Chain stores' expansion spotlighted (China Daily) Updated: 2005-04-01 09:10 Editor's Note: The China
Chain Store & Franchise Association recently released a report on the
development of the country's chain store operators in 2004. Following are some
excerpts from the report.
The China Chain Store & Franchise Association has ranked the sector's top
100 enterprises in 2004, based on figures provided by most of the nation's chain
store operators.
Coming out on top was Bailian (Group) Co Ltd, with a sales revenue in excess
of 67.6 billion yuan (US$8.16 billion) in 2004.
It was followed by Gome Appliances, Dalian Dashang Group, Suning Home
Appliances, Carrefour (China), Beijing Hualian Group, Shanghai Yongle Home
Appliances, Suguo Supermarkets, Shanghai Agriculture Industry Commerce
Supermarket Co Ltd (NGS Supermarket) and Beijing Wu-Mart.
The total sales revenue of China's top 100 chain store companies rose 39 per
cent year-on-year, reaching 496.8 billion yuan (US$60 billion).
Last year also saw an expansion in the number of stores run by the top 100
firms to 30,416, up 49 per cent from the previous year's 20,424.
The 100 companies had a total sales area of 25.8 million square metres and
810,000 employees, year-on-year rises of 35 per cent and 27 per cent
respectively.
The performance of these companies reflected the sector's basic development
trends last year.
Firstly, the chain store operators' business scope continued to expand last
year.
Hebei Guoda Chain Commercial Co Ltd, at the bottom of the list, saw its
annual sales rise to 480 million yuan (US$58 million), 17 per cent higher than
the 410 million yuan (US$49.5 million) recorded by the 100th-placed company in
2003.
The top 100 chain store companies' sales have continued to witness rapid
growth in recent years.
Although the 39 per cent growth in 2004 was slower than the 45 per cent
growth rate in 2003, it was much faster than the overall growth of the country's
retail sales, which was 10.2 per cent last year.
And their sales accounted for 9.3 per cent of China's total retail sales last
year, up from just 2.9 per cent in 2000. This figure was an impressive 37 per
cent in Shanghai and 29 per cent in Beijing.
Second, the sector's good performance showed that market regulation had
improved.
Last year saw the central government draft and implement the Administrative
Regulations on Foreign Investment in the Commercial Sector, the Administrative
Measures on Commercial Franchising, and the National Standards on the
Classification of the Retail Business Modalities.
In the meantime, the government has conducted studies on fields such as the
commercial layout of urban areas and the direct-selling sector, and is drafting
new regulations related to these sectors.
All of this has served to boost the sector's healthy development.
Consumers also have a greater awareness of chain enterprises. Consumers think
chain supermarkets are the best place to shop, according to the association's
survey.
Safer place to purchase
And with many consumers increasingly wary about the quality of the food that
they eat, they believe that chain supermarkets are the most reliable places in
which to make their purchases.
The capital market's positive attitude towards chain enterprises also
reflects the growing importance of the chain sector.
Last year, many chain companies, including Gome and Suning, were listed in
the domestic or Hong Kong stock market. Some also attracted investment from
international venture capitalists.
In reverse, the injection of a large amount of capital accelerated the
development of chain store operators.
Third, chain enterprises started to expand into the country's central and
western areas and smaller cities.
Major domestic and foreign firms are shifting their focus from the saturated
market in eastern China, and increasingly looking towards the nation's vast
central and western regions. Local firms are also accelerating the pace of their
development in order to cope with intensified competition.
The chain operating model is also being adopted beyond the traditional
business fields like supermarkets and convenience stores, becoming increasingly
popular for the sale of garments, toys and office equipment.
Retail companies' sales currently account for 74 per cent of the total of the
top 100 chain companies. The figure is 17 per cent for home appliance chains, 6
per cent for catering companies, 2 per cent for home furnishing markets, and 1
per cent for chain drugstores.
In addition, some new business models appeared last year, such as
supermarkets selling fresh produce and stores specializing in the sale of
personal care goods.
Fourth, enterprises are attaching greater importance to business performance,
rather than a simple growth in the number of outlets.
In 2001, the number of outlets operated by the top 100 chain companies
increased by 85 per cent, but sales grew by just 56 per cent.
The business management and operation capability was obviously unable to
catch up with the rapidly increasing business scale.
This situation has gradually improved, with a narrowing of the gap between
the growth in store numbers and sales.
But the opening of new stores remained the major means of the chain
companies' expansion last year. Some companies also develop through mergers,
acquisitions and franchising.
Fifth, the sales of foreign-funded companies increased greatly among the top
100 chain companies.
Foreign-funded companies' sales accounted for 23 per cent of last year's
total sales of the top 100 chain firms, compared with 16 per cent in 2003.
The sales of State-owned enterprises and private firms accounted for 32 per
cent and 45 per cent last year.
Among the top 100 companies, 17 are foreign-funded and 49 are privately
owned.
Development trends this year
Hypermarkets, convenience stores and specialized stores like home appliance
chains and home furnishing outlets will still be the hot spots of this year's
competition.
Regional enterprises with a relatively high local market share and more
effective management will enjoy more rapid development, compared with nationwide
enterprises, in 2005.
Innovation in business models, management systems and employment of advanced
technologies is key to development.
The capital market will forge closer links with the chain sector.
There will be more mergers and acquisitions between foreign-funded companies
and domestic players and among the Chinese companies in the industry.
An increasing number of chain companies will seek public listings to gain
capital support. Chain retailers like Trust-Mark, Jingkelong Supermarket Chain,
Yongle and Home World have made plans for listings.
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