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Report: China Will Top US as World’s Largest Retail Market by 2018

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Retailers aren’t worried that China’s economic growth slowed to a six-year low of 7 percent in the first quarter of 2015. According to a new report by strategy and management consulting firm A.T. Kearney, the country will surpass the United States as the world’s largest retail market within three years as global brands clamor to cater to an increasingly wealthy consumer class.

The 2015 Global Retail Development Index, published Monday, ranks the top 30 developing countries for retail investment taking into account such variables as market size, how saturated it already is and overall riskiness.

Uruguay, Chile, Quatar and Mongolia all figured among the best locations, but China claimed the top spot for the first time in five years because, despite its cooling economy, retail growth was 11.6 percent in 2014 and sales hit $2.83 trillion.

The report calls China “the leader of the pack” and says retailers are “adapting to an environment of slower economic growth” by “pruning and optimizing store portfolios.” Walmart, for instance, closed 29 underperforming stores in the country in 2013 but will have opened 111 new stores by 2016. French chain Carrefour shuttered eight of its Chinese locations and added 11 last year. British retailer Marks & Spencer plans to close five Shanghai stores this year while opening flagships in Bejing and Guangzhou.

Elsewhere, Apple is aiming to up its Chinese footprint from 15 to 40 by 2017, while affordable clothing chains Uniqlo, H&M and Zara opened a combined total of 264 stores in the past year. Luxury retailers Hermes and Lane Crawford opened new stores, too.

Plus, China’s e-commerce sales swelled 50 percent to nearly $450 billion last year—that included $150 million in mobile transactions—and is projected to reach $1 trillion by 2019 as Alibaba and JD.com work to better serve smaller cities and rural areas. Alibaba teamed with China Post last year to boost its last-mile delivery capabilities, while JD.com launched same-day delivery in more than 100 counties and districts and next-day delivery in another 600.

Among the least desirable places in the developing world for retailers: Mexico and Angola, the latter because “local production facilities are limited and infrastructure is underdeveloped,” the report said.

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