Rapidly growing marketplace shapes personnel, marketing strategies

DSN Retailing Today, Dec 13, 2004 by Mike Troy

The high level of management focus combined with the emphasis on training programs are the surest indicators of Wal-Mart's optimism toward China's potential.

The best example of that potential, from Wal-Mart's perspective anyway, exists in Shenzhen. It was the first market Wal-Mart entered in 1996 when it opened a Sam's Club and a supercenter.

According to Qin Qunli, deputy director general of the Shenzhen Bureau of Trade and Industry, the city was the first to be established as a special economic development zone as China began to liberalize its economic development policies. The results have been astounding. The average growth rate for retail during the past 10 years has been more than 15%, according to Qunli, and the structure of the industry has evolved so that chain stores now account for 40% of retail volume. In Wal-Mart's case, 11 of its 43 stores in China are located in Shenzhen including eight supercenters, two Neighborhood Markets and one Sam's Club.

"We welcome more and more U.S. retailers to open shops in Shezhen as this area has the most purchasing power in China. It is so ideal," Qunli said.

That helps explain why the Sam's Club that opened in Shenzhen eight years ago now needs to be relocated. The city's growing affluence and rising number of automobiles has caused a parking problem. The original location had 450 parking spaces, while the new location will have 2,000.

A visit to Wal-Mart's first supercenter in Shenzhen also offers a glimpse into how the company has evolved with that format. The Shenzhen location feels cramped, and high fixtures make sightlines difficult. Conversely, Wal-Mart's newest supercenter in Wuhan boasts extremely wide aisles, an improved layout and a sign package that simplifies navigation.

Wal-Mart has come a long way in China. That much is evident by comparing supercenters and Sam's Clubs in Shenzhen to newer units in Wuhan and Beijing. This ability to make adjustments combined with good government relations and a workforce that has taken Wal-Mart's corporate culture to a new level bode well for future growth.

TOP FIVE RETAILERS IN CHINA BY MARKET SHARE

  Company                                  Corporate HQ

1 Shangai Bailian (Gropu) Co.              China
2 Dalian Dashang Group Co.                 China
3 Beijing Gome Electrical Appliances Co.   China
4 Beijing Hualian Group (Holdings) Co.     China
5 Carrefour                                France

  Company                                  2003 sales      2002 sales

1 Shangai Bailian (Gropu) Co.              $5,5857         $4,805
2 Dalian Dashang Group Co.                 $2,198          $1,545
3 Beijing Gome Electrical Appliances Co.   $2,149          $1,316
4 Beijing Hualian Group (Holdings) Co.     $l,642          $1,244
5 Carrefour                                $1,618          $1,109

Sales are for China only, in millions. Where necessary, figures are
converted to U.S. dollars based on average annual exchange rates
for 2003 and 2002.

Source: Ministry of Commerce of the People's Republic of China,
PricewaterhouseCoopers 2004/2005 Global Retail & Consumer Study