Traditionally, when international retailers come to China, they would consider China’s first-tier cities such as Beijing and Shanghai as their point of entry the market, due to first tier cities’ stronger consumption power and more mature market for foreign brands. Recently, however, as the firsttier cities’ retail market becomes relatively saturated, many retailers have felt the impact of the increasingly competitive market, skyrocketing operational costs, and the shrinking of their profit margin. Therefore, instead of China’s first-tier cities, many retailers are now focusing on the faster growing secondtier China, where customers’ disposable income is ever increasing and the arrival of high-quality foreign brands is eagerly anticipated.
Wuhan, arguably the most pivotal second-tier city along China’s Yangtze rive, has stood out as one of the most promising area for further retail investment because of its status as one of China’s most important logistics, manufacturing, and center. In this week’s blog post, we will discuss the retail market of Wuhan, including some of the city’s key retail areas, and present to our readers the challenges of entering this emerging market.
Wuhan is the provincial capital of Hubei province located in the center of China. It is the economic, finance, education, and technology hub of central China and the most affluent provincial capital city among all the six provinces in the region of central China. As one of the most important transportation hubs in China, Wuhan boasts dozens of railways, expressways, and flights that pass through the city, connecting China’s central and western inland and its eastern coastal regions. As a result, manufacturing and domestic trade has flourished in Wuhan, allowing the city to become a strategic location for many companies that wish to expand their business from the cities in the east of China such as Beijing and Shanghai to the central and western part of the country. Many businesses even regard Wuhan as the “golden key” to fully penetrate the Chinese market.
Among Wuhan city’s key industries including manufacturing, logistics, and high-tech development, the city’s retail industry might be the most curious for many Western businesses, who understood the importance of the city but possessed little knowledge about the market. Therefore we will dedicate this blog post to discuss the current situation of the city’s retail market, the projection of its future growth, and the opportunities and challenges posed by the city that no retailers should dismiss.
Wuhan’s Retail Growth
Wuhan’s rapid economic development has resulted in a significant increase in its resident’s disposable income, which in turn has contributed to its incredible retail growth. To put it in numbers— during the year of 2013, Wuhan’s GDP enjoyed another year of double-digit growth of 11.1% to 681.1 billion RMB in 2013. With the city’s strong economic performance, people’s life quality is also increasing step by step—in 2013, the average annual disposable income of Wuhan citizens has increased by 10.2% to 29821 RMB. In the more affluent districts of the city, the number has even far passed the 30,000 RMB thresholds.
Because Chinese people are now much more inclined to spend part of their disposable income shopping for products of their choice rather than just saving it all like 30 years ago, the retail industry is booming in Wuhan. What’s more, as the provincial capital of Hubei province, Wuhan takes 37% share of Hubei’s total retail sales in 2011, which demonstrates Wuhan’s strong customer basis that goes beyond the city itself. Last year in 2013, Wuhan’s total retail sales of consumer goods have increased by 13% to 379.5 billion RMB. This incredible sales number was ranked No.7 in China, only trailing after the 4 directly controlled municipalities and the first tier Guangzhou and Shenzhen.
Where is the center of retail activities in Wuhan?
If you look at the map of Wuhan, you will easily discover that the two main rivers flowing through the city has separated the city into three parts—Wuchang (the political and education center), Hankou (transportation and commerce center), and Hanyang (manufacturing center). These three notable towns of Wuhan have been functioning quite independently from each other until the last century. After more bridges were built and the transportation across the Yangtze and the Han improved significantly, Wuhan’s three towns have been increasingly integrated while each town’s uniqueness and specialty well maintained. The traditional commerce center of the city is in the town of Hankou. While Hankou still boasts the largest number of commercial districts among the three areas, the retail development of the other two towns have been catching up fast. Below is a summary of the top three most important retail districts in Wuhan
Jianghan Road (江汉路) in Hankou