---
title: "In-depth Insights | Anatomy of Five Major Retail Trends in 2022"
description: "The pandemic's repeated impact continues to weigh on the consumer market, with total retail sales of consumer goods reaching 44.0823 trillion yuan in 2021, up 12.5% year-on-year. Amidst this, five key trends are emerging:业态分化加大,品质消费提升;零供关系变革,厂商界限模糊;国货国潮兴起,Z世代成主力;线上监管强化,线下迎来转机."
author: "利丰研究中心"
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published: "2022-05-05"
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# In-depth Insights | Anatomy of Five Major Retail Trends in 2022

> The pandemic's repeated impact continues to weigh on the consumer market, with total retail sales of consumer goods reaching 44.0823 trillion yuan in 2021, up 12.5% year-on-year. Amidst this, five key trends are emerging:业态分化加大,品质消费提升;零供关系变革,厂商界限模糊;国货国潮兴起,Z世代成主力;线上监管强化,线下迎来转机.

******The pandemic's repeated impact****continues to affect the consumer market**
Data shows that in 2021, total retail sales of consumer goods reached 44.0823 trillion yuan, up 12.5% year-on-year, with a two-year average growth of 3.9%.
Looking at monthly data, the growth rate of total retail sales of consumer goods showed a trend of high in the first half and low in the second half. The faster growth in the first half was due to the low base in Q1 and Q2 caused by the pandemic outbreak in early 2020, as well as effective pandemic prevention and control, which led to a gradual recovery in consumption.
However, starting from the second half of 2021, frequent outbreaks in Suzhou, Shaanxi, Henan, and other places affected normal economic life, and the growth rate of total retail sales of consumer goods declined. The year-on-year growth rate dropped sharply from 8.5% in July to 2.5% in August, with September, October, and November seeing growth rates of 4.4%, 4.9%, and 3.9% respectively, and December falling to 1.7%, a less-than-ideal trend.
Entering 2022, the pandemic has flared up in various places, with sporadic and large-scale outbreaks in Shanghai, Beijing, Tianjin, Chongqing, Guangzhou, Shenzhen, Hangzhou, Qingdao, Shenyang, Hong Kong, and other areas. The current consumer market still faces significant pressure.
The pandemic affects consumer confidence. The Central Economic Work Conference in December 2021 pointed out that China's economic development faces triple pressures: demand contraction, supply shocks, and weakening expectations.
A survey jointly conducted by the China General Chamber of Commerce and the Fung Group's Li & Fung Research Centre on the department store retail industry shows that enterprises currently face two major challenges: first, the impact of the pandemic, with 97.7% of enterprises believing it has affected store traffic; second, insufficient consumption power, with 76.5% of enterprises reporting weak consumption power and sluggish growth.
******Increasing divergence in business formats****and rising quality consumption**
Although the overall consumption growth rate faces downward pressure, there are some bright spots.
By business format, sales data from enterprises above the designated size show that convenience stores grew rapidly, up 16.9% year-on-year, followed by specialty stores and brand stores at 12.8% and 12% respectively, and department stores at 11.7%.
These formats all achieved double-digit growth, partly due to the low base from negative growth in the previous year, and partly because non-essential consumer goods consumption recovered well overall in 2021, leading to better annual growth.
**Retail formats mainly selling standardized goods face a more difficult situation, reflected in the continuous decline in foot traffic at hypermarkets and supermarkets.** In 2021, among retail formats above the designated size, supermarkets grew by only 6%, the lowest among major formats, significantly below the growth rate of total retail sales of consumer goods.
Main reasons: first, the substitutability of online channels for standardized goods; second, changing consumption habits, as the pandemic has kept some consumers who previously did not shop online on online platforms, further increasing the share of online retail; third, young consumers rarely visit stores without distinctive features or experiences.
**On the other hand, data shows that demand for upgraded consumption continues to be released.**
In 2021, retail sales of cultural and office supplies, cosmetics, gold, silver, and jewelry, and communication equipment from enterprises above the designated size increased by 18.8%, 14%, 29.8%, and 14.6% year-on-year respectively, with two-year average growth of 12.1%, 11.7%, 11.2%, and 13.7%, **significantly higher than the average growth of commodity retail**. The overall market sales continued to recover, consumption structure optimized, and the upgrading trend was evident.
The rapid growth in luxury goods consumption also indicates the improvement in quality consumption, with many institutions making predictions about luxury sales.
A report jointly released by Bain & Company and Tmall Luxury predicts that global luxury goods sales fell by 23% in 2020, **but China's mainland share of the global market nearly doubled**, jumping from about 11% in 2019 to 20% in 2020 and 21% in 2021; **by 2025, the Chinese mainland market is expected to become the world's largest luxury goods market.**
The growth in quality consumption is mainly due to two reasons:
**First, consumption upgrading.** There is much discussion about whether Chinese consumption is upgrading, downgrading, or polarizing. In the long run and overall, it is definitely upgrading.
Even in 2020, severely affected by the pandemic, per capita disposable income still grew by 2.1% in real terms. As the economy grows and incomes increase, consumption will continue to show upgrading characteristics.
**Second, the decline in the Engel coefficient.** The Engel coefficient is the ratio of food expenditure to total expenditure, which generally decreases as income increases. With no significant change in population, the consumption of food commodities is relatively fixed, and total consumption will not fluctuate greatly.
The decline in the food proportion corresponds to the rise in upgraded categories. Over the past 20 years, China's Engel coefficient has shown a clear downward trend, with each percentage point change corresponding to trillions of yuan in consumption, having a huge impact on quality-upgraded goods.
******Changes in retailer-supplier relations****and blurring boundaries between manufacturers and retailers**
The relationship between retailers and suppliers has always been love-hate. In recent years, with channel diversification and comprehensive digitalization, this relationship has been subtly changing, mainly in three aspects.
**First, role changes.** Many brand owners use self-built channels, especially online channels, to directly engage in retail business with consumers, enhancing their retail attributes.
At the same time, some retailers, relying on their market scale, develop private labels and engage in customized production and processing. In this interaction, retailers and brand owners cross boundaries, and their respective attributes or the middle ground become blurred.
**Second, tool changes.** In traditional retailer-supplier relationships, the role of "people" as intermediaries was crucial, such as brand promoters, information officers, and sales guides, and retailer buyers and business managers. The smoothness of person-to-person coordination largely determined the efficiency of product turnover.
Under digital conditions, the retailer-supplier relationship relies more on the digitalization level of the entire supply chain, reducing the hindering effects of human intervention. The visualized transparent supply chain advocated in traditional ERP and SCM is now realized through full digitalization.
**Third, status changes.** Brand owners have more and more choices for market terminal channels, including offline stores, e-commerce platforms, or independently developed sales channels.
Additionally, in the C2M scenario, production can be based on consumer demand, further compressing intermediate channels, making the relationship between consumers and manufacturers more direct.
In summary, compared to the past when offline channels were dominant, brand owners now have stronger market positions, and their dependence on physical channels and the channel dominance of physical stores have greatly decreased. A side example is that retailers have been collecting fewer channel fees in recent years.
******Rise of domestic brands and national trend****with Gen Z as the main force**
The rise of domestic brands is not only a manifestation of consumer confidence in a major country but also supported by multiple factors such as production and R&D capabilities, substitution capabilities, product quality and fashionability, and high cost-performance.
The "2020 China Consumer Brand Development Report" released by AliResearch shows that **domestic brands' market share in online channels had already exceeded 70% in 2020.** According to iiMedia data, during the 2021 National Day holiday, **sales of domestic clothing on Douyin e-commerce increased by 840% year-on-year**, and domestic beauty products increased by 667%.
According to a survey conducted by Jiguang in September 2021, 76.4% of young people are interested in new domestic brands, with over 40% very interested. Jiguang noted that in daily consumption, 70% of post-90s and nearly 80% of post-00s consumers mainly purchase domestic brands.
**Sports and cosmetics are two major categories where domestic brands are rising.**
In recent years, the operating revenue and net profit of some domestic sports brands have generally grown rapidly. For example, Anta's operating revenue increased by 38.9% to 49.33 billion yuan in 2021, and net profit increased by 49.6% to 7.72 billion yuan; Li Ning's operating revenue increased by 56.1% to 22.57 billion yuan, and net profit increased by 136% to 4.01 billion yuan.
The "2021 National Cosmetics Industry Regional Research Report" by Qixinbao shows that **the number of newly added cosmetics enterprises in 2020 exceeded 25,000, with a growth rate of 70%**; in terms of market size, China's cosmetics market reached 340 billion yuan in 2020, and from January to November 2021, it reached 367.8 billion yuan, with a growth rate of 15.3%.
Gen Z consumers, along with the rise of the national trend, are gradually becoming the main consumer force. Gen Z generally refers to young people born between 1995 and 2010, with data showing this group is close to 300 million and is becoming the main consumer in the mobile internet era.
They grew up in an era of internet information explosion and have multiple labels, such as internet natives, main force of new lifestyles, emphasis on personalization, diversified consumption needs, and willingness to interact and share. In terms of consumption, young people care more about product design style, brand power, new products, and IP.
The "Post-00s Lifestyle Insight Report" released by People's Daily Online Research Institute and Tencent Marketing Insights shows that clothing is endowed by post-00s with spiritual and cultural connotations beyond daily wear. They are more willing to buy personalized accessories, cosplay costumes, Hanfu, and other special clothing, and are also willing to try niche brands.
In 2021, no matter which retail format, great importance was attached to the consumption power of young people, especially Gen Z. According to estimates by relevant consulting institutions, **China's Gen Z drove consumption expenditure of over 5 trillion yuan in 2021, becoming the main force of consumption.**
******Strengthened online regulation****and a turning point for offline**
Since the advent of e-commerce, the consumption pie has been divided between online and offline. From the initial 3C digital products, home appliances, and clothing, to now food and fresh produce, online has captured a considerable share.
E-commerce, live streaming, and other internet-based methods have innovated business models and become an important circulation method.
However, some enterprises use abnormal means to achieve performance, some rely on massive capital subsidies to quickly form scale, reduce average and marginal costs, and achieve economies of scale; some use unfair pricing strategies, such as brand owners adding gifts through online channels, causing unfair price differences between online and offline; some use illegal tax avoidance methods, such as top live-streaming influencers being heavily fined for tax evasion in 2021; additionally, some platforms claim to "break through the lowest price" or "maximum discounts," which are suspected of false advertising.
If these problems are not restricted and allowed to grow wildly, they are not conducive to balanced development between online and offline, offline employment, or common prosperity.
Fortunately, these issues received sufficient attention in 2021, and some have been properly regulated, bringing an important turning point for offline development. First, from the perspective of regulatory requirements, an environment for fair online and offline development is being formed.
From the governance of community group buying chaos, to the antitrust rectification of e-commerce platforms, to the punishment of live-streaming influencers for tax evasion, online development will become more standardized, price differences between online and offline will further narrow, and the convenience of online and the experience of offline will be better complemented and balanced.
Second, from the perspective of online growth rate, compared with previous years, there has been a significant decline.
In 2021, the total online retail sales of physical goods grew by only 12%, **the lowest since the National Bureau of Statistics began tracking this data**; the proportion of online retail sales of physical goods to total retail sales of consumer goods was 24.5%, down 0.4 percentage points from 2020, the first decline since the data was released in 2015.
**The return to offline is an inevitable trend.** On the one hand, data shows that the growth rates of online retail sales and online retail sales of physical goods have shown a continuous and significant downward trend, with the gap with the growth rate of total retail sales of consumer goods gradually narrowing, indicating that online's squeeze on offline is gradually decreasing.
On the other hand, with the transformation and upgrading of offline physical businesses, the development of omni-channel digitalization, and the full exploration of offline functions, more consumers are gradually returning to physical businesses, and offline commerce is ushering in new opportunities.
Source: Li & Fung Research Centre (ID:FBIC_2000)
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