While some international brands are planning hundreds of new stores in China in the next few years, other brands are closing down their chains in the country. So what makes a store network in this emerging market successful and what makes them fail? Bruce Berkman, CEO of getchee, a solutions provider of Asia market and location intelligence, tells Retail in Asia some tips to success in the market. He also talks about the upcoming getchee event – Tools & Processes for Store Network Success in China – where attendants can learn more about the tools that can help in building a successful store network.
RIA: Can you give us a general picture of the Chinese retail industry nowadays? What challenges are retailers in China facing? What are the opportunities?
Bruce Berkman (BB): As Chinese consumers grow richer daily, the market is maturing. This is especially true in the coastal cities where rents and brand consciousness continue to rapidly increase. Interior cities are also becoming richer and more are willing to spend on branded products. However, the development in these cities is more uneven. Retailers are now pushing into third to seventh tier cities where domestically driven economic growth is high but the number of quality retail spaces and brand consciousness remain quite low. Local competition is also growing rapidly across all markets with local retailers competing strongly on lower-end products. However, they are starting to compete at the higher end of the playing field. Even as brand consciousness grows, Chinese consumers still look for bargains. Sometimes foreign retailers don’t recognise that the market remains quite mixed with some regions and segments demanding more branded products while others unexpectedly don’t.
RIA: How is the Chinese retail market different from that of other countries?
BB: Other than the overall geographic size, diversity, and emergence of local competition, I don’t think the consumer demand is much different than any other rapidly growing Asian market. The key is to be systematic in researching and understanding local (city-level) tastes and demand. Because the market is large, being systematic in data collection and use is critical. Unfortunately, like many rapidly emerging markets, China data quality varies substantially and data sourcing is complex. Local competition creates many challenges because of their different operating models, willingness to sacrifice profits for market share, and relatively low cost of funding.
RIA: What do you think is the key to success in China’s retail industry?
BB: The key is understanding consumer trends and having the tools and resources to exploit them. Successful retailers systematically mine transaction data, local knowledge, and consumer survey information to analyze geographic and demographic trends. They look at competitors’ behaviour and performance broadly. They adapt, rather than import, western consumer behaviour models. They cultivate and retain local management loyalty and skills. They systematically build brand loyalty, rather than expect it will come.
RIA: What tools and processes do Chinese retailers need for better store network development and optimising business operations?
BB: Nowadays, consumers really drive the retail industry. Therefore, all retailers need to understand consumer preferences and trends. They need data and analytic tools to separate consumer markets by size, wealth, and geography. Assessing POS data with demographic data and qualitative consumer behaviour data is critical. Location is the first critical path step in good retailing, so understanding local consumer behaviour and demographics as well as competition is crucial. Brands also need data and location analytics for targeted and localised merchandising and marketing management.
RIA: What is the aim for the upcoming getchee seminar Tools & Processes for Store Network Success in China? In what way will it help retailers in China?
BB: The upcoming seminar is meant to open the eyes of retailers in China to the available tools and data available for systematic channel expansion. Problems are often hidden and we hope to shed some light on how to identify and address them. This is also a great opportunity for people in the industry, including ourselves, to share and build upon our experiences so that we continue to come up with innovative industry solutions.
RIA: What topics will be covered in this seminar? What kind of information and insights will it deliver? Why these topics?
BB: We’ll first talk about building a store network in China then move into managing operations. For our first two seminars, we talked about targeting lower-tier cities and shopping malls. This time we want to focus on a robust solution to build and manage a network of stores. Obviously, this requires an integration of multiple tools and processes.
RIA: Can you name some of your speakers and tell us a bit about their backgrounds?
BB: Johnson Lee from Daphne Shoes will speak first. He has a lot of experience in market development. He’s familiar with retail food and merchandise. Lee’s insight will help retailers spot red flags and provide them with ways to fix the problems. Ray Leimin from Wincor will discuss ways to improve store operations through different industry methods and tools. Howard Hsiao from getchee will present solutions to optimise a business’s performance with regard to better managing retail expansion and store operations.
RIA: Who are the targeted attendees? What can these attendees get from the conference?
BB: CEOs, directors, network planners, business development managers, marketing managers, sales managers, business operations managers, real estate developers, and the like are all welcome. Anyone who attends will take home new information about how to improve their businesses in China. Attendees will build new valuable relationships at the seminar as well.
Bruce Berkman is CEO of getchee. getchee is a solutions provider of Asian market and location intelligence. It helps brand owners expand and optimise their businesses in emerging economies.
The seminar Tools & Processes for Store Network Success in China will be held at Shanghai, China, on 13 April. It is the third installment of getchee’s ongoing seminars series. For more information, visit getchee’s Events.