China was ranked as the No. 1 country in A.T. Kearney's 2015 Global Retail Development Index, topping the list for the first time since 2010. China's retail market is expected to grow to $8 trillion by 2022, which is double the size of the U.S. market.
In general, Asia was the top region for retail development, outpacing others despite its slowed growth. Both online and offline development are outpacing other regions in Asia. E-commerce in Asia has reached $525 billion, passing North America at $483 billion. If internet penetration continues to expand, Asia's e-commerce could grow as much as 25 percent annually.
The growth in China directly affects retailers in the United States. "China is bursting—both from a consumer viewpoint, but also from a government policy viewpoint," said Mike Moriarty, a partner in the retail practice at A.T. Kearney and co-author of the GRDI. "U.S. retailers need to engage in the China market—they won't feel the breeze unless they're on the beach."
Although China's GDP was mostly stagnant in 2014, its retail sector saw an impressive growth of 11.6 percent and is expected to surpass the world's largest retail market in the United States by 2018.
According to Moriarty, the growth in retail is spurred by a new generation of shoppers.
"They love to shop, they love brands, and the millennials live in a completely different country compared to what their parents experienced," Moriarty said. "GDP per capita is growing in China and savings rates remain high, but there are still 300 million consumers who think Louis Vuitton is aspirational."
Many U.S. retailers are expanding storefronts into China, either through brick-and-mortar or e-commerce. For example, Gap (NYSE:GPS), Levi's and Skechers are partners with JD.com, one of China's two largest online marketplaces. Additional U.S. retailers, such as Costco (NASDAQ:COSTCO), are working with China's other e-commerce giant, Alibaba (NYSE:BABA).
-See this A.T. Kearney study
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