Chinese consumer spending on fast moving consumer goods grew just 2 percent in the first quarter of this year, compared to a year ago, according to Kantar Worldpanel’s quarterly report.

Spending in modern trade, including such organizations as hypermarkets, supermarkets and convenience stores, declined by 0.5 percent in the first quarter, due to the success of e-commerce. Online shopping picked up, with spending on consumer goods via e-commerce channels rising by 48.1 percent.

The rise of online spending was as a result of more households purchasing via the channel, with penetration up by 33.7 percent; the fastest penetration growth came in lower tier cities. County level cities saw the fastest gains, with growth coming in at 48.9 percent. E-commerce retailers have recently been making obvious attempts to create inroads into countryside communities and drive rural spending. According to the report, e-tailers are pushing to develop the demands of county level cities and are improving logistic capabilities.

The report also noted that the rivalry between e-commerce giants Tmall and is leading to consumers in key cities enjoying deep price promotions from Tmall stores.

Local retailers are continuing to perform better than international retailers, but non-Chinese retailers are beginning to claw back the difference. In the first quarter of 2016, international retailers saw their market share fall to 13.2 percent, which was down only 0.3 percent for the same period last year, the smallest recorded market share decline in recent years, said the report.

Wal-Mart showed the strongest signs of recovery, seeing share growth for a second consecutive month. Its quarterly share is now 5 percent of the market recorded in the first quarter, up 0.2 percent for the same period last year, and driven by the strong performance in western China, where the retailer holds 6.4 percent of the market, according to the report.

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