Despite the opening up of new cities, retailing is not necessarily a license to print money in China.

US retailer Best Buy has closed all of its nine brand-named stores in recent days. Home Depot, another US retailer, announced in January it was closing its last Beijing store, leaving it with just seven stores in the rest of the country.

Howard Abe, partner with management consultants A.T. Kearney in Shanghai and a retail specialist who is currently advising a major retailer on market opportunities in China's smaller cities, says it is important retailers get their format right.

Wu Wenjie, executive officer of Lv Yuan supermarket in Yibin, says he is happy to see the competition from foreign retailers. Xie Chenren / for China Daily

"Although there is a major opportunity for retailers in tier-3 and tier-4 cities, there is an intense level of competition. Getting the right formula for the China market is critical," he says.

An example of a third-tier city is Yibin in Southwest China's Sichuan province. The city, which has a population of 5.35 million, is a four-hour bus ride from the more prosperous provincial capital of Chengdu, which boasts the third-largest private car ownership in China.

Although much of the city, where there is distinct odor from the local manufacture of baijiu, the potent Chinese alcohol spirit, looks a world apart from London's Oxford Street, something exciting is now happening in retail.

Zeng Xianwei, a director responsible for retail in the Yibin bureau of commerce. Xie Chenren / for China Daily

Among the run down "mom and pop" shops there is now also a distinctly modern look to some of the retail frontages.

Retail sales are set to be 37 billion yuan (4 billion euros) this year, a near 40 percent increase on the 26.63 billion yuan (2.94 billion euros) in 2009.

The first major international retailer Walmart opened a store three years ago and now French supermarket group Auchan is looking at the possibility of opening a store.