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The Death of the Salesmen
By CRYSTYL MO |
China's traditional corner shops face off
the competition from the global giants - and all the signs
are that are going to lose
The Death of the Salesmen Apparently, Shanghai people are craving many such things
- and at all hours of the day and night. In 2001, the city
had 2000 chain convenience store outlets; within the coming
year, that number will likely reach an astounding 5000.
The xiaomaibu - the scruffy privately owned convenience
stores of Shanghai's yesteryear and Beijing's present - have
nearly vanished from Shanghai's busiest intersections and
main streets.
Now Shanghai's chain stores are eyeing the Beijing market,
with hopes of scattering stores all over the city like so
many Lego blocks in a kid's playroom. The top brass from Shanghai's
biggest chains have already set up offices in Beijing to map
out ideal locations for stores throughout the city; Shanghai
Hualian has been pushing for a license to open 200 Beijing
stores this year. Meanwhile, Shanghai rival, supermarket giant
Lianhua, has plans for 600 Beijing convenience stores in the
next two years. Also on the scene are several foreign chain
companies, including international king of convenience, 7-Eleven,
which operates 20,000 stores worldwide.
Now, the question is, will Beijing's friendly neighborhood
store go the way of the dodo (and the Shanghai xiaomaibu)
and slowly disappear from the planet?
Convenience Culture
China's capital currently has few chain convenience stores.
Instead of big-brand 24-hour shops, most neighborhoods are
dotted with small xiaomaibu that sell the basics - instant
noodles and Coca-Cola - with no frills. They are the kind
of place where the owner knows your name, and low overheads
keep prices very down-to-earth. Li Shaorong, who runs a xiaomaibu
in Beijing's Fangzhuang District, says she's not fretting
about the impending wave of chain stores: "If I can sell things
cheaper than them, people will still shop here. I am not worried
about closing."
But if Li could see the scene in Shanghai, she might be feeling
at least a few twangs of nervousness. Just five years ago,
no Shanghainese imagined that the ubiquitous xiaomaibu in
this coastal city would so quickly be driven out of business
by the big chains. "The old family-run stores do not have
the power to compete," says a representative of the Shanghai
Chain Enterprises Association. "The service, variety of product
selection and logistical management in franchise stores could
never been matched by the small stores."
Perhaps the biggest threat to the little family store is
the deep pockets of the chain stores, which can afford to
make mistakes and even open branch after branch without even
netting a penny. According to Hualian executive Mao Weiwen,
chain companies generally plan on opening around 150 outlets
before they will reach profitability.
Shanghai's lightning fast growth illustrates the stubborn
competitive streak in the chain retail industry. In Shanghai,
it is not uncommon to see two chain stores sulkily facing
each other across a street and fighting it out over shoppers
too lazy to cross the road. Some areas even have stores side-by-side,
with a shared wall between them. One retailer says that his
chain opened the first convenience store on along one main
street and was soon reaping daily revenues of Y10,000. But
within a short time, a Liangyou, two All-days outlets and
a Lianhua store all opened within a few hundred meters and
the store's revenue dropped so dramatically that it had to
close. This eye-for-an-eye competition spells disaster for
xiaomaibu trying to hang on when chain branches spring up
on all sides.
Family Stores
However, all is not over for Beijing's mom-and-pop shops.
The fevered expansion that has flattened xiaomaibu
in Shanghai will not necessarily work in the capital. The
two cities present quite different markets, both in terms
of government policies and also consumer culture. Shanghai's
government is known for its gung-ho attitude toward chain
stores, allowing them to spread metastically throughout the
city, while Beijing is known for unhurried deliberation. "The
Shanghai government has been very supportive of retail chains,
but up north there has been more caution," says Kuai Jianping,
business development manager for Shanghai Lianhua, quoted
by the Economist Intelligence Unit.
Certainly Beijing's government will not allow the kind of
aggressive battling that shops have engaged in down south
in Shanghai. Even the Shanghai Chain Enterprise Association
itself has not been pleased with the uncontrolled sprouting
of hundreds of chain stores. A June admonishment, advising
members not to open new stores within 100 meters of existing
stores, has been resoundingly ignored. One section of town
near Shanghai's People's Square now has several dozen operators
in a single square kilometer. "China's convenience store operators
have lost their business sense," says Isamu Ochiai, president
of Shanghai Hualian Lawson. "They are involved in a shop-opening
race, disregarding profitability."
Beijing's authorities have had plenty of time to learn from
Shanghai's mistakes. The capital city's government has been
slow to grant licenses to anyone and even the city's native
chain stores have found themselves limited to small areas.
No chain store currently has branches spread throughout the
city, and this has helped to preserve the neighborhood xiaomaibu.
Another blessing for the capital's time-honored private stores
is that Beijing people just don't shop the same way the Shanghainese
do. One of the reasons that Shanghai's 24-hour stores flourish
is that the city never seems to sleep. In 1998, 30 percent
of shopping at chain stores was done after standard supermarket
closing hours. One year later, that number had grown to 50
percent. "Chain stores are successful in Shanghai because
Shanghainese are used to shopping during the night," says
a representative from the China Chain Store Enterprise Association,
"But Beijingers are early to bed and this results in less
visits during the night and less profitability for the 24-hour
convenience stores."
Shanghainese are also well known for their vanity. "Shanghai
people like to go to a clean and tidy place to buy things,"
says Zhu Ou, a native Shanghainese 31-year-old who runs an
import/export business, "they think it gives them face and
makes them feel like they have consumer power." However, Beijingers
are known to be far pickier about price than décor and Beijing's convenience stores will find it hard
to win customers by dint of good lighting and immaculately
arranged aisles.
Beijing chains will find that value-added extras are needed
to attract people who would normally be happy going to their
local xiaomaibu or supermarket. "Shanghai's stores have fought
hard to have real "conveniences" such as being able to accept
bill payments for water and electricity, sell phone cards
and install ATM machines, while no BJ stores have any of these
services," says Huang Tao, president of Lianhua's North China
convenience store division. That's because getting government
and bank partnerships to offer such services is a time consuming
process and chain stores may find they have to go through
separate negotiation procedures for each Beijing area that
they want to occupy.
The chain stores say they are prepared for the battle. Huang
says he doesn't fear the red tape involved in getting approvals.
"In all the areas in Beijing, in terms of the applications
for different services, we will patiently fight for each store,"
says Huang, "This project is the long-term objective of Lianhua."
Despite the imminent arrival of chain stores, Beijing's xiaomaibu
are not a dying species. Some people even predict that the
friendly neighborhood shops will be around forever and that
there's room for everyone in Beijing's immense market. "The
Beijing government will not let all the family stores totally
die out. That would not benefit social stability," says the
director of membership of the China Chain Store Enterprise
Association, "Internationally you see foreign governments
have enacted laws to protect the interests of small enterprise.
I think in the future the family stores and the chain stores
will be able to co-exist."
Perhaps the most precious aspect of Beijing's xiaomaibu is
the camaraderie formed between shoppers and shopkeepers. It
gives the big city a feeling of small community. A recent
street survey of Beijing shoppers showed that many people
are friendly with their local storeowners. "I know the owner
of my local xiaomaibu quite well," says Lei Jian, a 31-year-old
Beijinger, "We play cards and chess together sometimes."
Li Shaorong, the xiaomaibu owner says she knows most of her
customers. "I see which items people buy most and if someone
asks us to stock something then we do it." How about if someone
is out of cash but in need of a bottle of soy sauce? No problem,
you can often 'buy now and pay later' at Li's shop, she says.
Now that's what Beijing people might call real convenience.
Additional interviews
by Jeffrey Saucer
  
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