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CHINA FRANCHISE NEWS
Vol. 4 , No. 5 - May 6, 2003
TOPICS THIS ISSUE:
- Foreign Discount Store To Open In Beijing
- Beijing Welcomes Foreign Retailers
- Competing For Market Share
- Localization Is The Solution
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Foreign Discount Store To Open In Beijing
According to a spokesman from Beijing Shoulian, within the next three to four years, Beijign Shoulian Group will enter into a partnership with Dia Group, an affiliate of the France-based Carrefour SA, to open discount stores in Beijing and its surrounding regions.
However, the spokesman declined to disclose the scale of the investment, i.e. the total amount of investment and the specific numbers of stores to be opened. He further explained that detailed information would be unveiled in a formal announcement by the company.
It was reported earlier that Dia's plan is to open 20 to 30 stores in residential areas this year, and 50 stores every year thereafter. Each store will have an area of around 300 to 500 square meters. According to the report, the prices of goods in Dia stores in Beijing would be 10% cheaper than those in Carrefour's stores in the municipality. Dia stores will focus on food items.
Dia has already signed an agreement with Shanghai Lianhua Supermarket Co Ltd, the biggest retailer in China, to form a 55-45 chain store joint venture. The new joint venture plans to open 300 discount food stores in Shanghai in five years. Total investment is estimated at 135.5 million yuan. The joint venture has a registered capital of 93.07 million, of which Dia will invest 51.19 million yuan and Lianhua the remaining 41.88 million yuan. It is expected that the first DIA discount store will open in June.
The Beijing Commerce Commission expects the city's retail sales to rise more than 10 percent to 200 billion yuan in 2003.
(Source: AFX European Focus)
Beijing Welcomes Foreign Retailers
As part of Beijing's efforts to set up a modern logistics framework, it is welcoming international retail companies to build regional headquarters and distribution centers or open outlets in the Chinese capital city.
It is reported that the municipal government has already entered into agreements with 10 international retailing chains including Walmart, Europe Fashion, 7-11 and China Resources, which are expected to open branches in Beijing this year. Several of them are leading global furniture and building material dealers.
Liang Wei, director of the Beijing Municipal Commerce Committee, promised that Beijing would keep on improving its investment environment, speeding up procedures and offering overseas companies with advices on picking outlet locations, seeking competent managers and acquiring up-to-date information.
Beijing has been working hard to boost its sales of retail consumer goods to 200 billion yuan (24 billion US dollars) in 2003, an increase of over 10 percent over the previous year. The proportion of added value in the city's commerce sector will make up more than eight percent of the city's Gross Domestic Product(GDP).
(Source: Xinhua News Agency)
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Competing For Market Share
According to the National Bureau of Statistics, retail sales increased by 9.2% year on year in February, up from 8.8% growth for the whole of 2002. This is good news for China's major retail chain operators, whose sales growth significantly outpaced overall retail sales growth last year. The country's 30 largest retail chains recorded RMB 178 billion (US$21.5bn) in total sales in 2002, a 43% year-on-year increase, according to the State Economic and Trade Commission.
Both foreign and domestic retailers are expanding quickly to capitalize on China's growing consumerism. The country's largest supermarket chain, Shanghai-based Lianhua Supermarket, released the news late last month that it had received approval from the China Securities Regulatory Commission to proceed with a listing in Hong Kong. According to local media reports, Lianhua is planning to raise US$100 million through the offering so as to add 4,000 stores in the next three years.
Lianhua says it expects annual sales of RMB 80 billion (US$9.7bn) by 2007. According to the China Chain Store & Franchise Association, the sales of Lianhua last year reached RMB 18.3 billion (US$2.2bn) -- an increase of about 30% over 2001 - remaining as China's top chain-store operator.
Other retail chains have also recently announced ambitious expansion plans for their China businesses:
The world's biggest retailer, US-based Wal-Mart, has already opened 26 outlets in many second-tier Chinese cities and is now moving into Beijing and Shanghai. The firm has already begun selling membership cards in Beijing for its Sam's Club outlet that will open in June. Wal-Mart plans to open its first Supercenter in Shanghai in 2005.
Watsons, a subsidiary of Hong Kong conglomerate Hutchison Whampoa, is also launching onto China market. With 42 Watsons outlets currently operating in China, the pharmacy chain (the world's third- largest by number of stores) plans to add 100 more outlets in China over the next two years.
Another domestic firm, New Hope, is also poised to jump into the retail fray. The firm -- involved in everything from animal feed to financial services -- established a Rmb400m (US$48.3m) joint venture with China Yintai Investment last month to launch a chain of hypermarkets in Shanghai.
(Source: EIU Business China)
Localization Is The Solution
Local and multi-national retailers in the Chinese market are being urged to implement more local characteristics to attract the shopping cash of young and affluent Chinese.
According to research by ACNielsen, those strategies adopted by major retail outlets, which are based on Western markets, are failing to win over well-off Chinese customers. The company has recently accomplished a customized research project based on the 2002 Shopper Trend Study. The project focused on young, affluent customers aged between 25 and 35 with middle or high monthly incomes averaging between 2,500 yuan (US $ 302) and 3,500 yuan (US $ 432) in seven major Chinese cities. "Young and affluent Chinese are becoming more sophisticated and more demanding than ever before," said Alistair Watts, managing director of ACNielsen China.
According to Watts, while people of this group are confronted with far greater store and product choices, their attitudes towards shopping are very much tied to their culture. Therefore, their expectations of a shopping trip can be in many ways different from consumers in Western-style markets.
As this group of young people endeavor to acquire visible demonstrations of success and status through hard work, their spare time is limited and consequently shopping is regarded more as a hobby, even a supplement for rest and relaxation. At the meantime, these customers are more willing to take shopping as a family occasion, mainly due to limited recreational resources.
"Such attitudes mean that young Chinese consumers are not just shopping when they need to buy. They shop more often but spend less than what you would see in a market like the United States," Watts further explained.
Bearing in mind these factors, retailers should, rather than expect major changes in the fundamental habits of shoppers in China, consider adapting to consumers' habits and develop their own market niches, he suggested.
"If they do not develop a market niche quickly, the difference between them will be further blurred and no one will win in such a crowded battlefield for consumer loyalty," he warned.
Latest statistics from the China Chain Store Association reveal that the sales volume of the country's top 100 chain stores hit 246.5 billion yuan (US $ 29.8 billion) in 2002, registering a sharp rise of 52 per cent over the previous year. At the same time, the number of chain store outlets increased by 29 per cent and the business areas of the stores increased by 59 per cent.
(Source: China Daily)
Lehman Lee & Xu
China Lawyers, Notaries, Patent, Copyright and Trademark Agents
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The China Franchise News is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
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