owned China
Resources Enterprise (CRE) and the British
retailer Tesco in May. CRE owns 80% of the JV
and Tesco holds the remaining 20%. The JV
combines Tesco's 131 outlets with CRE's almost
3,000 supermarkets in China, making it the
largest food retailer in China123.
Aeon ramps up China expansion
Aeon plans to add 15 shopping centres in China

by 2016. The Japanese retailer already operates
20 shopping centres in the country. Aeon
announces that it will open 50 new supermarkets
in China by 2016124.
Convenience stores
Chinas first City Convenience Store
Index released
The China Chain Store and Franchise Association
released the first China City Convenience Store
Index in April 2014. A total of 26 cities were
selected and the index ranked the cities based on

growth rate, opening hours, saturation of the
convenience stores (CVS) and policy support
given to them. Shenzhen, Dongguan, Taiyuan rank
the top three among the selected cities. There are
176 CVS brands in the selected cities and
Shenzhen, Shanghai, Nanjing and Dongguan see
the fiercest competition as there are more than
10 CVS brands in each of the four cities. The
survey also indicates that CVS has become the
fastest growing retail format in China125.
SF Express to add 30,000 O2O stores
SF Express, a leading express courier company in

China, plans to open 30,000 O2O (online-tooffline) stores focusing on the CBD area and
residential area this year. Consumers can pick up
their parcels at the stores; they can also shop at
SF Express online store via tablets provided at the
stores. Virtual shopping walls can also be found at
the stores126.
FamilyMart to open 200 new stores

in China
Japanese convenience store chain operator

FamilyMart will open at least 200 new stores in
China in 2014. FamilyMart aims to enter one or
two new cities each year over the next few years.
It also plans to renovate its existing stores to
attract more foot traffic127.
Apparel
Marisfrolg buys Krizia
Marisfrolg, an apparel retailer based in Shenzhen,
has acquired Krizia, one of Italy's oldest ready-towear fashion brands. Marisfrolg plans to open
flagship stores in cities such as Beijing, Shanghai,
Chengdu, Guangzhou and Shenzhen over the next
five years128.
Cache-Cache goes online in China
Cache-Cache, a French apparel company, plans to

launch its own e-commerce platform in China.
The company is already selling products online in
China through Tmall as well as its 850 bricks-andmortar stores129.
China In the news
Oroton to add 30 stores in China

Australian fashion accessories retailer Oroton is
seeking a partner to open up to 30 stores in China
over the next three to five years. The retailer
entered China in October 2013, with a store in
Shanghai130.
A&F in rapid Chinese expansion
American clothing retailer Abercrombie & Fitch

plans to aggressively expand its presence in
China. The company plans to open more than 100
stores over the next 10 years in China. It will also
launch its online store within 2014131.
Pringle enters China
Scottish knitwear maker Pringle is expanding into

China. It opened its first store in Chengdu in April
2014. The brand aims to open up to 20 stores
within three to five years132.
Old Navy enters China
American apparel retailer Gap launched its first

Old Navy store in Shanghai in April 2014 and
plans to add five more stores within 2014. Old
Navys e-commerce website was also launched on
the same day. Gap currently has 81 Gap stores in
China and plans to open 30 more in 2014133.
H&M eyes Chinas smaller cities
Swedish fashion retailer H&M plans to open

between 80 to 90 stores across China in 2014,
mostly located in lower tier cities. According to
H&M, increasing competition in Chinas top tier
cities has prompted the company to move to
smaller cities for growth134.
Ann Demeulemeester debuts in

China
Belgian fashion designer Ann Demeulemeester

has opened its first store in Shanghai. The store is
operated by I.T., a Hong Kong-based fashion
retailer. Shanghai is Ann Demeulemeesters
fourth market in Asia after Hong Kong, South
Korea and Japan135.
Antony Morato to enter China

market
Italian menswear brand Antony Morato plans to

open 40 stores in China by 2017. The first store is
scheduled to open in Shanghai in September
2014. The China presence is an integral part of
the brands plan to boost visibility in the Far

East136.
Peine Group teams up with

Shandong Ruyi
European fashion brand Peine Group has teamed

up with Ruyi137, one of the largest Chinese mens
clothing groups, to launch Barutti and
Masterhand in Asian markets. The two companies
will also cooperate in strategic acquisitions in
Europe.
Giordano eyes 1,000 new stores

under new brand in five years
Giordano, a Hong Kong-based apparel retailer,

plans to open 1,000 new stores in China under a
new brand name, Beau Monde (BM), focusing on
the affordable fashion market. The first BM store
was opened in Shenzhen in May 2014. There are
no cashiers at BM stores. Shop assistants check
out customers items via their smartphones, while
receipts are printed out via Bluetooth
transmission138.
South Korean apparel company MK Trend plans

to set up about 20 stores in China by end 2014.
The company will sell sports fashion with US NBA
team characters and images139 in major Chinese
department stores and shopping malls140. The
company plans to increase the number of shops
to 80 by 2016. The company also seeks to
introduce its own labels such as TBJ, Andrew, and
Buckaroo later on141.

Jo Malone London enters China
Jo Malone London, an international perfume and
cosmetics retailer, has launched Jo Malone
London brand in China at the Mitsukoshi store in
Beijing. The brand expects to add two more stores
in Shanghai and Beijing in 2014142.
Estee Lauder opens on Tmall
Estee Lauder, the international beauty giant,

launched their official online shop on Tmall in
May 2014. The total sales reached about 3 million
yuan on its first day of operation, exceeding the
monthly sales achieved by an offline store143.
China In the news
Yosen enters the U.S.
Yosen, China's leading wholesale distributor and
retailer of 3C merchandise, opened its first store
in New York in March. As a start, the store offers
only building supplies. It will add more categories
in future144.
Best Buy considers sale of China

business
American consumer electronics retailer Best Buy

is reportedly looking at a sale of or partnership
for its business in China due to declining of sales.
It currently runs about 190 locations in China
under the names Five Star and Best Buy Mobile145.
Food and beverage

Costa Coffee to make China its
second home
Costa Coffee, a British coffee house company,
plans to add 400 stores in China and hopes to
bring the number to 700 by 2017146. The coffee
chain now operates over 1,755 shops and 3,000
Costa Express machines in 30 countries147.
Caffe Bene in China expansion
Korean cafe brand Caffe Bene plans to rapidly

expand its presence in China with several outlet
openings in the pipeline. The coffee company
targets 1,000 outlets in China in 2014 and 3,000
by 2015. Flagship stores are planned for cities
such as Beijing, Shanghai, Shenzhen, Wuhan and
Chongqing148.
Mister Pizza to expand in China
Mister Pizza, South Koreas largest pizza brand,

plans to expedite its expansion in China149. Mister
Pizza proposes to add 70 outlets this year on top
of the current 30. The pizza chain has also
partnered with Golden Eagle Group, a leading
Chinese property developer and operator, to
operate restaurants in Golden Eagle Department
Stores.
Bright Food buys a controlling stake

of Tnuva
Bright Food, one of the leading Chinese food and
beverage companies, signed an agreement to buy
56% of Tnuva, Israel's largest food company in
May 2014. The deal gives Bright Food a broader
range of high quality products to bring into
China150.
PizzaExpress debuts in China
PizzaExpress, a London-based Pizza chain,

opened its first outlet in China in June 2014. The
company is currently looking for new restaurant
sites and hopes to open a second restaurant in
Beijing soon151.
Luxury
BCG: China riches fuel Asia
According to a report published by Boston
Consulting Group (BCG) in June, the affluent
Chinese make Asia the fastest growing region for
number of wealthy households in 2013. BCG adds
that China has leapfrogged Germany and Japan in
the past five years to become the second, only
after the U.S., in terms of private financial wealth.
BCG predicts that total amount of private financial
wealth in China will increase from US$22 trillion
in 2013 by more than 80% to US$40 trillion in
2018155.
Caf De La Don Manuel to enter

China
DTS8 Coffee Company, an American coffee roaster

and wholesaler, will open new coffee shops in
China under the name Caf De La Don Manuel.
The first coffee shop is scheduled to debut in
Shanghai by September 2014. The coffee
company seeks to add five more stores by
1Q15152.
Orange Leaf Frozen Yogurt to

expand into China
Orange Leaf Frozen Yogurt (Orange Leaf), one of

America's fastest-growing frozen yogurt concept
stores, will launch its first two stores in Shanghai
in 2014. Orange Leaf seeks to add 100 stores
across China, Hong Kong, Taiwan and Macau in
the coming years153.
FMCG
China fines Johnson & Johnson and

others for price fixing
According to the National Development and
Reform Commission (NDRC), Johnson & Johnson,
Bausch & Lomb and other major producers were
fined more than 19 million yuan for price fixing in
China's eye wear market in June 2014. NDRC
found that the companies required their
distributors to sell at fixed prices154.
China In the news
Thanks to Abenomics156, which adopts a mix of

fiscal stimulus, monetary easing and structural
reform as advocated by Japanese Prime Minister
Shinzo Abe to boost the economy, Japan has
undergone moderate economic recovery since
2013. The countrys real GDP growth in 2013 was
1.5%, up from 1.4% the previous year157. The
Economist Intelligence Unit predicts that Japan
will maintain an average real GDP growth rate of
about 1.4% until 2018. Tokyo winning the 2020
Olympic Games is set to boost the confidence in
the positive outlook for the country. Sectors such
as construction, transportation and consumer
spending are likely the major beneficiaries158.
The spending power of Japanese consumers will
continue to rise as personal disposable income is
expected to grow from US$3.0 trillion in 2013 to
US$3.2 trillion159 in 2017, with a compound
annual growth rate (CAGR) of 2.0%160.
With the second largest retail market in Asia
after China, Japans retail sales stood at about
107.6 trillion yen in 2013161. According to
Euromonitor International, Japans retail sales will
increase to 108.4 trillion yen by 2018, with a
CAGR of 0.2%162. Despite flat growth, relatively
high incomes and strong demand for high-end
goods will continue to guarantee Japan has one of
the highest levels of retail spending in Asia.
Having said that, Japan remains a difficult
market for foreign investors to penetrate. Major
reasons for this include restricted growth
opportunities in view of its mature market status
and the discerning approach taken by Japanese
consumers. Increasing operating costs have posed
another challenge to retailers in Japan. For
instance, mounting rental costs in prime retail
sites have put tremendous pressure on retailers.
Also, importing raw materials is much more
expensive today due to the depreciation of yen
over the last couple of years.
According to the Statistics Bureau of Japan, as of
1 February 2014, Japanese people aged 65 or
above accounted for 25.4%163 of the total
population. This ageing population presents a
specific market segment for retailers and they are
developing products or services tailor made for
the special needs of senior citizens. For instance,
some retailers have increased healthy menu
Japan Overview
options for the elderly. Others offer home delivery

services aiming to serve older customers who are
losing their physical strength.
Railway station shopping facilities, which
emerged from over a decade ago, are one of the
special features in Japans retail landscape. Tailor
made for the hectic pace of living of Japanese, the
abundance of various kinds of shops in major
stations help commuters turn unproductive
waiting time into enjoyable shopping time.
Aeon and Seven & I are the most prominent,
well-established local retailers in Japan, with
thousands of retail outlets in various formats at
home and abroad. According to Deloittes study in
January 2014164, Aeon and Seven & I ranked 13th
and 16th respectively in 2012 among global
retailers in terms of sales.
The three largest convenience store chains in
the Asia Pacific are Japanese companies, namely,
Seven Eleven, Family Mart and Lawson. Seven
Eleven, Family Mart and Lawson now manage
52,811165, 23,622166 and 12,363167 convenience
stores at home and abroad respectively.
Uniqlo, controlled by the Fast Retailing Group, is
an internationally-recognised Japanese brand
known for its fast fashion form of presentation
and distribution and is achieving huge success in
both domestic and international markets. By
Japans island chain in eastern Asia stretches

from the North Pacific Ocean to the Sea of
Japan with a population of about 127 million
covering 377,000 square kilometres. With the
largest developed market in Asia, Japan ranks
third globally for the size of its economy168.
August 2013, Uniqlo had 1,229 retail stores169

globally. Uniqlos global sales reached 637.5
billion yen in the first half of FY2014170.
Consumption tax hike slowing retail sales

growth?
To reduce huge public debt and bolster economic
growth, the Japanese government increased the
consumption tax rate from 5% to 8% on 1 April,
2014. This is the second rise since the
introduction of the tax in 1989; the first was in
1997, from 3% to 5%.
According to the Ministry of Economy, Trade
and Industry, retail sales in March 2014 reached
13,733 billion yen, with a year-on-year (yoy)
growth rate of 11.0%. The record-high increase
was largely due to a last-minute shopping rush
before the tax increase in April. By retail format,
department store sales in March 2014 surged
25% yoy. Sales for supermarkets and convenience
stores also recorded significant increases of 9.8%
and 7.6%, respectively. Consumers tended to
purchase big-ticket items before the tax hike,
including electrical appliances sold by department
stores and this was probably the reason why
department store sales recorded a larger increase
than those of other retail formats.
As a result of the sales tax hike, retail sales in
April 2014 slid to 11,011 billion yen, representing
a yoy decline of 4.4%. Meanwhile, the CPI surged
to 102.8 in April 2014, or 3.4% yoy, thanks to
higher retail prices.
Facing the tax hike, some retailers such as
convenience store operators have passed the cost
increase on with retail prices. Other retailers
affected, who cannot pass such costs to
consumers, are adopting various alternative
measures to boost sales. For instance, some retail
chains have increased their range of private label
products; consumers were expected to scale back
expenses and turn to lower-priced products in the
private label category. This is not believed to be a
negative strategy by retailers as they can enjoy
larger gross margins via these private label
products.
Barclays Bank predicts that the drop in retail
sales is likely to be temporary, with the market
picking up over the summer when Japanese
incomes are expected to improve171. According to
the latest survey conducted by Reuters between
25 April, 2014 and 12 May, 2014, 37% of
surveyed companies said they were willing to
raise workers income levels as a result of
Abenomics. Some 63% of respondents in the same
Japan Overview
survey expected Japans retail sales to rebound by

the end of 2014172.
Nonetheless, the Japanese government has
announced that a further tax increase to 10% will
come into effect in October 2015. The new tax
hike will likely put the market to the test again.
Exhibit 11 | Consumer price index in Japan, Jun 2013 May 2014

4.0%
3.5%
3.0%
Exhibit 10 |Real GDP growth of Japan, 1Q13-1Q14
1.4%
1.2%
1.5%
1.2%
0.9%
1.0%
0.2%
0.0%
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Source: Statistics Bureau of Japan
Retail sales drop in May 2014

Japans retail sales fell by 0.4% yoy in May 2014,
marking the second drop since April. The retail
market is picking up since drop in sales is less
steep when comparing to 4.3% in April175.
See Exhibit 12.
11.0
1Q2013 2Q2013 3Q2013 4Q2013 1Q2014
Source: Ministry of Economy, Trade and Industry of Japan
Consumer price index in April 2014

rises to 23-year high
Japan's consumer price index rose by 3.4% yoy in
May 2014 ( See Exhibit 11). It was higher than
the 3.2% increase in April and is the fastest since
April 1982, as an increase in the national sales tax
continued to boost prices174.
12,000
10,000
8,000
6,000
4,000
2,000
8.0
3.0
1.6
12.0
10.0
14,000
0.1%
Japan In the news
0.0%
16,000 billion yen
0.3%
0.4%
0.5%
Exhibit 12 | Total retail sales in Japan, Jun 2013 May

2014
0.8%
0.6%
1.0%
1.1
-0.3
4.1
2.4
4.4
2.5
3.6
-4.3
6.0
4.0
2.0
-0.4 0.0
-2.0
-4.0
-6.0
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
1.6%
1.5%
Aug-13
Japans real GDP grew by 1.5% in 1Q14 quarteron-quarter (qoq), up from 0.1% in 4Q13 ( See
Exhibit 10). The satisfactory performance was
partly fueled by rush spending ahead of sales tax
increase in April 2014 by the Japanese consumers
and rising business investment in light of the
positive prospects for future economic growth in
Japan173.
2.0%
Jul-13
GDP growth registers 1.5% in 1Q14
2.5%
Jun-13
Statistics
Total retail sales
yoy change %
Source: Ministry of Economy, Trade and Industry of Japan
Consumer confidence index in April

2014 drops to the lowest level since
August 2011
Japans consumer confidence index fell further to
37.0 in April 2014, the lowest level since August
2011, largely due to the increase in sales tax on 1
April. See Exhibit 13.
Exhibit 13 | Consumer confidence index in Japan, May
2013- Apr 2014
Rakuten opened a caf in Tokyo in May 2014. The

caf is an offline extension of Rakuten's expansive
suite of Internet services. The caf offers popular
desserts, snacks and drinks, which are also
available in Rakutens online store. Customers are
able to pay for dishes using a range of Rakuten
payment methods including Rakuten Edy, the
companys contactless payment technology. A
concierge is also on duty at all times, ready to
answer any questions customers might have
about Rakuten services. Kobo eReaders, an ebook reader, are also available for free in the
caf178.
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Aug-13
Jul-13
Jun-13
Sep-13
Rakuten launches credit card

service in the U.S.
May-13
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Rakuten opens a caf in Tokyo
Source: Cabinet Office of Japan
E-commerce
Rakuten acquires Viber
Japan's leading e-commerce company Rakuten
acquired Viber, an instant messaging voice-overInternet Protocol application in March 2014.
Rakuten paid US$900 million for the mobile
application, which offers free calls and text
messages from a mobile phone. The deal would
more than double the number of users in
Rakutens digital empire, boosting its presence in
digital content and services176.
Rakuten ties with Alipay
Rakuten teams up with Alipay, the leading online

payment solution in China. About 250 shops
under Rakuten Global Market, the international
shopping service platform operated by Rakuten,
started accepting Alipay in April 2014. About
10,000 of the shops will eventually accept Alipay
in future177.
Japan In the news
Rakuten expands its international reach by

partnering with First National Bank of Omaha to
launch its first credit card in the U.S. The initiative
is the first banking move outside home for the
company and aligns to its strategy to expand its
financial services worldwide179.
Rakuten Wuaki and Microsoft link

on app
Wuaki.tv, the movie and TV streaming platform

owned by Rakuten, partners with Microsoft on a
new dedicated app for Windows 8.1. At present,
the service is only available in the U.K., Spain and
Andorra. The service is offered either as
unlimited streaming at a monthly subscription or
as an option to rent and purchase digital titles
individually180.
Yahoo Japan accepts Alipay as a

payment option
Yahoo Japan started to accept Alipay in June

2014. Chinese consumers now can pay by Alipay
through Buyee, a Japanese buying and bidding
service that provides shipping and transaction
services for overseas Yahoo Japan users, when
they purchase products from Yahoo Japan.
Beforehand, payment options were limited to
credit cards and PayPal, a U.S. electronic payment
solution, only. By adding Alipay, which is widely
used in China, Yahoo hopes to expand sales by
making it easier for Chinese consumers to shop
and pay online181.
MasterCard adds Japan online

payment option
WebMoney, a Japan-based company engaging in
electronic money business, has partnered with
MasterCard and Credit Saison to launch its first
MasterCard-branded prepaid card in Japan. The
prepaid card, WebMoneyCard, can be used both
online and at physical merchants that accept
WebMoney or MasterCard payment cards182.
Muji opens on Tmall
Muji opened a Tmall store in June 2014. Although

it is running over 100 physical stores and has
launched its own e-commerce platform on its
website in April last year, the company expects
Tmall will help them develop a better
understanding towards the Chinese consumers,
which is extremely important for research and
developing products and promoting services in
future183.
Department stores
H2O Retailing to acquire an udon
chain
H2O Retailing, parent company of Hankyu
Department Store and Hanshin Department Store,
agreed to acquire a 26.56% stake in Kazokutei,
Japans famous udon restaurant company for 1.5
billion yen in May 2014. The deal is expected to
close in August 2014184.
Aeons fresh expansion spree
Japanese retail giant Aeon will spend 380 billion

yen to fund its expansion over the next three
years till 2016. Of which, 25% will be allocated to
the opening of new stores and shopping centres
in China and Southeast Asia185. Aeon opened its
first store in Vietnam186 and Cambodia187 in
January 2014 and June 2014, respectively. It also
plans to expand its operation in Vietnam to 20
stores by 2020188.
to expand the dog nursing facilities nationwide in

future189.
Supermarkets
Supermarket sales mark the first
rise in 17 years
According to the Japan Chain Stores Association,
Japan's supermarket sales in fiscal year 2013
grew by 0.8% yoy, the first increase in 17 years.
The rare increase is reportedly contributed by the
recovery in consumption under the government's
economic stimulus programs and the surge in
purchases before the sales tax hike in April
2014190.
Convenience stores
FamilyMart cooperates with
agricultural cooperatives
FamilyMart, the second largest convenience store
chain in the Asia Pacific, is developing business
ties with companies in other sectors. In June
2014, the convenience store operator and the
National Federation of Agricultural Cooperative
Associations (Zen-Noh) have announced a new
agreement to jointly run stores in Japan. The
companies aim to open about 30 such stores over
the next three years. The first joint outlet will
open in Ehime Prefecture. The store will have a
special section featuring locally produced fresh
foods as well as a dining area191.
FamilyMart in rapid expansion
FamilyMart plans to rapidly roll out new outlets

in both domestic and overseas markets. In 2014,
FamilyMart will open 1,500 new outlets in Japan
and 1,000 overseas, including 300 in Thailand,
200-300 in China and 80 in Vietnam192.
Aeon introduces dog care home at

shopping mall
Aeon is introducing the first care home for elderly

dogs in the shopping mall in the city of Chiba.
There are also gym and swimming pool for pets in
the mall. It's the first entry by a major retailer into
the pet nursing care business. Aeon says it hopes
Japan In the news
FamilyMart exits South Korea

FamilyMart exited South Korea in May 2014. The
company entered South Korea in 1990 through a
franchise licensing agreement with Bokwang
Group, owner of South Koreans largest
convenience store chain (CU convenience store)
193. The split is reportedly to be part of the
Japanese chains announced plans to focus on
Southeast Asia194.
Seven & I teams up with West Japan

Railway
Seven & I, the world's biggest convenience store

operator, has partnered with West Japan Railway
to convert 500 convenience stores and
newsstands into 7-Eleven stores. The existing 500
stores, including 200 kiosks, in western Japan will
be rebranded to 7-Eleven stores. The conversion
commenced in June 2014 and will finish in five
years195.
7-Eleven unveils expansion plans at

home
Seven & I plans to open a record high of 1,600

new convenience stores in Japan in the fiscal year
ending February 2015. Despite years of deflation
and the recent sales tax hike, the company still
expresses confidence in the outlook and states
that they will continue to develop new products
and offer more value-added services196.
7-Eleven to enter Dubai
Seven & I plans to open 100 convenience stores in

the United Arab Emirates by 2017. The first one is
scheduled to open in Dubai in 2015 summer. The
opening will mark the companys expansion into
the Middle East region197.
Lawson to enter the Philippines
Lawson will form a joint venture (JV) with the

Philippines-based retail company Puregold to
open convenience stores in the Philippines.
Puregold owns a 70% stake in the JV while
Lawson holds the remaining 30%. The target is to
build a network of 500 stores by 2020198 and
2,000 stores in a longer term. This is the third
overseas market in Southeast Asia for Lawson
after Indonesia and Thailand199.
Japan In the news
Apparel
Fast Retailing debuts on Hong Kong
Stock Exchange
Fast Retailing listed in Hong Kong in February
2014. The listing aimed at raising its profile
in China where it plans to expand aggressively as
part of its bid to become the world's top apparel
company by 2020. With sales of 1.143 trillion yen
in 2013, Fast Retailing is the fourth largest
apparel retailer in the world, only after Inditex,
H&M and Gap.200
Fast Retailing to take GU to Taiwan
Fast Retailings GU is to enter Taiwan with two

new stores in Taipei this autumn. Taiwan will be
GUs second overseas market, after the debut in
China in 2013. The Japanese retailer regards
Taiwan as a springboard to expand to other Asian
countries in future201. The brand also plans to
enter the U.S. and Europe within several years202.
Uniqlo enters Germany
Uniqlo opened its first shop in Germany in April

2014. Located in one of Berlin's popular shopping
districts, the new store is Uniqlo's largest one in
Europe203. As a global flagship store, the Berlin
store features high-tech installations such as
monitors, LED tickers and revolving mannequins.
Uniqlo to enter Indian market
Uniqlo plans to open up to 1,000 stores across

India within 10 years. The company will also
source garments in India. The Indian expansion
plan forms an integral part of the companys plan
to be the largest apparel retailer in the world by
2020204.

Shiseido sells Carita and Declor to
L'Oreal
Japanese beauty giant Shiseido agreed to sell its
Carita and Declor to L'Oreal for 227.5 million
euro205 in February 2014. Both Carita and Declor
are European brands offering skin, body and hair
care, and beauty treatments products. The deal is
expected to close in the near future, subject to
regulatory approvals206.
Kose acquires Tarte

Japan-based beauty company Kos signed an
agreement in March 2014, to acquire Tarte, a New
York-based color cosmetics and skin care brand
specialising in products based on naturally
derived ingredients. By acquiring Tarte, Kos
plans to heighten its stature in North America
while continuing to expand its overseas
operations and increase new sales channels and
customers207.
Sony to enter real estate business
Sony is to branch out into the real-estate business
in August 2014. It also plans to take the unit
public in three years208. The company recently set
up a real-estate unit in Tokyo, with an aim of
generating annual sales of 50 billion yen in five
years. The unit will provide individuals
brokerage services, as well as real estate assets
management209.
Food and beverage

Asahi acquires Etika Dairies
Asahi, Japans leading brewery and soft drink
company, has agreed to acquire Malaysia's Etika
Dairies, Malaysia's second largest dairy company,
for US$329 million210 by June 2014211. Asahi
intends to develop dairy-based products as it
expects the growth of such products in Malaysia
and other Southeast Asian countries will be stable
in the coming years. Asahi will also tap the sales
channels of Etika Dairies to boost sales of soft
drinks in such markets as Vietnam and
Indonesia212.
Doc Popcorn enters Japan
Doc Popcorn, one of the biggest popcorn retailers

in the world, opened its first store in Japan on 31
May, 2014. It plans to open at least one new outlet
every year in the next 10 years. Its Japanese
partner, FS Planning, with a strong track record in
the restaurant industry, has been managing
various gourmet brands successfully in Japan
including Maxim de Paris, Vieille Vigne, Cote de
Rouge, Dominique Saibron and Radish Boy213.
Japan In the news
Recovering from the global downturn, South

Koreas economy is expected to show real GDP
growth advancing gradually from 2.8% in 2013 to
4.1% in 2017. South Koreans spending power is
set to increase in coming years, with personal
disposable income estimated to rise steadily from
US$686.7 billion in 2013 to US$916.0 billion in
2017214.
South Korea is the fifth largest retail market in
Asia, after China, Japan, India and Indonesia.
According to Euromonitor International, the
countrys retail sales reached 233.8 trillion won in
2013. Retail sales are expected to increase further
to 246.8 trillion won by 2018, with a compound
annual growth rate (CAGR) of 1.1%215.
Foreign direct investment is encouraged yet
foreign players are seldom in the leading retail
positions, with only a few exceptions such as
apparel specialist retailers. The success of local
retailers is largely due to a better understanding
of domestic tastes and established dominant
positions216.
The best-established local retailers in the
country are Lotte Shopping, Shinsegae and
Hyundai the so-called Big Three. According to
results announcements, revenues registered for
the three giants in 2013 were 28.2 trillion won217,
2.4 trillion won218 and 1.5 trillion won219,
respectively. Besides organic growth, these giants
have also sought to expand through mergers and
acquisitions. Lotte Shopping acquired Hi Mart, the
leading South Korean electronics and appliance
specialist retailer, in 2012220. Meanwhile, in the
same year, Shinsegae acquired an 81% holding in
Paradise Duty Free, one of the countrys and Asias
leading duty free shopping operators221.
South Korea has achieved the worlds highest
penetration rate for broadband Internet access222.
According to Statistics Korea, e-commerce
transactions amounted to 10.5 trillion won in
1Q14, up by 16.6% year-on-year (yoy)223. Many
large traditional retailers have launched online
and mobile platforms. Mobile retailing is also
growing rapidly, thanks to the wide adoption of
smartphones. For instance, Tesco Homeplus (the
second largest chain grocery retailer in the
country) launched the worlds first virtual store in
the Seoul subway in August 2011; more virtual
South Korea Overview
stores were subsequently launched at more than

20 bus stops in 2012. Using virtual displays,
consumers can scan a relevant barcode or QR
code with their Homeplus App installed in mobile
devices such as smartphones to order various
products; they can even arrange for home delivery
on the same day224.
An overprotected market for chain
hypermarkets and supermarkets?
According to Euromonitor International, the retail
value of modern grocery retailers (such as
convenience stores, hypermarkets and
supermarkets) accounted for 75.8% of the total
retail value of all grocery retailers in 2012, up
from 67.6% in 2007. Euromonitor International
predicts that this proportion will further increase
to over 80% by 2017225. By contrast, the retail
value of traditional grocery retailers (such as
mom and pop shops) accounted for 24.2% of
total grocery retail value in 2012, down from
32.4% in 2007. Their presence will likely
continue to shrink with their proportion of sales
dropping to 19.1% in 2017226.
In order to protect the traditional grocery retail
trade, the South Korean government introduced
restrictions on new store openings of chain
hypermarkets and supermarkets in 2011. New
In the southern half of the Korean Peninsula

bordering the Sea of Japan and the Yellow Sea,
South Korea comprises a population of about
48 million in an area of over 99,000 square
kilometres. South Korea ranks 14th in the
world in terms of the size of its economy227.
stores are not allowed to open within one

kilometre of traditional grocery retailers without
their consent. Furthermore, there are also
restrictions on the opening hours of hypermarkets
and supermarkets operated by large companies.
Stores are allowed to open only from 10am to 12
midnight each day. Also, these stores have to close
on two Sundays of each month.
In response to the perception of unfair
regulation, affected grocery retailers filed a case
against these new restrictions in local courts in
each region of the country. Yet, no consolidated
results can be concluded as yet since cases are still
being considered by various local courts.
Since chain stores are forced to close every
second Sunday, retail owners encourage their
customers to shop on other days, expecting to
make up for the loss of sales on the Sundays when
they are forced to shut. Handsome product
discounts are available in stores during the
Saturdays before and the Mondays after the
Sunday closures. Naturally, customers prefer to
shop in chain stores for bargains rather than look
for less attractive propositions in traditional
grocery retailers.
Modern grocery retailers affected by the
regulations have found other ways to sidestep
them. For instance, they have started to open
smaller-sized stores that can operate 24 hours a
day. These stores are run like convenience stores,
and cannot be restricted under the new
regulations even though they are larger in size
than pre-existing convenience stores. The new
convenience operations also sell products under
private labels, which the usual convenience stores
do not. Additionally, prices of other products (i.e.
non-private-label products) are lower than those
in the pre-existing convenience stores228.
To alleviate sales losses on the Sundays when
they are closed or operate restricted opening
hours, some chain grocery retailers have gone
online. Quite a number of them have launched
smartphone applications and have begun offering
special discounts, providing extra services while
sending promotional emails or other messages to
customers.
South Korea Overview
Exhibit 14 | Real GDP growth of South Korea, 1Q13-1Q14

4.5%
3.7%
4.0%
3.3%
3.5%
3.0%
1.0%
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Oct-13
Nov-13
110
South Korea In the news
102
Jun-14
98
May-14
100
Apr-14
The consumer price index in South Korea was

109.24 in May 2014231, the highest in 19 months
( See Exhibit 15)232. The surge was contributed
by the price hikes in clothing and footwear,
furnishings, household equipment and routine
maintenance, restaurants and hotels233.
104
Mar-14
CPI hits 19-month high in May 2014
106
Feb-14
1Q14
Jan-14
Q4
Dec-13
Source: The Bank of Korea
Q3
Nov-13
Q2
Oct-13
1Q13
108
Sep-13
0.0%
As shown in Exhibit 16, the composite

consumer sentiment index was 107234 in June
2014, rebounding from the eight-month low of
105 in May as negative impact from the April
Sewol235 ferry disaster faded236.
Exhibit 16 | Composite consumer sentiment index in
South Korea, Jul 2013 to Jun 2014
1.5%
1.5%
0.5%
Composite consumer sentiment

index rebounds to 107 in June 2014
Aug-13
2.0%
2.3%
Source: Statistics Korea
Jul-13
2.5%
3.9%
Sep-13
The real GDP growth of South Korea further

increased to 3.9% yoy229 in 1Q14, the highest in
two years. See Exhibit 14. The growth came
with a strong rebound in construction spending
and an upswing in export growth230.
Aug-13
Real GDP growth rises to 3.9% in

1Q14
Jul-13
Statistics
109.5
109.0
108.5
108.0
107.5
107.0
106.5
106.0
Jun-13
Exhibit 15 | Consumer price index in South Korea, Jun

2013 to May 2014
Source: The Bank of Korea
Retail sales fall by 1.7% mom in

April 2014
The retail sales index in April 2014 was 107.4237,
down by 1.7% month-on-month (mom), mainly
due to the Sewol ferry tragedy238 happened in
April, which dampened consumers spending
appetite239. See Exhibit 17.
Mar-14
Feb-14
Apr-14
Kakao acquires Daum at US$3

billion
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
112
111
110
109
108
107
106
105
104
May-13
Exhibit 17 | South Korea retail sales index,

May 2013 to Apr 2014
Source: Statistics Korea
Sales of department store and

discount store chains rebound from
a 3-month low
Sales of the top three chain department store
operators in South Korea, namely, Hyundai
Department Store, Lotte Shopping and Shinsegae,
increased by 0.8% yoy in May 2014 after sliding
for three consecutive months. The sales at the
country's top discount stores also grew by 1.2%
yoy. The rebound was mainly contributed by
electronics sales, underpinned by the ongoing
World Cup and earlier-than-usual seasonal
sales240.
E-commerce
Lotte.com ties up with Alipay
Lotte.com, the South Koreas online shopping mall
under Lotte Group, has rolled out a new payment
service for Chinese customers. Starting from April
2014241, Chinese consumers shopping with
Lotte.com can pay by Alipay, the leading online
payment solution in China.
Ticket Monster acquired by

Groupon
Ticket Monster, a leading Korean e-commerce

company, was acquired by Groupon for US$260
million in January 2014. Established in 2010 and
based in Seoul, Ticket Monster serves more than
4 million active customers. About half of its sales
are transacted on mobile devices. The acquisition
helps Groupon transform its business from a flash
sale email model to a mobile commerce
marketplace242.
Kakao, South Koreas largest mobile messaging

service company, has agreed to take over an
Internet company Daum Communications in a
deal of 3.1 trillion won (US$3 billion). Kakao
expects Daums search engine, display
advertisement and game businesses to create a
considerable synergy effect with Kakaos mobile
messenger and mobile service243.
Department stores
Hyundai Department Store taps into
discount outlet
Hyundai Department Store, a leading chain
department store operator in South Korea, is
branching out to another retail format outlet. It
set up its first outlet in Seoul in May 2014244. It
will open another two outlets within this year245.
Apparel
LG Fashion renamed to Life in
Future
LG Fashion was renamed Life in Future in April
2014. The move comes seven years after its
spinoff from the LG Group, one of the
conglomerates in South Korea. With the new
name, the company hopes to create an image of
creating futuristic lifestyles246. Currently, Life in
Future runs a number of apparel brands in South
Korea, including mens wear brands Daks, Hazzys,
Tnct and Maestro, as well as womens wear
brands MaxMara, Leonard, Isabel Marant and
Joseph247.
MK Trend, a major South Korean apparel

company, plans to set up about 20 stores in China
by end 2014. The company will sell sports fashion
with US NBA team characters and images248 in
major Chinese department stores and shopping
malls249. The company plans to increase the
number of shops to 80 by 2016. The company
also seeks to introduce its own labels such as TBJ,
Andrew, and Buckaroo later on250.
Handsome to launch more new

brands
Shilla Duty Free plans Cambodia

store
Handsome, a major South Korean apparel

company, plans to introduce four to five new
brands to South Korea in 2014 a womens
accessories brand Decke, a casual apparel brand
Lanvin Sports Casual and a couple of cashmere
product brands. Distributing products through
department stores and other channels, the
company is currently selling a diverse portfolio of
fashion brands such as Jimmy Choo, Bally, Lanvin
Iro, Eleventy and Elizabeth & James251.
Shilla Duty Free plans to set up its debut

downtown duty free shop in Cambodia in 2015
subject to government approval. The location of
the shop is likely to be adjacent to Angkor Wat,
Cambodias most sought after tourist attraction
and a world heritage site. Shilla currently
operates six airport duty free shops in South
Korea and three in Singapore257.
Van Heusen to make debut in South

Korea
PVH, one of the largest apparel companies in the

world, is introducing one of its brands, Van
Heusen to South Korea. It has licensed TS
Commerce, a mens apparel company in South
Korea, to manufacture, open free-standing stores,
and distribute Van Heusen products via shop-inshops, specialty stores, department stores, retail
outlets and an e-commerce website in South
Korea252.
Joe Fresh enters South Korea
Canadian apparel brand Joe Fresh opened its first

overseas store in Seoul in May 2014253. The store
offers mens, womens and childrens apparel, as
well as cosmetics products. The company will add
nine more stores in South Korea within this year.
The South Korea expansion is an integral part of
the brands four-year international expansion
plan covering Asia, North Africa, Middle East,
Eastern Europe and South America254.

Shilla Duty Free to open stores in
Singapore
Shilla Duty Free, South Koreas leading duty free
retailer, has been approved to operate perfume
and cosmetics stores at Changi Airport in
Singapore from October 2014. The retailer will
operate around 20 stores at all of the four
terminals in Changi Airport by 2017255. The
company has set a sales target of 4 trillion won
(US$3.75 billion) by 2020256.
Nature Republic opens debut store

in Hong Kong
Nature Republic, South Koreas green cosmetics

brand, opened its first store in Hong Kong in
January 2014. The company will set up another
two to three more stores in Hong Kong within this
year. Hong Kong will act as a hub for its overseas
expansion, especially China. So far, the brand has
established presence in 14 overseas markets
including Japan and Malaysia. It plans to roll out a
flagship store in China within this year 258.
Dongsung Pharmaceutical enters

China
Dongsung Pharmaceutical, a South Korean

company producing pharmaceuticals, hair dyes
and cosmetics products, inked an agreement with
Lock&Lock, a South-Korean company in March
2014 to sell in China market. Dongsung will
leverage Lock&Locks distribution network in
China 21 home shopping channels, 6,600
general stores and some 300 department
stores259.
LG Household & Health Care seeks

to buy Elizabeth Arden
LG Household & Health Care, a leading household

and health care company in South Korea,
expressed in late April 2014 that it was
considering a possible acquisition of Elizabeth
Arden260, an American premium cosmetics brand,
as part of its efforts to expand its overseas
markets261. The bidding price is estimated at
about 1 trillion won, which would be the biggest
deal for LG Household & Healthcare. Elizabeth
Arden posted US$1.34 billion in sales in 2013262.
LGs sales for 2013 rose 11% to 4.33 trillion won
263 (US$4 billion264).
LG Household & Health Care affiliate

to merge with R&Y Corporation
LG Household & Health Care said its subsidiary
Ginza Stefany265, a Japan-based cosmetics
distributor, will merge with R&Y Corporation, a
South Korea-based266 company selling healthy
food in Japan. The merger, aiming to improve
operating efficiency and create synergy in the
Japan market, will come into effect in July 2014267.
Samsung to boost sales in India
Samsung, the worlds leading mobile phone
makers, mulls opening 3,000-4,000 stores across
Indias smaller cities (with population of less than
100,000) as part of its strategy to drive sales in
emerging markets for electronic devices. A first
batch of 1,000 outlets will be set up within this
year268. Samsung currently runs more than 2,000
stores in India, accounting for 19% of the Indian
mobile phone market in terms of volume269.
Samsung and Barnes & Noble

produce a co-branded tablet
Samsung and Barnes & Noble, the worlds largest

distributor of publications based in the U.S., will
produce a co-branded Galaxy Tab. The Galaxy
Tab 4 Nook combines "Samsungs Galaxy Tab 4"
and Barnes & Nobles e-book software "Nook"
with an access to 3 million publications270. The
deal allows Barnes & Noble to focus on digital
content rather than R&D and manufacturing of
tablets271. The Galaxy Tab 4 Nook is set to hit
nearly 700 Barnes & Noble stores and its website
in early August 2014272.
Food and beverage

Mister Pizza scales up in China
Mister Pizza, South Koreas largest domestic pizza
brand, plans to expedite its expansion in China273.
Mister Pizza proposes to add 70 outlets this year
on top of the current 30. The pizza chain has also
partnered with Golden Eagle Group, a leading
Chinese property developer and operator, to
operate restaurants in Golden Eagle Department

Stores.
Subway eyes growth in South Korea

The American fast food chain Subway will roll out
300 new outlets in South Korea over the next
three years, on top of the current 78. The
company seeks to compete with its rivals such as
McDonalds and Lotteria274.
McDonalds to ramp up presence in

South Korea
McDonalds is set to increase market share in the

South Korean fast food market. McDonalds aims
to double the number of shops to 103 stores by
the end of 2014. McDonald currently runs 53
outlets in South Korea and a total of about 34,000
stores worldwide275.
Caffe Bene to ramp up China

presence
Caffe Bene, a leading coffee brand of South Korea,

is working to rapidly expand its presence in China
in the coming two years276. The brand aims to
open 1,000 outlets in China within this year and
increase the number to 3,000 by 2015. Flagship
stores are planned for a number of cities such as
Shanghai, Shenzhen, Beijing, Wuhan and
Chongqing.
Juan Valdez Caf enters South Korea

Juan Valdez Caf, a leading Colombian coffee
chain, opened its first store in Seoul in February
2014, the first stop of its expansion in Asia. It
plans to open 300 to 400 cafes in Asia over the
next five years277. Currently, it is running about
250 cafes in different countries across the globe
such as Colombia, Cuba, Chile, Spain and the U.S.
Burger King to expand to 300

outlets by 2018
Burger King plans to expand its footprint in South

Korea to 300 outlets within five years through
expanding its franchise businesses, with a view to
becoming a leader in the fast food business in
South Korea in 10 years. As of end 2013, it
operates a total of 150 stores in South Korea278.
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Fung Business Intelligence Centre

The Fung Group is a privately held multinational group of
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AsiaDistributionRetail July14

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Issue 1 | July 2014

Beauty and personal care p9

Food and beverage p9

Asia Market Update Issue 1 July 2014 p1

Suning to enter supermarket business

Department stores p17

Consumer electronics p20

Food and beverage p20

Shopping malls p18

Convenience stores p18

Department stores p26

Convenience stores p26

Asia Market Update Issue 1 July 2014 p2

7-Eleven unveils expansion plans at home

Dongsung Pharmaceutical enters China

Consumer electronics p34

Department stores p32

Beauty and personal care p33

Asia Market Update Issue 1 July 2014 p3

Asia, accounting for more than 50% of the worlds

Asia Pacific region in 2013. Among these, China is

While Asia is becoming increasingly attractive as a

Asia Market Update Issue 1 July 2014 p4

Asia & Australasia

Source: Economist Intelligence Unit

GDP per head

yoy growth (%)

yoy growth (%)

specific in their distribution. For market entry,

largely due to weaker demand in China, Russia

Exhibit 3 | Asia Pacifics % share of global luxury sales,

2007 2008 2009 2010 2011 2012 2013E

Source: Bain & Company

Asia Market Update Issue 1 July 2014 p5

In coming years, the growth of modern grocery

Asia at a glance Overview

Exhibit 4 | Worldwide B2C e-commerce sales,

B2C ecommerce sales (US$ trillion)

Asia Market Update Issue 1 July 2014 p6

Asia & Australasia

Source: Economist Intelligence Unit

Asia Pacific retail market to grow

Asia at a glance In the news

Asians are becoming more affluent. According to

Tourists from Asia Pacific to become

Airport retail to boom in Asia

According to Verdict Retail, a retail consultancy

Global retailers regional strategy in

A survey conducted in 2013 by CBRE21, a leading

Asia Pacific to become worlds

M&S announces Asia expansion

According to eMarketer, a research company

Mobile shopping set to boom in Asia

According to Euromonitor International, the

Asia to drive growth of global FMCG

Kantar Worldpanel anticipates that global FMCG

Asia at a glance In the news

British department store operator Marks &

Aeon to expand in Asia

Japanese retail giant Aeon will spend 380 billion

Duty free shops

Antony Morato to further expand in

Beauty and personal care