(Yicai Global) July 11 -- China's sales of discounted luxury goods expanded 8 percent last year, faster than sales in other retail channels, and the sector will continue to grow quickly over the next three years, an industry body said.

Sales of these out-of-season, no-longer-on-the-shelf wares of famous brands have reached CNY210 billion (USD29.2 billion), according to a white paper released by the China Commerce Association for General Merchandise last week.

Some 23 new discount outlets were formed last year, a jump of 11 percent from the year before and the fastest growth among all retailing forms, bringing the total to 226, the association said.

The rapid growth is related to several factors such as increased purchasing power in smaller cities, the smaller size of the sector, growing support among middle-income consumers and the fact that most purchases of luxury goods are now happening on the mainland, it said.

The pandemic forced many big spenders, who used to travel abroad in search of their luxury brand fix, to start buying from mainland stores and this helped spur the development of discount retailers, one such shop owner said.

Rivalry is very intense in the bigger first- and second-tier cities as the operating costs there are high, market players told Yicai Global. Smaller cities have more potential, and some areas offer favorable policies. Of the 23 new shops that opened last year, 10 are based in the smaller third and fourth-tier cities, the association said.

China’s discount outlets sector will face greater competition in the future, the white paper said. E-commerce platforms are also selling more luxury goods, high-end brands are setting up their own online channels and people are starting to travel again, all of which will erode discount outlets’ customer base.

The sector has become more concentrated in the past few years, with chain stores making up around 70 percent of retailers. A third of stores are operated by large shopping mall chains such as Shazhichuan, Wangfujing and Bailian. And those with annual sales of over CNY3 billion (USD416.6 million) mainly belong to the big players.

Digitization will play an increasingly greater role, the association said. The shift to a social space from a retail space is also a key trend. One discount outlet operated by Shanghai-based Bailian will integrate local tourism activities to inject vitality and makes its operations more sustainable, according to a person in charge.

Editors: Shi Yi, Kim Taylor