Stores urged to set up franchises
By Liu Jie (China Daily)
Updated: 2004-04-05 08:58

China's general merchandise industry should be consolidated and turned into a chain operation to enhance its competitiveness.

"We encourage department stores to join together to set up enterprise groups and expand franchise networks nationwide," said Huang Hai, assistant minister of commerce, at the weekend during the 2004 China Department Store Summit.

Meanwhile,  domestic merchan-dising enterprises should introduce global management and development skills from their foreign counterparts to upgrade operations.

During the last decade, facing challenges from supermarkets, hypermarkets and convenience stores, a large number of domestic department stores struggled to make money and some, such as Beijing Xinte, Guangzhou Qiancun and Tianjin Asiatic, went bust.

"Due to mergers, acquisitions and re-organization, some large-scale department stores have extricated themselves from the difficulties that existed until about the end of 2000," said Chu Xiuqi, secretary-general of the China Commerce Association of General Merchandise.

According to the Ministry of Commerce, department stores or groups comprised more than one-third of the nation's top 30 commercial retailers last year.

Their combined sales volume reached 99.8 billion yuan (US$12 billion) last year, up 23.5 per cent over 2002.

Shanghai Bailian Group, which topped the list, was jointly set up last April by Shanghai No 1 Department Store (Group) Co Ltd, Friendship (Group) Co Ltd, Shanghai Hualian Co Ltd, and Shanghai Goods and Materials Corp.

The sales volume of the group hit 48.52 billion yuan (US$5.85 billion) last year, 267 per cent higher than the No 2 retailer - Dalian-based Dashang Co Ltd - with 18.18 billion yuan (US$2.19 billion).

Tang Jianhua, general manager of Shanghai Bailian Group's department stores, said that the alliance elaborated the respective strengths of the four partners, while the group's size has allowed for business, capital, sales and logistics network expansions, in addition to cost reductions.

Most of the large general merchandise groups are running chain operations via franchises or by opening outlets.

Beijing Wangfujing Department Store (Group), China's No 1 department store since 1949 and a State-owned enterprise, experienced a dark period during the 1990s.

After the property right reform, Wangfujing survived and launched 11 outlets in seven key cities, pushing it to 16th on the commerce ministry's list.

"Though the domestic general merchandise operators still dominate the local market, their overseas counterparts are boosting their market shares gradually based on advanced operation mechanisms and their rich experience," said Chu.

Chu pointed out that most of the local department stores are similar, which means there are often price wars and a lot of competition, hindering their development in the long run.

"Every company needs to have a name and a personality that people can recognize," said Ian Duffy, general manager of Ikea (China) Co.

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