China's retail market is becoming increasingly saturated, which will likely limit expansion opportunities for overseas retailers, according to a recent study.
China slipped one spot to No. 5 on a list of retail markets in emerging economies. India retained its position as the world's most attractive emerging market, according to the 2006 Global Retail Development Index, an annual study on emerging market by ATKearney, a global strategic management consulting firm.
It ranks the investment attractiveness of 30 emerging markets based on country risk, population, business efficiency, modern retail sales area per resident, and number of international retailers.
"Market saturation in China is on the rise as more than 40 foreign retailers have entered the market to date," said the report, mentioning foreign retailers are fueling the rapid growth of China's retail market.
China's retail sales grew 12.8 percent to 1.84 trillion yuan (US$230 billion) in the first quarter of this year after jumping 12.9 percent to 6.72 trillion yuan in 2005.
Shanghai alone was home to 115 hypermarket outlets covering more than 5,000 square meters in floor space, by the end of last year. One hundred of those stores are owned by overseas retailers.
Despite growing saturation, many retailers continue to increase their market presence.
French-based Carrefour SA, the world's second-largest retailer, opened 14 stores across China last year. The company, which first entered China in the early 1990s, now has 73 outlets on the mainland.
"China remains one of the most attractive markets to us and we plan to further speed up our expansion in the rapidly developing country," said Wang Xiaozhong, a spokesman for Carrefour China.
Wal-Mart Stores Inc last month said it plans to hire up to 150,000 employees in China over the next five years - five times its current work force, to help its expansion in the country. Running about 50 stores in China including two in Shanghai, the world's largest retailer plans to add one in the city's suburban Jiading District early next year.