SPECIALFEATURE
W
ith consumer spending down and Adapting to the Chinese market is essential and often
the list of global retailers suffering this means adjusting to different approaches to business
or dying from the “crisis” plague processes and a complex distribution structure. Lelio
growing, China is still viewed as Gavazza, Chief Executive Officer of Sharmoon EZ Gar-
an oasis of consumer spending, if ments, a Joint venture with Italian retailer, Ermenegildo
only in the potential. How to unlock Zegna, noted that “Chinese manufacturers did not under-
the tight fists of Chinese consumers – personal savings stand the need for planning.” It has taken time to shift the
are estimated at 40%, compared to 5% in the U.S. – is mindset and convince stakeholders that new processes
another issue companies are grappling with. are necessary.
China’s retail environment is a mine-field of its own, For logistics service provider, FM Logistic which does a
as retailers such as B&Q have discovered. Having the lot of retail distribution and transportation in China, a key
market is not enough, failure to cater to the right tastes challenge has been winning bids for business where the
and spending habits, navigating regulations and manag- focus is often on price and does not take into account the
ing distribution have all been stumbling blocks for foreign ability to deliver quality service. “The market is changing,
retailers in tapping China’s retail hope. though,” says Aymeric Chandavoine, Logistics Director
for FM Logistic China, “When
Retail and distribution in China:
customers realize that low
prices often come with lower
quality and service, they do
big opportunity, big risk
a better assessment of their
logistics providers.”
Cold Chain logistics is
another ongoing challenge
which is improving, but still
results in 20-30% of fruit and
At the China Supply Chain Council’s Retail and Distribu- vegetable wastage in China, says Derek Abel, Supply
tion Summit on April 15, Companies such as adidas, Met- Chain Director for Tesco China. Like other retailers such
ro Best-Buy, Tesco, FM Logistic, Amway and Yum Brands as Metro, Tesco has centralized distribution and brought
all talked about the challenges they face in distributing in strict quality controls to regulate pesticide usage and
product in China. These challenges vary from insufficient other health and quality concerns.
cold chain storage and transportation infrastructure to im- Tier two, three and smaller cities are apparently grow-
mature IT systems
to manage the flow
of goods, coupled
with the difficulty
of a fragmented
logistics market
spread over a vast
geography.
Aldo Spaanjaars,
Vice President, Op-
erations, adidas
China spoke about
the complexity of managing distribution to over 5,000 ing strong and haven’t heard much about a recession.
stores in 500 cities in China. For them, a key success Major retailers like Suning, Gome and others are broaden-
factor is having data transparency. “I’m a true believer in ing their presence in rural China, riding on government
technology, I want to know where our products are and I initiatives to stimulate consumer spending. Suning has
want to see data integration,” said Spaanjaars. This criti- already opened 4,500 licensed retail stores in the vast
cal concern was also addressed by Tony Li, Warehouse rural areas over the last 13 months. If the big opportunity
and Transportation Manager at Amway, which success- in retail is China, then the silver lining in China is outside
fully adapted its business model to China by shifting away the big cities - as long as they can be served.
from direct sales to having retail distribution outlets.
46 MAY/JUNE 2009
www.chainaonline.com
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