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Retail Sector in Shanghai
China Knowledge Press, Oct 2003, Pages: 89
China is a vast land with four municipalities, 22 provinces, five Autonomous Regions and two Special Administrative Regions. Tastes, customs, culture, infrastructure, and business rules vary among provinces. Thus every administrative region may be viewed as a separate market.
In this report, we focus on retailing in Shanghai in four sections.
Part 1 has three chapters. The first chapter provides some key statistics in a national context. It now has the highest GDP per capita and urban disposable income in the country. Chapter Two tells of shanghai’s rapid development since 1978. Chapter Three shows the relative prices of five basic items (rice, cooking oil, washing powder, beer and mineral water) in Shanghai and Singapore. Shanghai has a lower cost of living than Singapore in most items (excluding imports).
Part 2 has two chapters, giving a sector overview and facts on Shanghai’s retail sector. There is still room for innovative offerings in food and beverage, fashion, and cosmetics, but entrepreneurs should not underestimate the competitiveness of the market. Consumers generally are sophisticated and brand conscious. Chain store development has been quite fast, with more than 30% of all retail sales of consumer goods transacted by 2001. Most top retailers are chain store operators. Though Shanghai has high income levels relative to other cities, certain subsectors like department stores, supermarkets and convenience stores are overcrowded, with many undifferentiated players. Without a unique market niche, these subsectors should be avoided. Small and medium enterprises should undertake small-scale market testing via franchising, a stand-alone shop, or in a department store. Getting approval to open stores and sourcing of space are becoming more difficult.
Part 3 has chapters on rental, advertising, and distribution. Rental for retail space in prime areas is getting costly. Alternative shopping districts can be considered. Chinese companies like to advertise on CCTV. It is one of the potent ways to achieve an instant name for any company but overexposure can have negative effects. The distribution network is the major obstacle that retailers face in Shanghai and China. This is slowly improving, with increased foreign investment in this sector after China joined WTO in November 2001.
The report ends with a case study on Carrefour, featuring the rise of this international retailer in China. It shows how this large foreign company successfully entered the China market as part of a worldwide presence.
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