Selling to Chinese consumers

A Hot Tip about Reaching the Consumer in China

Last updated: 8 Feb 2011

Executive Summary
Urbanisation has spurred on the development of the peripheral areas of first-tier cities as well as the second- and third-tier cities on the Chinese mainland. This in turn has expedited the expansion of retail chains on a regional scale. The rapid development of new retail distribution channels such as online sale and convenience store has also added impetus to the evolution of sales channels. More and more retail enterprises adopt a multi-channel strategy such as “hypermarket + supermarket + convenience store” and “physical store + online sales” with a view to enhancing their operational efficiency through increasing the purchase volume and overcoming the challenges of a geographically dispersed market.

 

The purchasing mode of retail enterprises is gradually shifting to the use of centralised purchase and the minimisation of intermediaries. For example, nearly all the mainland general merchandise enterprises have introduced the system of centralised purchase by stores. Some large general merchandise enterprises are even upgrading their centralised store purchase system to centralised group purchase system where the purchase authority of stores is centralised at the headquarters of the group which will make direct purchase from producers or national sole agents.

 

The continuous expansion of China market has contributed to the average annual growth of more than 13% in the total retail sales of consumer goods in the past decade. Yet in terms of management, information utilisation and product planning, mainland retail enterprises still lag behind their counterparts in advanced countries of Europe and the United States. In the face of increasing market competition, mainland retail enterprises have started to step up the management of brands and supply chains, and develop new, competitive product varieties and product sources. Some even consider building up their own brands.

 

Large retail enterprises on the mainland have been occupying a relatively dominant position, imposing different “slotting fees” and other stringent terms upon their suppliers. But with the growing maturity of franchise operations, the increasing popularity of modern multi-purpose shopping malls and the proliferation of online sale platforms, Hong Kong companies can have more options in opening up domestic sales channels. 

 

In spite of the growing number of domestic sales channels, Hong Kong companies still need to closely monitor the changing preferences of mainland consumers. In particular, the vast expanse of the mainland with great regional differences calls for greater attention to product development and design, product cycles and even logistics and distribution support, all of which are indispensable for achieving sustainable development and building brands.


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Posted: 03 February 2011, last updated 8 February 2011

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