Outlets in lower-tier cities key to steady growth

British retailer House of Fraser Plc, which was acquired by Chinese services conglomerate Sanpower Group Co Ltd last year, said in April that it would open its first shops in Chongqing and the Jiangsu province cities of Nanjing and Xuzhou next year.

Sanpower Chairman Yuan Yafei urged the company's nearly 1,000 UK suppliers to tap into the Chinese market together. The company also said that online trading will begin in China and Australia in 2016.

As Chinese people pursue a better quality of life, consumers in cities of all sizes will seek out premium products. Lower-tier city shoppers aim to catch up with their first-tier cousins when it comes to the retail experience, and these markets may even outperform those in the top cities.

But brands need high awareness and unique advantages as they try to sell to lower-tier urban consumers. It helps if the brands are available in first-tier cities that these emerging shoppers may visit. Brands that skip the first-tier markets altogether need to figure out how they will gain consumer acceptance.

In the House of Fraser case, the brand itself is not very famous in China, but consumers' familiarity with UK labels generally might help.

China is one of the world's most enticing and challenging retail markets, but foreign retailers still need to work out suitable strategies to gain a foothold.