China retail sector to grow in 2025, report urges policy support

China's gross domestic product (GDP) is forecast to grow by 4.5 per cent, while total retail sales of consumer goods are expected to rise by 5.0 per cent in 2025, according to the report, jointly published by the HKUST Li & Fung Supply Chain Institute (‘the Institute’) and the China Commerce Association for General Merchandise (‘CCAGM’),

However, optimism among department store operators has declined. A joint survey by the Institute and CCAGM reveals that only 24 per cent of respondents anticipate sales growth in 2025 — a steep drop from 66 per cent in the previous year’s survey.

To adapt to intensifying market competition and shifting consumer preferences, department store operators are increasingly focusing on transformation and upgrading. The survey shows that 63 per cent of respondents view transformation as the primary development trend for the industry over the next three years. Key strategies include upgrades to physical spaces, diversification of business formats, refinement of product categories, and clearer strategic positioning.

A strong 82 per cent of surveyed enterprises believe that enhancing product competitiveness will be the core focus going forward. With consumer demand becoming more diverse and personalised, the transformation of department stores must go beyond superficial changes. Operators are urged to optimise product structures, improve supply chain efficiency, boost product innovation, and forge deeper partnerships with brands.

The year 2024 saw widespread adoption of scenario-based transformations across department stores and shopping centres, aiming to meet evolving consumer expectations through immersive experiences and curated store environments.

The report highlights notable progress in digital transformation and the adoption of AI technologies across the retail sector. 82 per cent of department store operators agree that AI will have a transformative impact on the industry’s digital development.

“As digitalisation continues to evolve and AI applications deepen, the department store industry will see increasingly diverse innovative practices in operational efficiency and cost control. Catalysed by Deepseek, businesses can utilise AI data analytics tools to monitor and analyse key indicators such as consumer behaviour and preferences and sales data in real-time. AI tools can also help implement refined management strategies and precise marketing strategies to further improve operational efficiency and profitability,” Helen Chin, head of research at the Institute, said in a release.

In support of industry modernisation, China’s Ministry of Commerce and six other departments introduced the ‘Implementation Plan for Retail Industry Innovation and Upgrade’ in late 2024. The plan outlines five key tasks: promoting scenario-based transformation, quality supply, digital empowerment, diversified innovation, and supply chain improvement. By 2029, the plan envisions a modernised retail landscape with abundant supply, smart services, low-carbon practices, and multi-channel integration.

The report calls on the government to further enhance regulatory frameworks and improve the business environment. It recommends increased financial support and special subsidies to help department stores develop experience-led retail formats. It also advocates for local governments to issue more consumption vouchers, thereby unlocking greater consumer spending and reinforcing domestic retail growth.

ALCHEMPro News Desk (HU)