Henan's way to tap rural market potential

Despite the global economic downturn, major chain retailers, including both domestic and foreign businesses, saw a new chance for promoting higher sales in China - entering the rural market, according to the China Chain Store and Franchise Association (CCFA).

Central China's Henan province is the first demonstration area for the campaign, Guo Geping, president of CCFA, said in a recent summit of China chain retailers in Zhengzhou, capital city of Henan province.

As one of the country's most significant agricultural provinces and with a better logistical situation, Henan province is an ideal test area for leading domestic and foreign retailers into China's rural markets, Guo said.

With CCFA's leadership, from January to October in 2008, Henan province already built up and renewed 11,167 small and medium-sized retail stores in the countryside.

Stimulus package

Based on that the local government also created a stimulus package for pushing the connection between the retailers and local agriculture industry. They established 100 purchasing stations in villages for getting the freshest and highest quality of agricultural products from farmers directly to retailers and supermarkets.

Carrefour, a leading global supermarket giant, created two purchasing stations in Henan province to get vegetable, beef, mutton and tofu for its supply chain in the local market.

"As the effect of the global financial crisis deepens, Carrefour will seek new opportunities in China's rural market," Eric Legros, CEO of Carrefour China said in November 2008, adding that Carrefour's development in central China's Henan province would be the focus on its business strategy and development in 2009.

Training program

Other mega-chain retailers, such as Wal-Mart, Tesco and Suguo Supermarket, have begun training programs for farmers from Henan province to better enhance their product quality and to form a standardized agricultural products supply chain.

Guo said the modern technology and information would encourage healthier development of the local agriculture industry and encourage the fast growth of the retail food sector.

Hu Dinghuan, professor from the Agricultural Economy and Development Institute under the Chinese Academy of Agricultural Sciences, said that by combining modern technology and information, farmers can become more competitive and they would pay more attention to quality control.

"There is no doubt that it will be a better starting point for promoting food safety in the country," Hu said.

The fast expanding retailing industry in Henan province, has boosted sales growth there.

Last year, the total income of Henan province's retail industry was 190.25 million yuan, a 20.8 percent year-on-year increase.

"Compared to the costal regions in China, rural market, especially for Henan province, showed larger room for the development of the retail industry," Legros said.

In 2009, Henan provincial government will further promote the development of retail industry in the major villages and counties.

"This year we will invest 36 million yuan more for building 6,000 new retail stores in Henan province, so they will cover 80 percent of the province," a senior official from Henan provincial government who declined to give his name told China Business Weekly in a phone interview.

Guo predicts that the "rural retail promotional drive" will spread to other regions across China, such as to Hubei and Hunan provinces in central China, Guizhou province in Southwest China and Gansu province in Northwest China.

(China Daily 01/12/2009 page10)