Profit Margins Continue To Decline In Chinese Retail Businesses

A report jointly released by China Chain Store Association and PWC, an accounting firm, in Beijing on 18 May showed that the growth rate of domestic listed retail enterprises continued to fluctuate year by year from 2008 to 2013, and the operating profit margin continued to decline.

The report on the 2008-2013 year financial situation of China's retail industry suggests that China

Improve cash flow management and increase substantially

In order to reverse the trend of profit decline.

The survey is based on 78 mainland listed retail enterprises, 32 Hongkong listed retail enterprises and 29 Fortune 500 foreign retail enterprises.

Specifically, the survey includes department stores, supermarkets and professional shops.

The survey shows that the year-on-year growth rate of China's retail enterprises' income has changed to "W" in the past 6 years.

Affected by the global financial crisis, retail revenue grew from 23.9% in the first half of 2008 to 3.7% in the first half of 2009.

Since then, the growth rate in 2010 and 2011 has risen to around 20%, stimulated by economic policies.

In 2012, due to the gradual downturn of the macro-economy, the year-on-year growth rate dropped to 6.5% year-on-year.

In the first half of 2013, the growth rate recovered to 12.3%. However, in the second half of this year, the growth rate dropped to 2.4% under the influence of economic slowdown.

In the past 6 years, the decline in sales, the high cost and the strong impact of online retailing led to a continuous decline in profits of Chinese retail businesses, down from 5.3% in 2008 to 3.9% in 2013.

The survey shows that the growth trend of domestic retail enterprises' revenue growth over the past 6 years is basically the same as that of Hongkong and fortune 500 companies, but the gross profit margin is lower.

In recent years, domestic retailers have also increased the gross profit margin by adjusting the category of commodities, increasing sales of gold and jewellery, and importing luxury goods.

China's domestic retail businesses have not stopped expanding in recent years.

In this regard, Wang Xiao, the head of PWC's retail and consumer goods industry in China, said that in the absence of an effective long-term external financing mechanism, sustained expansion will bring greater financial pressure to enterprises.

How to manage enterprise cash flow to support sustained and rapid expansion of enterprises and avoid the risk of capital chain discontinuity will be a problem that many retailers need to pay special attention to.

The report points out that there are 59 traditional retailers in China's top 100 chain enterprises, which operate more than 70 online stores.

However, these

The retail sales of enterprises are only 35 billion yuan, accounting for a small proportion of their sales and overall retail sales.

Sun Jin, chief audit partner of PWC North China retail and consumer goods industry, recommends that retail companies increase investment in network sales, improve technical support for integration of information, logistics and customer systems, establish a professional network retail team, and use big data to thoroughly understand customer needs and create more targeted marketing tools.