looking beyond covid-19: the fmcg sector – fast-moving changes for fast-moving consumer goods in china
jun 22, 2020
shanghai, june 22, 2020 —— according to cushman & wakefield’s recent report，
looking beyond covid-19: the fmcg sector – fast-moving changes for fast-moving consumer goods in china, over recent years, the fast-moving consumer goods (fmcg) sector in china has enjoyed favourable industry growth off the back of a growing economy and consumer spending leading to greater retail sales.
when examining economic growth, according to standard chartered, 10 years ago, china’s nominal gross domestic product (gdp) was worth $ 14.9 trillion in purchasing power parity (ppp) terms using current international dollars. in 10 years’ time, standard chartered estimates that this figure will grow to $ 64.2 trillion.
when looking at spending power in china, and specifically urban households’ disposable income per capita, we can see that as the economy has developed so spending power in the country has increased and this growing potential to consume has been consistently attractive to both overseas and domestic fmcg companies doing business in china. by 2019, average annual disposable income in china had reached rmb 42,359, after recording a figure of rmb 39,250.8 in 2018.
increasing spending power in china is also reflected in retail sales in the country. over time, as spending power has increased, so total retail sales volume has grown, reaching rmb 41.16 trillion in 2019, up 8.0% year-on-year (y-o-y). moreover, if we separate out retail sales in china generated from online shopping, at 19.5%, the 2019 annual volume y-o-y growth rate was more than double the growth for offline shopping.
shaun brodie, head of occupier research, greater china, cushman & wakefield, said: “given the importance of the retail sector, the evident expanding market opportunities and the need to secure and service new business, over the years, fmcg companies have also steadily grown their organisations in china.”
most large fmcg companies now have a very established business footprint in the country. today, however, even though the business presence has been established, many fmcg companies are still seeking to expand their commercial activity, and this is evidenced when examining office leasing activity rates in city markets around china.
for example, when considering the number of grade a office leasing deals completed in china’s four first-tier cities, according to cushman & wakefield research, between q4 2018 and q3 2019, companies in the retail sector (which fmcg companies form a part of) were responsible for 3.5% of deals done in beijing, 9.0% of deals done in shanghai, 4.7% of deals done in shenzhen and 6.4% of deals done in guangzhou.
the covid-19 outbreak has brought about rapid changes on many levels in china and the fmcg sector is no exception:
· ecommerce – thanks to high-speed internet access, o2o platforms and online services, during the height of the outbreak period, chinese consumers were able to effectively utilise ecommerce technology to ensure they were able to continue to conveniently shop for the everyday fmcg items they needed.
· digitalisation and data intelligence – the covid-19 outbreak also heightened the use of digitalisation and data intelligence by retailers in china.
· marketing and sales – as consumers stayed at home during the covid-19 outbreak, retail sector marketing and sales moved online via apps and livestream broadcasting.
ahead, after assessing the changing nature of business and the different business platforms fmcg companies could utilise to optimise their businesses, the road to recovery will vary for every individual company involved in the fmcg sector in china. what’s more, to remain ahead of the game as much as possible, it will be important for every fmcg sector company in china to also understand: the business demand forecasts; the new uses that have arisen for fmcg items as a result of the covid-19 outbreak, and; the various new products that could emerge from new usage.
when viewed from a real estate portfolio standpoint, we have seen major overseas and domestic fmcg sector companies already establish a comprehensive real estate platform across china, from r&d facilities, to manufacturing plants, to distribution warehouses, to offices, to retail outlets. other newly emerging and fast developing fmcg companies are only just getting started and as their businesses expand, they will also look to continually enlarge their real estate portfolio footprint in china.
given the impact of the covid-19 outbreak and also the long-term fmcg sector-related macroeconomics, many new business opportunities will appear. accordingly, fmcg company executives and corporate real estate practitioners (whether they are working for established fmcg companies or newly emerging fmcg companies) will have to rapidly reassess the fast-moving and fast-changing situation. by doing this, they will be able to better formulate new real estate portfolio stratagems to ensure their companies are best positioned for future business growth in china for the years to come.
please click to download the report.
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about cushman & wakefield
cushman & wakefield (nyse: cwk) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. cushman & wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries. across greater china, there are 22 offices servicing the local market. the company won four of the top awards in the euromoney survey 2017 and 2018 in the categories of overall, agency letting/sales, valuation and research in china. in 2019, the firm had revenue of $8.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. to learn more, visit www.cushmanwakefield.com or follow @cushwake on twitter.
for further information, please contact:
mandy qian
director, marketing & communications, greater china
tel: 86 10 8519 8040
mandy.qian@cushwake.com
