As chinese market's opening-up, many foreign firms and brands enter into Chinese market. And some of them have mad a good performance and welcomed by chinese customers. the following article reports in details.
Eastern and western commerce are mingling again in Urumqi, once a pit-stop on the old Silk Road, at a Carrefour hypermarket next door to the most famous mosque in this heavily Muslim area of western China.
Shortly after Friday prayers, the store is thronging with shoppers, recent converts to the French retailer. “It is certainly a bit more expensive here,” says Kurban Wahab, picking through racks of lamb with a metal stick to check for the best cut. “But here I know what I am getting is fresh and has been checked by inspectors.”
Safety scandals involving Chinese goods have sent a wave of panic through multinational companies that outsource production to China. But for international retailers looking to expand there, the safety concerns are an enormous opportunity as they seek to target newly affluent Chinese who are increasingly worried about the quality of the produce they consume.
“The food scares over the past few years have been great news for branded goods and retailers,” says Zhang Bing, at the Shanghai office of consultants AT Kearney.
Carrefour and Wal-Mart are both expanding aggressively in China, which they hope could become a mainstay of their businesses in the future. Carrefour has 101 hypermarkets in 37 cities, while Wal-Mart has 86 and is in the process of acquiring up to 100 stores belonging to the Trust-Mart chain.
Yet as the retailers move inland from China’s coastal areas in search of new customers, they are facing huge challenges in ensuring the quality of their products because of primitive logistics infrastructure.
Nowhere is this more apparent than in Urumqi, a city of 2m near the border with Kazakhstan and by far the most remote outpost of Carrefour’s China operations. Executives from the French group say it takes seven days for a truck to arrive from Beijing, which is nearly 2,000 miles away.
Eric Legros, chief executive of Carrefour in China, insists the group uses only food producers that have passed the group’s quality tests but the precarious transport system is evident at the supply entrance to the Urumqi store, where a flatbed truck arrives with fruit held in place only by old blankets.
According to AT Kearney, there are only 30,000 refrigerated trucks in the whole of China, a country with a similar area to the US and with four times the population. In the US there are 280,000 such trucks, an essential part of the system of keeping food fresh over long distances.
“The logistics costs are much higher when you have stores in cities so far inland because the infrastructure is weaker,” says Huang Guoxiong, a professor at Renmin University in Beijing. “It will take them a number of years before they can be profitable.”
Retailers also have to cater for very different tastes around the country. Carrefour has three stores in Urumqi, two of which are in neighbourhoods populated mostly by Han Chinese, the country’s dominant ethnic group. Their favourite items are similar to those of shoppers in Shanghai and Beijing.
However, the hypermarket beside the Erdaqiao mosque is in an area dominated by ethnic Uighurs and other Muslim minorities from western China, so the shelves carry rows of dried apricots, almonds, saffron and different varieties of raisins. Women in bright headscarves queue for bags of dried lavender. The lamb and beef is halal; fresh pork – the most popular meat in China – is nowhere to be seen.
Carrefour’s aggressive expansion into such remote parts of China has been helped by the decentralised model it has adopted, which gives individual store managers flexibility to adapt to different consumer tastes.
However, such autonomy has also led to some breaches of quality standards. The group received a fine last year after one store was found to be selling pork past its sell-by date, while another was sued for selling fake Louis Vuitton handbags. This month, eight officials involved in meat purchasing were detained by police over allegations of accepting bribes. “The Carrefour system allows them to be much more flexible, but the downside is that it opens up a lot more space for corruption,” says Paul French, a retail industry consultant in Shanghai.
However, even though such problems have been widely aired in local media, which like to analyse the missteps of multinationals, the French group still enjoys a reputation for good quality among its customers in Urumqi.
“When you buy beef at some of the shops around here, they sometimes try to sell you horse meat or even camel and they cheat you on the scales,” says Zhang Li, a housewife. “Here at least I know exactly what I am getting.”
Origin: The Financial Times
