Posts tagged ‘retail’


Furniture Retailing With Chinese Characteristics – China Real Time Report – WSJ

At the opening of Zaozuo’s first furniture store this month in Beijing, a shopper snoozed on a couch while others clambered onto wall-mounted shelves to take selfies perched in chairs.

Welcome to furniture retailing with Chinese characteristics.Online furniture startup Zaozuo Zaohua Zworks Ltd. opened the outlet in an upscale mall after hitting resistance from customers wary of buying bulky items without so much as a feel of the fabric, let alone a bit of shuteye.

Liu Yusi, a 33-year old human-resource executive living in Beijing, said the showroom is a good idea given that buying large pieces of furniture without a test drive can be a leap of faith, although she was a little disappointed there weren’t any beds on display. “Maybe the store is too small,” Ms. Liu said. “But I think a mattress is something you really need to lay on before you decide to buy.”

Zaozuo has tried to distinguish itself from competitors by letting customers vote on the design and style of furniture items at the prototype stage before they’re mass produced, a strategy it says reduces inventory and cuts cost. This is a Chinese adaptation of business models used by the likes of U.S. website — which conducts online polls of crowd-sourced T-shirt designs before producing winning entries – and by crowd-funding sites that have investors vote on ventures they’re willing to fund.

Zaozuo’s customers vote for the designs they’d like to buy. PHOTO: ZAOZUO, DON ARBOUR/THE WALL STREET JOURNAL

The approach has its skeptics. Guangdong Weiyuhua Furniture Co. says it thinks Zaozuo’s voting is a gimmick and questions whether selling furniture online is sustainable. “It targets a few rich people in cities like Beijing or Shanghai,” said company sales manager Li Songzhi. “Traditional furniture companies like ours have real stores all over China.”

With nearly 700 million online users, Chinese consumers are driving explosive growth in the e-commerce sector, undercutting traditional retailers and leaving new online ventures fighting for an edge. Zaozuo co-founders, Stanford business school graduates Shu Wei and Guan Zishan, say China’s struggling manufacturing sector needs a wakeup call as it battles rising debt and excess capacity.“

The old system is not working very well,” said Ms. Shu. “That was the starting point of our business model.”

One potential problem with the company’s voting system is possible voter fraud, says Travis Wu, China research director with consultancy Forrester Research Inc. “In China, everything is a bit tricky, and lots of people try to game the system,” Mr. Wu said. That could see designers tilt results toward their own models, for example, or allow competitors to steer Zaozuo into producing money-losing items, he said.

Another concern: with Zaozuo opening a showroom, it risks driving up costs and undercutting its advantage over traditional furniture makers. Mr. Guan says users must be registered before voting, the company watches carefully for unusual online activity and the new store is not a major investment.

Zaozuo, which attracted several thousand curious shoppers to its store launch on a recent weekend, sees itself inhabiting a competitive space between expensive designer brands and mass marketers like Sweden’s IKEA, a company that attracts its share of showroom lounge lizards. On any given weekend, entire families can be found snoozing on beds in Ikea’s massive showrooms, luxuriating in the air conditioning and enjoying the inexpensive food.

China’s fragmented furniture industry with around 5,000 large companies and combined revenue of 244.5 billion yuan [$37.3 billion] in 2015, up 16.1% increase from the previous year, is tradition-bound and due for a shakeup, say online companies. Internet furniture companies only command a tiny slice of the market but are growing rapidly. Privately held Zaozuo said sales are increasing by 40% annually although it has yet to break even. MZGF Furniture Studio Co., another online firm, said sales have been expanding by as much as 200% year on year in some months.

Zaozuo, which works with 50 Chinese factories and more than 80 European designers, has attracted $17.5 million in venture funding and hopes to eventually go public. Anna Fang, chief executive of venture capital group Zhen Fund, which has invested $1.3 million in Zaozuo, said prospects for the industry are promising but the startup may need to shorten delivery times, which range from three to 35 days. “Ikea can get furniture to you right away,” she added.At its store opening, Zaozuo said it tried to discourage shoppers from getting too comfortable on its furniture. “The customer might be comfortable, but the image is not that good for other customers who can’t feel the fabrics if someone’s sleeping on it,” said Mr. Guan. “Maybe they do it because they’re tired. Shopping can be very tiring.”

Source: Furniture Retailing With Chinese Characteristics – China Real Time Report – WSJ


China’s Industrial Output, Retail Sales Accelerate in August – China Real Time Report – WSJ

China’s economy strengthened in August, with a slew of data, from factory production to retail sales, beating estimates Tuesday. The improved performance is a fresh sign that stepped-up government spending and strong property sales are helping to stabilize growth in the world’s second-largest economy.

As for the numbers themselves, as reported by the government, industrial output rose 6.3% last month from a year earlier. Investment in buildings and other fixed assets outside rural households climbed a better-than-expected 8.1% year over year in the first eight months of 2016, while retail sales grew 10.6% in August from a year ago.

Economists generally cheered the numbers, but wondered how long the better times would last. Following are excerpts from economists’ views on the latest data, edited for length and style:Better-than-expected data out of China today raise hopes that policymakers’ efforts to reverse the slide in investment growth are seeing some success. Stronger industrial activity last month appears to have been partly driven by a recovery in investment spending, especially in the state sector. The delayed impact of earlier policy easing means that a stronger second half of this year is likely. The latest evidence of a pick-up suggests that recent concerns that policy easing had failed to provide any noticeable boost to the economy were likely somewhat premature.  Julian Evans-Pritchard, Capital EconomicsToday’s data suggest that the downside risk for third quarter GDP is significantly reduced. Investment in manufacturing industry increased only 3% in Jan-Aug, while investment in services picked up to 11.2%, showing economic rebalancing continues to take place. The uptick in industrial output is consistent with the rebound in the August official manufacturing PMI. However, the divergence of PMI performance between large corporates and small- and medium-size enterprises remains a concern.

Louis Lam and David Qu, ANZ ResearchWe expect investment to remain under pressure for the rest of the year because of slower real estate construction and spare capacity in key sectors. But with industrial profits recovering recently, and investment also up in August, the downward pressure should diminish. Meanwhile, export momentum should improve along with global trade, while we expect consumption to hold up. In all, while further stimulus is necessary to reach the government’s GDP growth target of at least 6.5% this year, the outlook has improved slightly after the August data.  Louis Kuijs, Oxford EconomicsChina needs to nurture an initial economic stabilization with continued fiscal support. Today’s data show economic growth seems to have stabilized a little last month, but it is not on a solid footing yet.  Measures such as tax cuts and increased government spending can not only help spur growth but also help restructure the economy by boosting consumption. Fiscal expenditures rose 10% in August from a year earlier, much faster than July’s 0.3% increase.  Liu Xuezhi, Bank of Communication

Source: Economists React: China’s Industrial Output, Retail Sales Accelerate in August – China Real Time Report – WSJ


* No meatballs’ as IKEA hits hurdles in India

India cannot make up its mind, it seems, whether to welcome foreign retailers or not.

Hindustan Times: “Swedish retailer IKEA said Friday it was reviewing sweeping curbs imposed on what it can sell at its planned new stores in India that will reportedly prevent it offering its famed meatballs. India’s foreign investment panel has rejected 15 of IKEA’s 30 product lines, a report said on

Friday, underscoring the regulatory hurdles faced by foreign stores who are eyeing the Indian market with renewed interest.

“We are now internally reviewing the details (of the investment board’s decision),” an IKEA spokeswoman told AFP, adding that she could not confirm the curbs as reported by The Economic Times on Friday.

Among the lines IKEA has been told by the Foreign Investment Promotion Board that it cannot sell are gift items, fabrics, books, toys, consumer electronics and food, the newspaper reported.

The group will, however, be allowed to sell furniture — its core business.

The investment panel also reportedly told IKEA it cannot offer customer financing schemes because that would violate banking regulations, or open cafes and food markets because that would break food policy regulations.

IKEA’s entry into India — it has pledged to invest $1.9 billion in the coming years — is being closely watched by competitors as a test case for how a large foreign corporation negotiates India’s byzantine rules and red tape.

India’s government announced a string of pro-market and investor-friendly reforms in September that relaxed or removed barriers preventing foreign retailers from operating in the country.

IKEA hopes to open 25 of its trademark blue-and-yellow stores in India through a 100-percent owned unit, Ingka Holding, as part of a wider push into emerging markets like China and Russia.

The government initially insisted that IKEA obtain 30 percent of its supplies from small Indian manufacturers that the Swedish retailer feared would not be able to keep pace with demand.

Later the government dropped the demand specifying the size of the supplier, but kept the 30 percent local sourcing requirement.”

via No meatballs’ as IKEA hits hurdles in India – Hindustan Times.


* Home Depot closes stores as it shifts focus

Home Depot closes stores as it shifts focusChina Daily: “Home Depot Inc, the largest home-improvement retailer in the United States, said it is closing its remaining seven big box stores in China as it shifts its focus to specialty and online outlets in the world’s second-largest economy.

The move will affect about 850 employees, and the company will record an after-tax charge of about $160 million, or 10 cents per diluted share, in the third quarter, it said in a statement issued on Thursday.

Employees of Home Depot gather outside the company’s Xi’an store on Friday as the home-improvement retailer declared that it will close all its seven stores in China. [Photo/China Daily]

“Closing stores is always a difficult decision,” said Frank Blake, the company’s chairman and CEO. “We’ve learned a great deal over the last six years in China, and our new approach leverages that experience.”

The company said it will keep its two recently launched specialty outlets – a paint and flooring store and a home decoration shop – in Tianjin.

It is also in talks with several Chinese e-commerce websites to explore selling its products online, it said, a combination believed to be more adequate to Chinese customers’ needs and shopping preferences.

The Atlanta-based seller of building materials and home-improvement products will also keep its R&D team in China, as well as the 170 workers in its sourcing offices in Shanghai and Shenzhen, the statement said.

Home Depot has 2,249 retail stores in operation globally. Excluding the charges related to the store closures, Home Depot expects its fiscal 2012 diluted earnings per share to rise 19 percent to $2.95 for the year.

The company’s success story in the global market did not translate well in China, where the do-it-yourself home decoration-retailing concept has failed to inspire Chinese homeowners, industry analysts said.

The US company acquired a local peer, The Home Way, in 2006 and took over its 12 outlets in China. However, it has closed five outlets since 2009. The company has also replaced three top executives since its establishment in the country, a move that did not alter its sales decline.

Though specialized home-improvement retail is an upcoming trend, Home Depot arrived in China too early, at a time when the country’s decoration culture and consumption behaviors were not ready for the concept, said Chen Lei, a retail analyst at China Galaxy Securities. Despite the construction boom, the low labor costs made the DIY decoration concept irrelevant, he said.

Chinese homeowners rarely paint houses or lay out wooden floors themselves. Rather, they prefer to hire decoration companies, which often find products with more competitive prices from local building material stores, Chen said.

In addition, the company’s strengths in the United States, including its lower prices due to its global sourcing channels, have been diluted in China.

“You can always find local brands that are cheaper, and consumers in various regions have very different preferences,” Chen said. “Winning the market through a price war is not going to work for a foreign retailer in China.””

via Home Depot closes stores as it shifts focus |Companies |


* India opens retail to global supermarkets

BBC News: “India’s government has once again cleared a controversial plan to open up its lucrative retail sector to global supermarket chains.

Last year, the government suspended a similar plan after fierce opposition from its allies and political rivals.

International firms such as Walmart and Tesco will now be able to buy up to a 51% stake in multi-brand retailers.

Analysts say the government has reintroduced the measure in an effort to revive a flagging economy.

Prime Minister Manmohan Singh is reported to have told cabinet colleagues that “the time for big bang reform has come; we have to go down fighting”.

Strong opposition

The decision was one of several key reforms announced by the government. It also approved a plan to allow foreign airlines to buy 49% stakes in local carriers, in the hope that this will boost the country’s troubled aviation sector.

The decision to open up India’s lucrative retail sector to international supermarket chains has come as a major surprise. It was among a slew of key economic reforms announced by the government and is seen as vital to reviving the country’s slowing economy.

For months the decision has been held up by political gridlock, especially because it was opposed by the government’s own allies. But it now appears the government has decided to bite the bullet, especially as its own credibility – and that of Manmohan Singh – is at an all-time low following a series of financial scandals.

Much will now depend on Mr Singh’s ability to keep his disparate coalition together, as opposition to these measures is expected to be fierce.

Many will see this as a final throw of the dice, not just to revive the economy and boost confidence among investors but also ahead of the national elections due in 2014.

It also follows Thursday’s dramatic 14% rise in the price of diesel, which is heavily subsidised in India.

The government was forced to back down on retail reform after the cabinet first undertook to open up the retail sector last November.

The move had been strongly opposed by tens of thousands of small businesses and cornershops who fear they will be put out of business.

But this latest move has already been welcomed by economists who say it will transform the way Indians shop and will boost the economy.

The opposition Bharatiya Janata Party and the Communists labelled it a “betrayal of democracy”.

via BBC News – India opens retail to global supermarkets.


* Ikea Applies for Big Indian Investment

WSJ: “Swedish housewares giant IKEA Group asked India for permission to invest €1.5 billion ($1.9 billion) in the country to set up 25 retail stores in coming years, a commitment that provides some relief for New Delhi policy makers who have been trying to boost sagging foreign-investor sentiment.

IKEA’s foray into India, made possible by a policy change last year that allowed some retailers to own 100% of their Indian units, could help transform India’s largely unorganized, $500 billion retail sector. But the company will face significant challenges, including meeting the government’s mandate that it source 30% of inventory from local small-scale industries.

IKEA, which has 290 stores in 26 countries and is known for selling affordable, modern-looking furniture and housewares, said that if the Indian government approves its application it could have a significant effect on the country’s retail sector, “vastly improving availability of high-quality, low-price products not available in India.”

The company announced its decision after its chief executive, Mikael Ohlsson, met with Indian Commerce Minister Anand Sharma on Friday at a conference in St. Petersburg, Russia.”

via Ikea Applies for Big Indian Investment –

See also: Consumerism grows in India


* GM to Add 600 China Dealerships

WSJ: “General Motors Co. plans to add 600 dealerships in China this year, about a 20% increase, as the auto maker looks to bolster its presence here amid growing competition and an economic-growth slowdown.Chief Executive Dan Akerson on Monday outlined steps GM is taking to boost sales and market share in China, where it is the largest foreign auto maker.

The addition of 600 dealerships would bring the companys dealer network in China to 3,500 stores, up from 2,900 at the end of 2011.  At that size, Chinas dealers would begin to rival the companys U.S. network of 4,400.

GM is adding new models and factory capacity and expanding a technology center near its China headquarters in Shanghai, which will soon be its second-largest global development center. The largest is in Warren, Mich., near its Detroit headquarters. Like GM, many of the worlds major auto makers are expanding in China, concentrating on a market expected to grow to more than 30 million vehicle sales by the end of the decade from 18.5 million last year.”

via GM to Add 600 China Dealerships –

If you are looking for a business opportunity in China, go for a tyre franchise. The vast majority of Chinese cars have yet to have their first set of tyres replaced!


* Starbucks finally opens in India

Starbucks and a Tata company have started a JV and will open 50 shops in India this year, starting in Delhi and Mumbai.

In the meantime Starbucks has raised its coffee prices in its 500 stores in China.

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