Breaking Into China’s Chains


China is a country caught in a tense struggle with its own identity these days, and the future looks like the road will not become less bumpy as things continue at their current momentum. Amidst all of the noise coming from the headlines about a brewing US-China currency war, Google pulling out of the Chinese market, Bluefin tuna getting the death sentence, and a proposed network of high-speed railroads connecting 17 nations across Asia and Europe, there is another reality check for those who are watching the PRC closely: retail chains are taking off, and they are taking off in a huge way.

Chains of consumer retail stores that were looking into the crystal ball back in 2005 saw a lot of opportunity behind expanding into China’s markets. Paris-based Carrefour, one of the bigger companies to take the plunge, had been wise to make the move, even though it got them into trouble here and there with deals being made and favors granted by local governments. They are still standing, and they are standing in every one of China’s major cities, with an initiative to start expansion into the smaller ones as well.

German retailer METRO has also been hard at work, as well as French Auchan, US-based Wal-Mart, and about a dozen others who knew that the earliest players would set the stage for competition as things became more apparent to the retail community. With hundreds of hypermarkets opening up in every one of China’s top-tier and second-tier cities, consumers are now finding a new array of selections and products that were once inconsistent, overpriced, or simply unavailable.

Chinese shoppers have changed, too. In the old days, it was common for consumers to wait in lines for a few goods that were rather uniform and limited in options, only to make the next round of the day’s shopping in open-air markets that provided staples like tofu, eggs, and vegetables – as well as freshly-killed meats – in rather unsanitary conditions. These days, Chinese consumers seem to be in a race to leave that part of their history as far behind them as possible, and that means making the drive to one of the hypermarkets that offer everything under one roof, with a clean and organized layout making shoppers feel more relaxed and comfortable in their experience. The average middle class Chinese consumer seeks comfort and organization over price, as studies have consistently shown in the past five years, and this will only become a larger number as the country’s population of middle class swells to a number larger than the USA’s population. This could happen as early as 2012, according to some research, but whether the number is on or off target by a few million, the fact that China represents any major retailer’s hopes is clearly there.

Of course, nothing is simple when dealing with China, and the rising figure that represents the middle class is also a figure that comes with a lot of extra baggage. Combined with a potentially crippling inflationary economy, a real estate market that seems to know no limits in ballooning prices, and environmental issues that are currently one of the top items of contention on many citizen’s minds, it’s not hard to see that launching your own chain of hypermarkets in China is still a risky business. It’s an unstable and rapidly-changing place to be in, with many decisions made in secret by authorities, and revealed to hapless businesses and foreign stakeholders only when the rules of the game have changed.

As with so many things in China, time will tell. For now the rush is on to provide a seamless and comfortable shopping experience to consumers who live a reality filled with long lines at every service desk, traffic that is world-class in its gridlock, choking clouds of pollution in most cities, and employment insecurities for every college grad that walks away with a diploma. For many Chinese, it’s nice to escape these things, even if it means paying more for basic goods. Smiling cashiers asking the question “Will you be paying with cash or credit?” should raise red flags as China’s middle class is also getting used to the feel of plastic, but that’s another story entirely.

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