| |
 |
Local retailers expand operation
|
Han Ximin
SHENZHEN'S Vanguard Department Store, one of the largest retail chains in Guangdong Province with a sales volume of 1.63 billion yuan (US$195.6 million) in 2000 alone, has set its sights on expanding throughout the Pearl River Delta region.
Under the company's current five-year development strategy (which began this year), five more outlets will open in Shenzhen in the following two years while others will open in Guangzhou, Zhuhai and Zhongshan this year.
The company which at present has five outlets in Shenzhen, is planning to open 30 more in other parts of the province, and is aiming for an annual business volume of four billion yuan by the year 2005, by which time two-thirds of the company's business will be then conducted outside Shenzhen.
At a commercial meeting last month, Vice-Mayor Wang Suiming urged local retailers to sharpen their competitive edges, tighten their management mechanisms and expand outside the city.
Xu Gang, general manager of Vanguard, said at a recent interview that not only is now the right time to expand operations, enlarge market share and form regional advantages to compete with foreign retailers, but that time is pressing for such moves.
Vanguard's strategy
Established in 1991, the department store was positioned as a micro community shopping centre among large supermarkets. Its sales income was only 300 million yuan in 1995, though that figure has exploded fivefold to over 1.63 billion yuan.
Vanguard's business model, which combines a modern supermarket with a traditional department store, was labelled a "Chinese mode", or a kind of "retail with Chinese characteristics", by Professor Gu Guojian of the China Chain Operation Association at the opening of the first China Supermarket Training Session last month in the city.
"Vanguard absorbed reasonable features of traditional department stores like co-distribution and invitation for investment with manufacturers, which greatly reduced operation costs, and expanded operations by setting up chain stores and a purchasing and distribution centre," said Gu, who believed that Vanguard has set a good example for China's retail business development.
Many local enterprises have focused on tapping the domestic market as an important part of their strategy since the beginning of this year.
Renrenle, another retail giant in the city, opened a Xi'an Shopping Market last December with a shopping area of 12,000 sqm. It plans to open four branches in Xi'an and six to seven in the Pearl River Delta in the following three years.
Accord Pharmacy Co in Shenzhen, the city's largest pharmacy chain, plans to open an astonishing 1,000 shops around the country over the next three years.
Women's World attraction
Hu Yuxing, who is responsible for project planning at the Nanjing Zhenhongminfang Industrial Development Co, called up Shenzhen's Women's World retail centre, a familiar shopping destination to Shenzheners. Hu was not looking for bargains, but is hoping to jointly develop a similar shopping centre in downtown Nanjing.
The company has, in fact, been contacted by quite a few developers asking for co-operation with several major Chinese cities, including Daqing, Suzhou, Hangzhou and Shijiazhuang. The visitors are either seeking management advice or direct investment in exchange for preferential incentives.
Women's World is attracting more and more business partners with its specific managerial mode of combining centralized administration and semi-autonomous multi-commercial entities.
It signed a five-year contract in January with the Jinjiang District Government, Chengdu City, to set up Women's World Chengdu Shopping Arcade in the heart of that Sichuan city.
This project, considered the biggest investment project undertaken by a Shenzhen-based retailer, covers an area of 12,000 square metres and is scheduled to open at the end of this month with an investment of 15 million yuan.
The project, which is one of the Jinjiang District's projects to introduce outside investment, enjoyed many preferential policies by the district government.
Already, the occupancy rate in the shopping mall has reached over 80 per cent.
Lin Ruiji, general manager of Women's World, said the company's "westward movement" is set to earn more profit by introducing its deep management experience. "The big cities in the western part of China with high consumption capacity like Chengdu and Xi'an have a lot of potential for retail business," he said.
Pressure is motivation
Looming over all these moves is the approaching entry of China into the WTO, which is expected to step up competition in the retail sector, which is already battling fierce local competition.
But as a regional commercial centre which cultivates modern commercial retailers, Shenzhen was one of the first places in China to feel the predicted effects of China's entry into the WTO, in the form of encounters with giant foreign retailers. "Local retailers had to foster competitive management, scale management and strong capital to compete with foreign counterparts long before China's entry into the WTO," said Xu Gang.
"To some degree, local retailers have gained flexible management experience through years of incessant commercial wars with domestic and foreign retailers like Wal-Mart and Carrefour," said Hua Tao, deputy secretary-general of Shenzhen Retail Industry Association.
Shenzhen's openness has also created a relatively well-functioned market mechanism in China.
"Though Vanguard is at present no match for such global retailing titans like Wal-Mart and Carrefour in terms of capital, size and human resources training, it is heading in the right direction," said Xu Gang. Xu believed that Vanguard's business model is in line with the international tendency of retail business.
With the growing saturation of the local retail market, expansion seems to be the only way to go.
Hua suggested local retailers be aware of their inferiority in funds and scale operation, weaknesses which are often fatal for local enterprises battling with global retailer giants. The increase in outlets doesn't mean the extension of technical and management support.
"Local retailers must strengthen internal administration to reduce costs," said Hua, adding that the net profit margin of Shenzhen's retail business, on the whole, was only one to three per cent last year.
There is still room for retailers to tap the Shenzhen market. The city of only four million people now has 52 shopping malls larger than 10,000 sqm, the highest rate in Guangdong Province. The quickening pace of retail product consumption exceeded the growth rate of the city's GDP for the first time last year.
"Though the market space for enterprises' further growth in the city is limited, there are still a lot of opportunities inside the city," said Hua. The hunger in Shenzhen of retailers which provide not just places to shop but also avenues of amusement, relaxation and fun still has not been completely satisfied, added Hua.
|
|
|
|
