Global retailers need to grasp market nuances
Updated: 2007-07-11 14:41
Such diversity often calls for customized products and services as well as a different product mix from one city to another, Hsu said. The trick is to find the right balance between uniformity and customization. Too much uniformity will hurt sales productivity whereas too much customization will lead to lower margins.
Foreign retailers should also get familiar with the supplier representative model in China.
Retailers act as landlords in this model, renting floor space to suppliers who handle customer interfaces such as merchandising, sales and after-sales services while jointly managing logistics and promotion with retailers.
Foreign retailers should also push a business model that combines international and local trade formats, said Patrick Ducasse, senior partner and managing director of Boston Consulting Group and the global leader of BCG's Consumer Practice at its Pa
ris office.
Although modern trade formats such as supermarkets and hypermarkets are gaining ground in China, traditional trade formats are still going strong in some sectors such as the home decoration market.
"They should make sure that they understand the format, the demographics and find a commercially and economically viable business model," Ducasse said.
Network expansion and increasing productivity, Ducasse said, are equally important.
Retailers should ask themselves some of the following questions before they set out to meet the challenges they will face in China, Hsu said.
Which format will help us break traditional trades' stronghold in some sectors?
Do we know how to balance the benefits of customization against scale advantages in China's fragmented market?
Do we know how to seek opportunities in China's white spaces without sacrificing same store productivity?
Do we understand the pros and cons of the supplier representative model for our business?
What capacities do we need to answer these questions?
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