DBS says technology poses major challenges for vast retail market

An LG smart TV is shown at a home appliances exhibition in Nanjing, Jiangsu province. WANG QIMING / FOR CHINA DAILY

Ever-changing technology and booming e-commerce will continue to be a game changer for the vast retail market in the Chinese mainland, with some industries jumping on the bandwagon of sustainable growth while other sectors feeling sustained pressure and struggling to seek a way out.

Smart home appliance makers, benefiting from technological advancement and government support, are looking to capitalize on low market penetration to get on the fast-growth track, said Mavis Hui, a Hong Kong-based analyst at DBS Vickers.

According to IHS Technology's Home Appliance Intelligence Service, this business offers enormous potential, and is projected to grow from an estimated less than 1 million units shipped in 2014 to more than 230 million units in 2020.

Global penetration is forecast to surge from 0.2 percent in 2014 to 31.3 percent in 2020. And China stands as a leading market, accounting for nearly 40 percent of total worldwide shipments by 2020.

Mid- and high-end products across three product segments, including washing machines, air conditioners and refrigerators, are enjoying robust sales, driven by mainland consumers' ongoing demand to upgrade consumption, said Hui.

"The traditional department store business, however, would continue to take a hit from e-commerce and see no signs of recovery in the near term," she noted.

"Some shopping malls may replace them with restaurants, cinemas and ice rinks in a bid to win customers back."

Hui believed the jewelry industry may offer the only respite for the traditional consumer goods market, as consumers still need to visit bricks-and-mortar stores to make product selections.

More importantly, as the country's generation of single children reach marriageable age, they tend to spend big on weddings, translating into an insatiable appetite for jewelry.

"This makes the prospects for jewelers in the Chinese mainland and Hong Kong look good for the coming three to five years," she observed.

As more and more mainlanders become global travelers, DBS said the travel-related industries would also thrive in the world's second-largest economy.

However, booming outbound tourism may deviate from the nation's determination to shift from an export-driven, investment-intensive economy to a consumer-driven economy in its quest for a new "growth engine". Hui said the country's weakening currency may dampen mainlanders' enthusiasm to travel and consume abroad.

But in the long term, she called for a less-rigid tax regime and a relaxation of duty-free spending restrictions to lift local consumption and spur domestic tourism.

All in all, the country's retail market as a whole is poised to register 10-percent growth this year, with ongoing urbanization, a growing middle class and a sharp rise in their wealth continuing to be major drivers, Hui said.