Retail trade is the first step in goods circulation, directly relative to the realization of merchandise value and use value. Retail trade is also a kind of “window” sector, a “window” of a nation’s material civilization and spiritual civilization, and it also play a very important role in animating market, meeting people’s various life needs.
During recent years, Chinese chain shops have stepped in a high-speed development stage. Super market, convenience shop, exclusive shop, and storage shop mushroomed turned into the most active sector. Chinese chain enterprises have formed a new trend of manifold development based on supper markets, retail shops and extending to relatively remote areas from the center of cities.
China's retail market has begun to reach a much more advanced stage of maturity in recent years in the main urban regions. The fact that this stage has been reached so rapidly since the retail industry was opened up in the mid-1980s is testament to the rapid development of the national economy and the strong demand amongst consumers for better products sold in more consumer-friendly ways.
The stage of rapid development in the key economic regions (the main cities of eastern China) has now come to an end, and market saturation is now being witnessed in these regions. Competition in these regions has intensified, and the need to be more accurately targeted to specific consumer groups is now much more significant.
Now that the main cities have become over-supplied, the retail industry has to expand ever outwards into the more difficult to reach rural regions of the country. Reaching sufficient numbers of consumers of sufficient wealth in these regions will mean more targeted marketing, and a greater focus on value-for-money retailing.
The Chinese government continues to put a lot of pressure on the domestic retail sector to continue its rapid development. Yet, at the same time as making entering the market harder for foreign retailers, the government is still telling local chain store companies that they are crucial to boosting consumer spending and hence helping China grow.
However, China's internal market cannot just continue to grow in size, but must continue to grow in sophistication and competitiveness. It is here that foreign retailers have the expertise that Chinese companies need to meet the growing sophistication and value-for-money demands of China's consumers.
Under the current policy, foreign-invested retail enterprises are not allowed to operate chain stores in the form of franchise. The trial measures for the administration of franchise operation were only applicable to domestic enterprises, but not foreign invested enterprises. McDonald's, KFC, and many Taiwan and Hong Kong food, beverage brands and garment chains all entered the mainland market in the name of processing trade and domestic sales rather than as commercial franchise.
In addition, China lacks a clear regulatory structure that would permit foreign retail companies to franchise their brands and retail outlets on a national basis.
