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Module 5 retail location selection
- 1. Locations in Chinese Retail Industry Presented by Yan Lu V1
- 6. Segment 1--Types of locations Free standing
- 7. Segment 1--Types of locations Business district central business district (CBD) secondary business district (SBD)
- 8. Segment 1--Types of locations Business district neighborhood business district (NBD) string
- 9. Segment 1--Types of locations shopping centers community shopping center regional shopping center factory outlets center
- 10. Segment 1--Types of locations -comparison between US retail locations and Chinese retail locations Exhibit:
- 11. Segment 1--Types of locations -some comparisons between US retail locations and Chinese retail locations Open market in China Free standing in China Free standing in US Lifestyle center in US
- 12. Segment 1--Types of locations -how to match them with location Segmentations in China
- 13. Segment 1--Types of locations Matching of location Segmentations with retail types –Chinese retail types
- 14. Segment 1--Types of locations Central Place theory -classic theory and understanding Developed by Walter Christaller in 1933 “Central Places in southern Germany”. It is a deductive theory to explain the number, location, size, spacing and functions of settlements in terms of the services they performed for surrounding hinterlands. Central place: a service center, a settlement providing a range of goods and services to the surrounding areas. Centrality: the functions or services provided by central place. The higher the centrality of a central place is, the more the variety of services and the higher the order of services it provides. Hinterlands: the market areas covered by the services of central places that may include smaller central places. The higher the centrality of a central place is, the larger the hinterland.
- 15. Segment 1--Types of locations Central Place theory The impact of increased population density or increased income of population Consumer expenditure will increase Further high-order services will be required Increase the potential number of levels of hierarchy Increase the degree of functional specialization of the highest-order center The impact of improved transportation on central place system Population mobility increased People are willing to travel longer to obtain services Market area of a central place will expand Restructuring of central places, some have to be closed.
- 16. Segment 1--Types of locations Central Place theory K = 3 Marketing principle
- 17. Segment 1--Types of locations Central Place theory K = 4 Transport principle
- 18. Segment 1--Types of locations Central Place theory K = 7 Administrative principle
- 19. Segment 1--Types of locations Central Place theory Case1 : Settlement systems in Zhejiang China Means a town in Zhejiang Province in China
- 21. Site future plan
- 23. Permission notes for location--we will talk about this in detail in Segment 3
- 24. Segment 1--Types of locations Life style Segmentations -Chinese life style Segmentations (Three ways) 1. subject Segmentation 1.1 Social 1.2 Group 1.3 Individual 2. Value Segmentation (most relative to our topics) 2.1 Blue-collar lifestyle: working class 2.2 Consuming lifestyle: wealth family 2.3 Leisure lifestyle: enjoy life 2.4 Social lifestyle: networking oriented 2.5 Political lifestyle: plays important role in government agencies 2.6 Religion lifestyle: (not a majority) 3. Community Segmentation 3.1 City lifestyle 3.2 Rural district lifestyle
- 25. Segment 1--Types of locations Lifestyle and Site Selection
- 26. Segment 2-- Site evaluation and selections Learning objectives: -Know about different site characteristics and the definition of trade area. -Learn how to evaluate a site for a specific retail store -Know about the general idea of forecasting revenues and costs for a retail store on a selected site Learning contents -Site evaluation -Trade area -definition -how to define a trade area in China -evaluate the trade area for different retail stores -Huff Gravity, Regression and comparable methods
- 27. Segment 2-- Site evaluation and selections Site Evaluation
- 28. Segment 2-- Site evaluation and selections Trade area -definition: The geographic region in which a good or service is available and from which a company generates most of its sales. For example, a local retail store may have a trade area with a 50-mile radius. Also called market area.
- 30. No standard classificationex. Wal-Mart may use 8 minutes driving time in US to describe its trade area. By contrast, it uses 20mins bus driving time in China (public transportation methods)
- 34. Segment 2-- Site evaluation and selections Site Characteristics -Parking -Size -Traffic volume -Accessibility -Visibility
- 35. Segment 2-- Site evaluation and selections Site Characteristics Parking In US, the parking standard for retail space is around 4 parking spots/1000 SF In China, the requirement varies from cities to cities, but the average ratio is 1/100 M² Ground parking VS. Structured Parking
- 36. Segment 2-- Site evaluation and selections Site Characteristics Size Floor Area Ratio In some central district in China, the FAR can be 5 or higher which make it possible to build multi-story shopping centers
- 37. Segment 2-- Site evaluation and selections Site Characteristics Traffic Volume Also refers to traffic counts, very important characteristic for retail space. For example, in China, supermarket requires traffic volume be between 4000-8000/day
- 38. Segment 2-- Site evaluation and selections Site Characteristics Accessibility --Entrance --Exit --Connect with major roads and traffic --internal roads design
- 39. Segment 2-- Site evaluation and selections Site Characteristics Visibility customer should see retail space easily and feel comfortable
- 40. Segment 2-- Site evaluation and selections Site Characteristics Visibility (Chinese Characteristics) As we said in last study Segment, free standings in China are not so common, it’s very difficult for retail stores to get visibility directly. In stead, almost every retail stores show very good visibility of their LOGOs and banners to attract customers.
- 42. Walmart: started from South China, second-tier cities, suburban area
- 44. Segment 2-- Site evaluation and selections Year: 2007
- 50. Some cost related terminologies
- 51. Base rent
- 52. Step rent
- 56. Purchase a project which is under construction
- 60. Segment 3--Regulation and Leasing Clauses Under-construction projects --land use restricts --building codes (e.g., …) Existed Stores --no land use restriction as long as it doesn’t change --check building codes
- 61. Segment 3--Regulation and Leasing Clauses Site selection regulations for foreign retailers --Removed most restrictions on foreign-invested retailers --Issued a regulation decentralizing store opening approvals ----commercial zoning commercial planning certificate
- 62. Segment 3--Regulation and Leasing Clauses Environmental regulations -- Environmental impact assessment must be completed before construction or upon request
- 63. Segment 3--Regulation and Leasing Clauses Exclusive use Most commercial leases for multi-tenant properties contain clauses which regulate the tenants' use of the leased premises. Many tenants will require a landlord to grant the tenant the exclusive right to operate a certain business or sell a certain product to avoid competing with other tenants. These provisions are appropriately referred to as exclusive use clauses.
- 64. Segment 3--Regulation and Leasing Clauses Prohibit use A landlord may also include a prohibited use clause to prevent a tenant from using the leased premises in a manner which the landlord believes is a nuisance to the others For example, a landlord may consider a bowling alley or a night club as a nuisance.
- 67. Segment 3--Regulation and Leasing Clauses Leasing clauses Chinese cases Wal-Mart exclusive use No similar business in the same building or shopping center No similar business with 1.5 Kilometers
- 68. Segment 3--Regulation and Leasing Clauses Leasing clauses Chinese cases 2. KFC and McDonalds complement effects No exclusive use for each other complement effect not substitute always choose to open stores next to each other or in the same business district.
- 69. Segment 4--Consumer behavior in retail site selections Learning objectives: Understand the different shopping types of consumers Know about the relationship between consumer behavior and retail store locations Learning contents Shopping types -group effect -convenient shopping -comparison shopping -specialized shopping mode
- 70. Segment 4--Consumer behavior in retail site selections Consumer Behavior in China --looking for aesthetic and social value instead of just focusing on the basic needs of warmth and the protective function of products. -- consumer’s expectations of product quality in general have been steadily rising, --reluctance to pioneer --like to shop in a free environment without interference
- 71. Segment 4--Consumer behavior in retail site selections Consumer Behavior and Retail site selections I Group effect Phenomenon: many brands like to open stores in very close locations such as KFC and McDonalds, Suning and Gome. Products: most of them are in the same industry but differentiate in products, and have the different target consumers. Consumer behavior: easy to find the multiple target products among these similar stores
- 72. Segment 4--Consumer behavior in retail site selections Consumer Behavior and Retail site selections II convenient shopping Phenomenon: many stores are likely to choose locations where consumers can access easily or where have more traffic such as CBDs, residential communities and subway stations Products: food and consumer goods. Some specialty stores can open close CBDs Consumer behavior: are likely to pay more at these retail store because less commuting expenses.
- 73. Segment 4--Consumer behavior in retail site selections Consumer Behavior and Retail site selections III comparison shopping—price war Phenomenon: in perfectly competition market, stores with same products are less likely to open closely because consumer can have greater bargain power to drive price down. Products: homogeneous Consumer behavior: consumer like to purchase products after comparing 3-5 stores if those stores are close.
- 74. Segment 4--Consumer behavior in retail site selections Consumer Behavior and Retail site selections IV specialized shopping Phenomenon: some retailer stores are likely to open at a specific location without any competitor or similar store nearby such as IKEA Products: all-kinds in this industry but has unique characteristics Consumer behavior: Loyal consumers are likely To shopping at that place even if the commuting expenses are high.
- 75. Segment 4--Consumer behavior in retail site selections Consumer Behavior and Retail site selections V one stop up-scale mall shopping Phenomenon: in CBD districts, people especially white collar and elite group like to shop in up-scale shopping mall matching their life style and fashion taste Products: all-kinds commodity Consumer behavior: Loyal consumption and brand effect
- 76. Segment 4--Consumer behavior in retail site selections Case —failed site selection Jusco --Up scale shopping center in Japan --choose railway station to open their stores in Shanghai --low consumer class --failed and out of business
- 77. Segment 5 — Retail Models and Expansion Strategies in Site Selection Learning objectives: Explore existingretail models and expansion strategies in China Understand why site selections must match retail models and expansion strategies Learning contents Retail Models Commercial Real Estate, Direct Operation, Franchising, etc. Expansion Strategies Fast & aggressive expansion, moderate expansion Tailored Site Selection Principle Scattered or concentrated, profit driven or attention driven
- 79. Segment 5— Retail Models and Expansion Strategies in Site Selection Red Star Macalline (buy) Gome (lease)
Notas del editor
- The classification is from <Chinese retail standard and classification>There are many different ways to classify the different store types, in my view, the store locations classification is only based on the sector of in-store retailing. We focus on our analysis on the physical locations of different kind of stores and the match of retail categories and those locations.
- Free standings in China and US are similar, however, in big cities in China, because of the scarcity of land, free standings for a single retail store are not very common. However, in some first-tier cities in China such as Shanghai and Beijing, you can see many department stores which own or lease the free standing building.
- In tier-1 cities, the central business district and secondary business district are always co-exist. For example, in Shanghai, Lujiazui Financial Center counts for CBD, however, it also have many SBD inside of the middle ring.
- In China, you can see many strings which in CBD or downtown areas. Motor vehicles are not permitted on strings. In fact, many strings are located in CBD areas.
- Here, shopping centers don’t mean department store but a clustered community shopping area where people can have access to different retail category stores. In US, we usually call it ”plaza”, but in China we often give them name of “shopping center” and recently we also use the name of “plaza”.For example in Shanghai, in Huaihai Road CBD area, we have” Hong Kong Plaza”, “New World Plaza”, “Pacific Shopping center” and many others.
- We can see from the exhibit, the United States has almost every kind of retail locations. For comparison, in China, the factory outlet is not very common, and lifestyle centers and power centers are not easily to seen even in big cities.
- Regarding the open market in China, we have two types. One is regular open market, which retailers just leave their goods in the market and they have a small storage space everyone. Another is specific open market such as some “old book markets” which those retailers only open the market on a specific date. Therefore they need to carry their goods everytime and sometimes they just leave the goods in nearby self storage warehouse.For example: “Wen Temple old book market” in Shanghai, it open only on sundays.
- Barber, clothing store and groceries are rare in CBD or SBD, but for a typical NBD or regional shopping center, they are necessary.
- These retail type classifications are from China retail industry website.
- Central place theory is a spatial theory in urban geography that attempts to explain the reasons behind the distribution patterns, size, and number of cities and towns around the world. It also attempts to provide a framework by which those areas can be studied both for historic reasons and for the locational patterns of areas today.
- According to the marketing principle K = 3, the market area of a higher-order place includes a third of the market area of each of the following size neighbouring lower-order places and each is located at the corner of a hexagon around the high-order settlement. Each high-order settlement gets 1/3 of each satellite settlement, thus K = 1 + 6×1/3 = 3.However, although in this K = 3 marketing network the distance traveled is minimized, the transport network is not the most efficient, because the important transport links between the larger places do not pass through intermediate places.
- According to K = 4 transport principle, the market area of a higher-order place includes a half of the market area of each of the six neighbouring lower-order places, as they are located on the edges of hexagons around the high-order settlements. This generates a hierarchy of central places which results in the most efficient transport network. There are maximum central places possible located on the main transport routes connecting the higher order center. K=1+1/6*2=4
- According to K = 7 administrative principle (or political-social principle), settlements are nested according to sevens. The market areas of the smaller settlements are completely enclosed within the market area of the larger settlement. Since tributary areas cannot be split administratively, they must be allocated exclusively to a single higher-order place. Efficient administration is the control principle in this hierarchy.
- This example is the settlement system in Zhejiang Province in China.From central place theory, we know that the marketing principle K = 3, the market area of a higher-order place includes a third of the market area of each of the following size neighbouring lower-order places and each is located at the corner of a hexagon around the high-order settlement. Each high-order settlement gets 1/3 of each satellite settlement, thus K = 1 + 6×1/3 = 3. Form the graph, we can see that the high order place such as “Wuzhen” get 1/3 of market area of lower order places such as “hongtang” and “taoyuan”.The situation of this town is consistent with the idea of “ group effect”. In China, many cities are famous for its unique theme such as “ Water town”, ”furniture town’ and “ wedding store town”. We can see from the figure, those “central places” are theme towns so other small towns are lower-order places and each is located at the corner of a hexagon around the high-order settlement.
- http://wenku.baidu.com/view/12e29dbd960590c69ec376ca.htmlThe government plays an important role in site selection in merging market such as China. Since lands are owned by government and developers can only get the using right of the land within some period, developers need to pay a “transfer fee” to the government and Chinese government and it agencys also controls the development process and the licensing process of the business. We will talk about this topic in detail later.
- The value segmentation in China varies fast recently. With the accumulation of social wealth and personal wealth, the consuming lifestyle an leisure lifestyle are increasing significantly. Those lifestyle modes are mostly come from wealthy family or elite class. Right now, the wealth gap in China is very huge, middle class or below can rare spend a lot of money in luxury retail stores. Also, these stores usually have their target small group consumers.
- The is the core segment of this module so everything in this segment is very important.First we need to understand the “location” from the macro perspective: trade area definition in ChinaThen we move to micro characteristics of unique locations in terms of accessibility, visibility and parking ratios.Finally, based on the macro and micro concepts of location, we can forecast and calculate the project revenue and cost of these retail stores based on some models.
- http://www.amendes.uac.pt/SEIO/ITOR.pdfRetail store location assessment
- http://www.directionsmag.com/features/retail-trade-area-analysis-concepts-and-new-approaches/129766<retail area analysis>http://www.tradeareasolutions.com/business_services.htm<trade area definition>The trade area definition in US frequently refers driving time and 5-miles radius. However, in China, except some metropolis, we seldom use driving time to define a trade area.
- Based on business plan and expansion plan, trade area changes for different retail stores. For example, KFC China has a local brand” DongfangJiBai”. This Chinese stylish fast food chain stores started from suburban area of China and then expanded into urban areas gradually.
- Some larger retail chains define regions as their trade area. Examples: Walmart and Carrefour
- Also some regional retail firms define trade area using province and metro cities.
- Shanghai: three ringsInner ring: downtown, CBDs, up scale lifestyleMiddle ring: uptown, expensive residential district and secondary CBDsOuter ring: suburban area, residential district and neighborhood shopping areaMany big cities in China also have similar trade area classification.
- Once we define the trade area of the macro concept of locations, we must analyze and compare different characteristics of locations which can reach and serve the trade area and meet the needs of business operations. Usually retailers need to deal with some trade-offs between “ excellent locations” and “high costs”
- http://www.sydcyx.cn/dichan/article/111817174.htmlhttp://wenku.baidu.com/view/c64be368a98271fe910ef947.htmlBecause of the different personal car ownerships, the parking ratios requirement is China is not as high as that in US, also, in big cities, China has more structured parking garages.
- http://www.excaliburgrpllc.com/Files/Assessment_Services_Maroon.pdf<site characteristics>http://www.bouldercolorado.gov/files/PDS/planning%20and%20zoning/density_floorarearatio.pdfUnderstand ratio and floor area ratioIn China, I want to mention that if the retailer is also the developer and develop the retail store from acquiring the land, they usually do the planning and revenue calculation based on the limited floor ratio. For example, if in downtown area, the floor ratio is 5, most developers design their buildings based on this floor ratio and get their leasable area and then calculate their projected revenue.
- http://www.butlerplaza.com/docs/traffic.pdfTraffic count map from Butler PlazaThe more traffic volume the better, this is the same requirement in China and US.
- The brown area is the shopping center site and those black lines are main roads. it has the very easy accesses to main roads and also on the passing point of many branches. In china, easy accessibility to main roads is of course a very important standard, but others are also important such as:Nearby bus stopsEasy access to subwaysOn the way home or on the way to work (for shopping centers, on the way home is better)
- http://www.ehow.com/list_6685595_retail-space-requirements.html<Retail space requirements>
- Unlike United States, advertising for logos and locations of retail stores is extremely important in China. Some retail stores which have invisible locations need to attract and guide customers from several hundreds yards away.
- http://www.amendes.uac.pt/SEIO/ITOR.pdfRetail store location assessmenthttp://www.hi138.com/e/?i192131Wal-Mart, Carrefour VS: Who wins in the future?They focused on so different business strategy and chose very different locations from the very beginning. Also, they are adjusting their strategies according to the market reactions. However, their possibility of future success are decided not only by themselves but also by the changing market and consumers in China.
- Compared to Carrefour’s CBD strategy, Wal-Mart locked its prospect locations in suburban areas which have fair traffic volume. Over 80% of Carrefour stores are located in crossroads.
- http://www.amendes.uac.pt/SEIO/ITOR.pdfRetail store location assessmenthttp://www.hi138.com/e/?i192131Wal-Mart, Carrefour VS: Who wins in the future?This is not the most recent map but we can clearly see that Carrefour is the faster mover in Chinese market.
- Carrefour competed Walmart from the beginning, however, since 2006, Walmart started expansion in East area so as shown in the growing chart, Walmart has the significant upwards trends.
- We put the revenue and cost calculation in this segment because trade area and site characteristics have direct effect on revenue and cost forecasting. The first model emphasis on the importance of the size of the store and the travel time of customers. The second model emphasis on the relationship between dependent variable and independent variables.The last model compared the current location and prospect location, then use”minus” or “plus” to calculate the revenue and cost.
- Multipleregression equationsY = β0 + β1x1 + β2x2 ……βnxnX1, X2 toXn are independent variables. Dependsondifferentrequirements and objectives, we can havedifferent variables.In China and US, these variables variessignificantly.
- They are different independent variables which in the regression equation. If we can define different variables for unique retail locations and calculate betas based on statistical data, we can forecast dependent variable(revenue) easily.
- This is a simple model for forecasting. If we can get reliable data from comparative locations of similar business model and retail category, we can just use “plus” or “minus” methods to calculate the projected revenue.For example, the comparable A has all similar location characteristics with subject store except the parking capacity. If we estimate the loss of parking capacity is $3000 /month and the monthly revenue of comparable A is $20,000, we can just estimate the months revenue for subject store is $17,000 In real life, locations are different from each other in many aspects, so we need to adjust it carefully.
- For chain stores, it’s easier to use comparable methods because the estimation is more reliable if these stores are within the same retail category and operated in same business model.We can also find that KFCs in China like to locate in CBD or “central places”, which is very different from the situation in United States. In China, price for a meal of KFC(RMB25) is more expensive for a regular meal for regular people(RMB10-15), therefore compared to regular working class, white-collar class are more likely to choose KFC as everyday meal.
- Base rent: The term "Base Rent" refers to the minimum rent due under the terms of a lease that also requires the tenant to pay additional rent based on a percentage or participation requirement. This type of lease is commonly executed in retail stores in malls. Step rent: Step rent is where you take the rental expense over the life of the leased asset and you amortize on a straight line basis. For example, if you are paying 10,000 a year for 20 years and then the rent goes up to 20,000 for another 20 years, then with straight lining that expense your rent expense would be 15,000 (600,000 total rent/480 months (12 months * 40 years). You incur additional expense the first 20 years and then the next 20 years you have the offset. After 40 years the expense is the same.Tenantimproment: Changes made to the interior of a commercial or industrial property by its owner to accommodate the needs of a tenant such as floor and wall coverings, ceilings, partitions, air conditioning, fire protection, and security. Who bears what portion of TI costs is negotiated between the lessor and the lessee, and is usually documented in the lease agreement.Pass through: A lease may contain a long list of pass-through expenses, such as real estate taxes, maintenance, repairs, trash removal, salaries of the landlord's employees, and costs of building improvements. Typically, landlords divide pass-through expenses among the tenants pro rata, according to the percentage of the building each tenant leases.
- This is also an important segment because government’s impacts are everywhere in China!If an international retailer wants to run business in China, he needs to meet the requirement of Chinese government in every step.
- There are three levels in retail site selections.First, land purchasing and developmentSecond, under constructing projectThird, existed projectThere are different governmental regulations applying for those site selections
- We need to notice that the time starts from when the developer bid the right of using the land from Chinese government. Sometimes the developer doesn’t want to develop the land immediately, making the net use life of the building shorter than the above land use period.In China, real estate developers can be many kinds of businesses and entities, they can work directly from acquiring a piece of land to the leasing or selling process of the developed property. They can also be a management group and manage professional teams to finish a project. However, no matter in which format, they must follow all statutes and codes and work closely with Chinese government.By contrast, the US developers work more closely with retailers. They usually design the layout of the building depends on the need of prospective tenants.http://www.59148.com/zs/tc/49025.html land use time period (Chinese)
- http://real-estate-law.freeadvice.com/zoning/zoning_legalese.htmWhat is zoning?Right now, in China, only threes ways are provided to get the right of using land:First: BiddingBidding is an offer (often competitive) of setting a price one is willing to pay for something. A price offer is called a bid.Second: ListingGovernment can list lands on an open market and developers can post price within a period. They can also change the price before the deadline. Third: AuctionAn auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder.http://www.robroad.com/data/law/index.php/tender-land-auction-people/“tender auction listing to sell state-owned construction land use rights,” which has 21 September, 2007 Ministry of Land and Resources Department of the 3rd meeting of Council. The “auction tender to sell state-owned land for construction purposes listed on the right to use that” published, since November 1, 2007 will come into effect. XuShaoshiMinister September 28, 2007 http://blogs.forbes.com/robertolsen/2011/01/06/wilmar-wins-china-land-bid/Walmart wins land bid in China
- China has the Chinese building codes. Every province also has the local codes and standards. If there is a conflict, we should follow the stricter one.The floor area ratio (FAR) or floor space index (FSI) is the ratio of the total floor area of buildings on a certain location to the size of the land of that location, or the limit imposed on such a ratio.As a formula: Floor area ratio = (Total covered area on all floors of all buildings on a certain plot)/(Area of the plot)Sun exposure calculation: the designing must meet the minimum requirements for sun exposure time in summer and winter
- http://chinahousing.mit.edu/english/resources/BuildingCode.htmlChina building codesFor the building codes, we have both national codes and local codes, sometimes developers need to follow the stricter one.Developers and retailers also need to meet specific regulations depends on different retail types such as tobacco and liquid stores.
- -- In accordance with its WTO commitments, China has removed most restrictions on foreign-invested retailers, including those governing location, proportion of ownership and the number of outlets.-- On September 12, 2008, the Foreign Investment Administration Department (FIA) of the Ministry of Commerce (MOFCOM) issued a regulation decentralizing store opening approvals. In December 2008, MOFCOM issued guidelines for local commerce bureaus on the examination and approval of store-opening applications.--According to the Measures on the Administration of Foreign Investment in Commercial Sectors, when applying for a new site, foreign retailers must produce a commercial planning certificate from the local government certifying that the proposed site complies zoning plans exist, a public hearing process is also oftentimes required, adding three months or more to the approval process. Furthermore, some locations have incomplete commercial zoning plans, making compliance confirmation impossible for foreign retailers.Since its implementation, the store approval decentralization regulation adopted by the Chinese government has effectively simplified the approval procedures for new foreign-invested retail stores and reduced operating costs and delays associated with the examination and approval process. AmCham-China applauds these moves to streamline the approval process and the resulting positive effects on the development of the retailsector in China.However, despite the simplification of procedures related to the opening of stores by foreign retailers and the number of store openings, discriminatory treatment and a lack of transparency still exist in certain areas of government administration over the retail industry.These issues continue to restrict the expansion of foreign retailers and discourage foreign investors from contributing their expertise, which would benefit the Chinese consumer and overall marketplace.
- ChinaThe Environmental Impact Assessment Law (EIA Law) requires an environmental impact assessment to be completed prior to project construction. However, if a developer completely ignores this requirement and builds a project without submitting an environmental impact statement, the only penalty is that the environmental protection bureau (EPB) may require the developer to do a make-up environmental assessment. If the developer does not complete this make-up assessment within the designated time, only then is the EPB authorized to fine the developer. Even so, the possible fine is capped at a maximum of about US$25,000, a fraction of the overall cost of most major projects. The lack of more stringent enforcement mechanisms has resulted in a significant percentage of projects not completing legally required environmental impact assessments prior to construction.[17]China's State Environmental Protection Administration (SEPA) used the legislation to halt 30 projects in 2004, including three hydro-power plants under the Three Gorges Project Company. Although one month later (Note as a point of reference, that the typical EIA for a major project in the USA takes one to two years.), most of the 30 halted projects resumed their construction, reportedly having passed the environmental assessment, the fact that these key projects' construction was ever suspended was notable.A joint investigation by SEPA and the Ministry of Land and Resources in 2004 showed that 30-40% of the mining construction projects went through the procedure of environment impact assessment as required, while in some areas only 6-7% did so. This partly explains why China has witnessed so many mining accidents in recent years.SEPA alone cannot guarantee the full enforcement of environmental laws and regulations, observed Professor Wang Canfa, director of the centre to help environmental victims at China University of Political Science and Law. In fact, according to Wang, the rate of China's environmental laws and regulations that are actually enforced is estimated to be barely 10%.[18]
- Some strong brands or stores always have more bargain powers on that to protect the customer group in that trade area.
- This is important in site selection because you can’t simply just analyze the characteristics of the site, you also need to watch out the possible impacts that adjacent stores may have on your stores. For example, most restaurant doesn’t want to next to a gym. To avoid that, you can put the clause in the contract in advance or just simply not to choose the store if those stores are existed.
- This is a very important part in Chinese retailing industry because the perception and feelings for retail locations is so different between western and eastern countries. Even within eastern countries such as Japan, Thailand and China, people will behave very differently because of consumer behavior and cultures.
- http://www.gov.mb.ca/agriculture/statistics/releases/china_market_analysis_report_en.pdfhttp://www.fibtex.lodz.pl/46_06_10.pdfBrand effect on consumer behavior in China If a salesman in a retail store is too eager to help and approaches a consumer who has not decided what to buy, the consumer will feel uneasy and go away. The proper way is to keep a certain distance from the consumer, but at the same time letting the consumer know that he is always ready to help.
- This phenomenon caused many specific markets in China such as “wedding store street”, “furniture streets”, “restaurant streets” and “ bar streets”. Some streets are famous for its specific stores across from the beginning to the end. In order to compare the price and quality easily and efficiently, people in China prefer to purchase in these specific areas. Also, because of the perfect competitive market characteristics, the market decide the price, consumers can get fair price for the goods.
- In China , you can find these convenient stores anywhere. In almost every apartment or condo complex, you can easily find at least one convenient store which open 7/24 through the year. In this stores, people can also buy hot and fresh Chinese breakfast and eat inside. Besides, it also offer other services to consumers such as “first-aid”, “microwave oven”, “ pay utility fees”.http://www.nacsonline.com/NACS/News/Daily/Pages/ND0322114.aspxConvenient stores in China provide healthier meals.http://www.reuters.com/article/2009/05/06/us-walmart-china-idUSTRE5450YY20090506Wal-Mart enters China's convenience store market
- In China, price wars happen in every market segment especially those have homogeneous products. Therefore, people are more likely to shop in those store has one or two ”special price” everyday. For example, in Carrefour Shanghai, every store must ensure that one vegetable's unit price is below RMB 1.00. Stores usually can’t make any profit by offering this price but can win more potential consumers.http://www.reuters.com/article/2008/04/16/us-agflation-china-retail-idUSHKG11361720080416China's retailers well-armed in food price war, for now
- Right now in China, specialty stores usually don’t operate very well because Chinese people are more likely to shop at huge and up-scale department store. They prefer “one-stop” shop.Brand loyalty also plays a very important role in “one-stop” shopping. With the increase of consumer lifestyle, more and more Chinese people put more weight on brand value and quality of products. They can easily find many international brands in department stores.
- http://www.people.com.cn/GB/paper40/1022/146724.htmlWhy Jusco failed in China?http://findarticles.com/p/articles/mi_m0WDP/is_2000_July_10/ai_63276181/Jusco closed shanghai divisionhttp://www.shanghai.gov.cn/shanghai/node17256/node18151/userobject22ai1540.htmlJusco plans to give Shanghai a second chance
- This is also an important part associated with site selection. Some retail stores formed different expansion strategy because their different site selection criterion.
- Commercial real estate is a big weight in retail models especially in appliance and furniture stores. Right now more and more appliance and furniture stores prefer buy the property because of the depreciation tax savings.These stores don’t get revenue by operating the retail business, instead, they gain their revenue from the leasing payment.GOME’s official website: http://www.gome.com.hk/Red S Star Macalline’s official website: http://www.chinaredstar.com/web/news.aspx?sortid=0565cf2d-e00c-4bea-bcc3-f6bc87e18119&page=1Leasing or buy depends on these stores’ business plan and their expansion speed. For example, GOME expands in a fast speed so it choose to lease instead of buying.
- http://www.monorails.org/tmspages/RedStarMacalline.htmlThe new Red Star Macalline store in Shanghai has one of the most unique monorails in the world. The furnishing store features a mini-monorail system that spirals it's way up inside the stores six stories, stopping on each floor. The 14-meter long system is the first of its kind in the world.
- This model can find in every retail segment. Compared to commercial real estate model, those stores must bear economic and business risks.
- Franchising first emerged in China in the late 1980s. In 1987, KFC’s first Chinese outlet was opened in Beijing, the capital city of China.The new Regulation on Commercial Franchise, announced by the Ministry ofCommerce on December 30th 2004 and which took effect on February 1, willstimulate business in terms of its scale and standardization. The new regulationfor franchises, to replace the 1997 measures concerning administration ofcommercial franchising, defines more clearly the way foreign brands operatefranchise businesses in China. The new rule should help build a sound legalenvironment and invite additional foreign franchisers into doing the localbusiness.The franchising model, which allows people with limited capital to enter anestablished business, is well suited to a developing economy. China’s infantfranchising industry is set to enter a rapid but orderly development
- See Attached Reading: Chain stores in China