Friday, April 30, 2010

World Retailing: China's Wild West

In the Financial Times World Retailing this month, "The Wild West with razor-thin margins" documents the complications associated with exponential growth opportunities associated with open markets.  Specifically, the case of "Huang Guangyu, founder of the giant Chinese electronics retail chain Gome, was named China's richest man two years ago... But in February, he cele- brated his second Chinese New Year behind bars, awaiting trial on vague charges of bribery and stock manipulation."

Chinese retailers ramped up their growth fast... more importantly, as good friend and colleague Mr. Tony Tsai, CEO – BHG Retail Innovation Institute and EVP Operations – The BJ Hualian Hypermarket Co. highlights, the Chinese retailers have adopted methods of understanding their shopper and consumer as well.  China is a place where the behavioral change of the shopper and consumer is simply very fast in comparison to the developed markets because "people who were at subsistence level a few years ago are becoming consumers."

The article states:

Retailing in China is still highly regional, highly frac- tured and overpopulated,” says Paul French, manag- ing director of retail consul- tancy Access Asia.

For example, in the western city of Chengdu, half a dozen high-end mega-malls are scheduled to open in the coming months. A giant statue of the late Communist leader Mao Zedong now points towards a Cartier store crowded in next to a Starbucks.

The wild west environment in which Mr Huang carried out his ambitious consolidation and which ultimately saw him toppled has spawned a cut-throat model that has been widely replicated."

Yet, China may also be developing its own in-store shopper engagement and conversion models:

"Companies such as Gome and Suning, its biggest competitor in the electronics sector, rely on product agents instead of inhouse salespeople as a way of con- trolling costs.

This means that when customers enter most Chinese appliance stores, the only people directly employed by the retailer are the cashiers, the security guards and the warehouse staff."

One thing is for certain, China has a ways to go in its experimentation as the shopper and the consumer remain an evolving base from needs vs. desires to affordability vs. affluence.

If you would like to read this and other articles in the World Retailing, download the complete file here.

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