HK businesses travel differing roads
When it comes to going north, Hong Kong retailers have taken different approaches in expanding their mainland operations.
Jewellery chain Chow Tai Fook prefers a rapid approach. Since opening the first shop there in December 1998, the private company has opened more than 400 outlets throughout the country and has plans for another 120 shops by the end of this year.
'We are bullish on the China economy,' said company director Kent Wong Siu-kee. 'There is a clear potential with GDP growth of 8 per cent to 9 per cent each year.'
Mr Wong said the goal was to ensure that his customers would never have to travel too far for jewellery.
Having fully developed its network in major cities, the company is now focusing on 'secondary markets' such as Dongguan, Fuzhou, Ningbo and Harbin. It also broke into Taiwan last month with the opening of a shop in Taipei.
Chow Tai Fook operates a mix of business models in the mainland. A third of them are owned by franchisees, another third are jointly owned and the rest are wholly owned by the company.
Mr Wong said revenues from mainland shops made up the majority of the company's total sales in 2005 and would continue to do so this year.
Other Hong Kong retailers expanding are cosmetics chain Sa Sa, clothing retailers I.T and Giordano, shoe chain Staccato, and health chains Watsons and Mannings.
Mannings went into the mainland market in October 2004 through the Closer Economic Partnership Arrangement, which allows Hong Kong companies to open wholly owned companies in certain provinces.
The chain is focusing on three Guangdong cities - Guangzhou, Dongguan and Shenzhen - to create a cluster of stores. The plan is to add another five to 10 stores to the existing 11 this year.
The cluster strategy cuts transport costs and made for more efficient management, said Caroline Mak Sui-king, health and beauty director of The Dairy Farm Group who oversees Mannings' China operations.
Mannings stores on the mainland are larger than those in Hong Kong. Beauty products are the most popular items, making up more than 30 per cent of sales.
But operating a business on the mainland is not as cheap as most people believe, with more expenses than in Hong Kong.
Some other challenges are lower profit margin on international branded products, a limited pool of experienced retail staff and changing business regulations.
'You learn every day,' Ms Mak said of the regulations. 'They're all written down, but it's not so easy to understand them.'
One such regulation is that a sale item cannot be marked down by a certain percentage unless the chain has sold the product at the original price at all its stores. Like most companies on the mainland, Mannings has a specialist liaising with government officials.
