Mao & Walton

Mao Zedong purposely avoided big cities and led China's revolution from rural areas in the 1930s. Now his military strategy has been adopted by Wang Tian, a retail business entrepreneur who, by coincidence, is also from Xiangtan, Mao's hometown in the central part of the country.

Wang remembers as a boy he used to climb a small hill and watch foreign tourists visiting Mao's residence with great curiosity. "We would watch from far away and compare, among the tourists, who had the darkest skin, and who has the largest nose," says Wang, the 40-year-old chairman of Better Life, a retail chain based in central China's Hunan province.

Unlike many retailers who target rich people at big cities, Wang, who treats Mao as his business mentor, is developing his business beginning in the less developed areas of the country, for people who spend their money carefully.

Wang says his company is mainly based in small-and-medium-sized cities in China. He mainly opens stores in cities with a population of 100,000 to 1 million, and towns with a population of 50,000.

Now, with over 100 stores in Hunan and neighboring Jiangxi province, Better Life has a net profit of over 120 million yuan for the first half of this year. That's relatively small, compared with the operations of multinational retailers in China, such as Carrefour, the French retailer, whose sales amounted to 3 billion euros in China last year.

Yet the company is impressive given the different strategy it adopts against much stronger competitors. For instance, in Loudi, a city in Hunan province, Wang's store is within 100 meters of a Wal-Mart, the world's largest retailer and in another city, Better Life is next door to a Carrefour.

But Wang manages to compete with the foreign giants. And in fact, after the Loudi Wal-Mart opened, the Better Life store's sales even increased. "Wal-Mart has gone through three managers, but still we do much better than them," says Wang.

The trick, Wang concludes, is that he better understands the local market and competes with a different strategy than his competitors. "The retail business, after all, is to guess what the consumer thinks," he says.

Wang has combined supermarkets, department stores, and hypermarkets in his business operation. He applied a strategy of avoiding the same business model when competing with stronger opponents face-to-face. For instance, in Loudi where Wal-Mart has a large hypermarket, Better Life opened a department store, selling brand clothes and other high-end items.

While they were drawn to the Wal-Mart, shoppers would buy low-price groceries there and then go to the Better Life department stores to buy clothes and other high-end products. As a result, Better Life's sales increased.

In its own supermarkets and convenience stores, Wang also manages to design them to appeal to locals. For instance, Better life has begun setting out fresh meat and vegetables at 6 am, as in the local outdoor markets. Wang says his target shoppers are people on average or low incomes.

"They have plenty of time, but little money to spend," he says. With a complete supply chain that covers his own organic farms and logistics, Wang managed to offer these products at a lower price, even compared with outdoor markets where people traditionally shop for vegetables.

Mother's influence

Wang began the company in 1995 after he quit his job at a local State-owned enterprise. Yet his business acumen goes back much earlier. In fact, he monopolized the college thermos glass liner market when he found careless students tend to easily break them frequently. And earlier than that he tried to earn money in high school by raising rabbits in his bedroom.

He says he was deeply influenced by his mother who was picking up and selling plastic trash in the early 1970s when few others were doing the same.

Wang says he felt the change in his life when his mother was increasingly able to buy better snacks as the family went village-to-village selling their items. At first his mother would buy him a piece of pancake, then a bowl of noodles and later he found some meat in the soup, a luxury at that time.

"I truly felt the quality of my life improved due to business," says Wang. The early interest in business increased when he studied business at a local college and finally established a business of his own.

Wang says his mother also influenced him in the way she treated other people. She would treat everyone equally, no matter rich or poor. That became a valuable lesson in his business.

"Most of the customers to foreign supermarkets are white collars or the middle class, but I only want to serve grandmas and baomu (nannies)," says Wang. But cheaper prices do not mean sacrificing quality. "We sell vegetables as if we were selling flowers," says Wang.

Although Wang's company competes head-on with Wal-Mart, Wang says he actually admires, and has learned a lot from the strong opponent. His favorite book is Made in America, the autobiography of Wal-Mart founder Sam Walton, which he has read for more than 10 years and still reads on the first day of every year. "Every time I read it I can find new inspiration in it," says Wang. And when he rewards an employee for good work, Walton's book is the most frequent gift.

"I believe that China will finally have a retail enterprise with the scale of Wal-Mart, but it will not necessarily be my company," says Wang.

Although the potential is limitless, for now Wang only focuses on the area that he understands. He plans to open 600 stores and increase the sales to 30 billion yuan in the next five years in Hunan and its neighboring Jiangxi province. That is rapid expansion compared to the 100 stores that he currently runs. When asked about the capital to support such a rapid increase, Wang says it won't be a problem as long as he remains focused on the retail business.

An advantage for Wang's business is China's large market and the rising domestic consumption. The regional expansion plan does not sound bold, but in fact the population of Hunan and Jiangxi is 100 million, larger than Germany, the most heavily populated European country. And Wang's company is also in a good position as the country's growth model in general has shifted from export driven to the expansion of domestic consumption. As policies encourage people in the rural areas to spend more, Wang expects his stores will get more customers.

As he looks back, he finds the track of his expansion, from Hunan to Jiangxi to Guizhou, which he plans to enter next, is also the route of Mao's legendary Long March.

While the revolution of last century finally led to a "national victory", Wang says he would try to be number one in the region first. And in the process, "I will think of the sufferings of the Long March as I meet hardships because persistence itself means success."

(China Daily 11/03/2008 page12)