Editor’s Note
NielsenIQ (NIQ) has released its “Trend Evolution of China’s Retail Channels in 2025” report today. Starting from the current status of retail channels in 2024, it provides a deep interpretation of three major characteristics of offline channels. It also highlights key development trends in the FMCG market in China for 2025. The report aims to offer retailers clear insights and identify keys to unlocking growth.
The following article is from NielsenIQ Author NIQ
Consumption is a significant engine for China’s economic growth. As the rise of all-channel consumption is unstoppable, the trend of channel fragmentation in the FMCG industry has become more prominent. In 2025, what strategies can realize the overall growth of both online and offline markets? NielsenIQ’s (NIQ) newly published report from the “China Retail Channel Series of Studies,” entitled “Trend Evolution of China’s Retail Channels in 2025” (hereinafter referred to as “the report”), points out that, with changes in population structure, economic cycles, and technological advancement, China’s offline retail channels are rapidly evolving toward “miniaturization, fresh product orientation, and discounting.”
This report starts from the retail channel status in 2024, interpreting in-depth the three significant features of offline channels and the key development trends of China’s FMCG market for 2025, intending to provide retailers with in-depth market insights and find keys to unlock growth.
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China’s Economy Sets the Stage
Wu Yihua, General Manager of Retail at NielsenIQ China, shared insight. In 2024, consumption contributed nearly 50% to economic growth. It added 2.4 percentage points to GDP. Boosting consumption is now a top economic goal for 2025.
Currently, offline channels still hold 70% of retail. Seizing offline opportunities is critical. Channel diversification and consumer shifts demand flexible planning.
Offline Channels Evolve Rapidly
From January to November 2024, total retail sales exceeded 44.27 trillion yuan. That’s a 3.5% increase year-on-year. National online retail sales grew by 7.4%. This growth continues to outpace offline sales.
NielsenIQ’s omnichannel monitoring shows that key FMCG market in China sales rose 3.8% year-on-year. Online channels grew 10.8%. Offline channels declined slightly by 0.7%. But the gap is narrowing.
Wang Ling, Retailer Client Success leader at NIQ, explained this trend. Since the pandemic, content commerce and discount platforms have grown rapidly. Traditional channels like hypermarkets are still recovering.
“Volume for price” now drives cross-channel sales. Financial caution leads consumers to seek core value. Yet emotional needs remain important too.
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New Patterns in Consumer Behavior
The report notes a shift to goal-driven purchases. Stratified consumption causes product price and preference splits.
47% of surveyed respondents said they bought only essentials. They wanted to avoid waste. Meanwhile, 68% said they spent more on stress-relieving or relaxing goods.
In retail channels, complexity is increasing. Urban store counts rebounded in 2024. Hypermarkets declined, but small formats grew. City retail formats rose 8.7% year-on-year.
The FMCG market in China is shifting fast. Retail formats now focus on small size, fresh goods, and discounts. These are clear offline retail trends in Chi
Miniaturization Dominates Offline Retail
NIQ data shows large formats declined after 2016. Small supermarkets and convenience stores became the norm. In 2024, small community stores made up 52% of modern retail.
Li Quncai, NIQ Deputy Director of Retail Analysis, explained the trend. Miniaturization is driven by aging and urban living. High-density housing brings more foot traffic.
By 2023, China’s urbanization rate exceeded 66%. The population over 60 reached 21%. Fast-paced lifestyles and small families increase demand for nearby stores.
74% of convenience store spaces are under 50㎡. 52% of small supermarkets are under 100㎡.
Retailers must adjust to local realities. Plans should align with demographics and income levels. Growth in Jilin and Liaoning reflects population shifts. In Guangdong, mature markets need deeper segmentation.
Large formats face real pressure. To adapt, they must cut inefficiencies. This means downsizing, optimizing product mix, and curating offerings.
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Fresh Goods Drive Store Traffic
Despite caution, consumers still spend on fresh food. Fresh items now account for 55% of daily grocery spend.
Fresh goods draw store traffic with discounts. Hypermarkets see high demand for fruit and meat. Penetration rates reach 61% for fruit and 48% for meat.
Fresh-focused stores grew by 32% in 2023. They now make up 11.8% of total supermarkets and hypermarkets.
Large formats can increase value with premium goods. For example, small-pack organic vegetables can sell for 2–10x more than regular ones. Ready-to-cook food adds convenience.
Linking fresh goods to food service and meal prep enhances the store experience. This also boosts related product sales.
Small supermarkets should focus on cost-effective fresh items. Pre-packed formats improve layout and reduce waste.
Convenience stores can sell hot meals, drinks, or snack combos. Health-focused items like protein cups also appeal.
Discounts Define New Normal
NIQ data shows that in 2024, sensitivity to prices in Chinese FMCG primary channels, including online shopping, O2O, supermarkets, hypermarkets, and convenience stores, has increased, with respective sensitivities of 80%, 72%, 72%, 77%, and 45%. This indicates that discounting has become a new standard in consumption, with consumers getting used to straightforward discounts and regularly completing purchases at discount stores.
However, customers are not willing to sacrifice the value of products for the sake of low-priced discounts; only 17% of the survey respondents would choose lower-priced products to save money. The report notes that traditional offline retail channels are cooling down on short-term promotions, with long-term concessions becoming the new norm for operations. Yet, amidst the wave of discounting, simply reducing the prices of established products is limited in driving sales volume growth. The focus of discounting lies in finding a new balance between price concessions and upgrading value.
On one hand, the report points out that from January to October 2024, only 9% of active FMCG sales in hypermarkets were due to effective price reductions, emphasizing that selective and targeted discounting can achieve purposes such as defense, repurchasing, and attracting new customers. On the other hand, upgrading the quality of product categories in large formats is key to increasing sales volume. For instance, hypermarkets need to continue strengthening product transformation and upgrades, focusing on elevating the quality of frequently consumed food and beverages and reversing inefficient price cuts.
While offering low prices, retail businesses should move beyond mere price competition and genuinely meet consumers’ core needs with higher-value goods and services. This includes selecting products based on practical values like health and convenience, offering advanced usability for a higher premium, and stimulating consumption through higher level needs—from utilitarian to emotional value—upgrading the content of consumption.
