Big Box in China
Much has been made about China overhauling Germany to become the world’s leading exporter in 2009. I am so underwhelmed.
The big story is the coming growth of China’s domestic consumer market. Yes, we have heard a lot about consumption in China, but it still lags its huge potential. Domestic demand has not been consistently encouraged by Beijing and China has a cultural imperative for a high propensity to save. Those may slow things down, but they are not capable of stopping demand growth. As China’s GDP per capita grows, domestic consumption will grow with it. Which explains why “big box” stores are opening like crazy across the face of China.
Expect More Malls in Shenzhen
China has its own home-grown department stores, of course. Wing On and Sincere were in business early in the 20th century and are still going strong.
The Japanese were the first of the foreigners to come in, with small stores opening as early as the 1960s. But Yaohan brought the first of the big stores in 1991 when they opened in Shenzhen. They were quickly followed by Seibu and Isetan – and shortly by other Asian department stores.
France’s Carrefour may have been the first of the western department stores to risk China. They launched their first store in 1995 and have grown to 156 outlets.
Walmart opened in Shenzhen in 1996 and have never stopped growing. They have 146 stores in 86 cities and they don’t think they have saturated the market. Walmart also purchased the 102-store Trust Mart chain, and employs roughly 70,000 Chinese workers. They don’t just buy things in China for sale in the United States, contrary to popular belief.
The British came late to the party, Tesco opening its first China store in 2004, but expanding quickly to 72 outlets. Now, Tesco is launching a complete shopping center (not just a store) in Qingdao – and plans twenty more if the Qingdao operation proves profitable. They have the know-how to pull it off. I saw Tesco’s takeover of the ill-fated Kmart in Bratislava and they did well there in tough conditions.
Costco has six warehouse stores in Taiwan, so one wonders when they will venture across the Strait.
There are many other stores in China (C&A and Marks & Spencer come to mind), but my point is that consumer demand will grow in China, big western-style stores are in place – and smaller exporters might find the buyers for these international chains to be their easiest and safest way to get into the Chinese consumer boom. If you are big enough to supply these stores in your home market, then you may be able to do so in China.
