• Fri
  • Jul 11, 2014
  • Updated: 12:52pm

Retailers upgrade to take on foreign rivals

PUBLISHED : Wednesday, 23 June, 2010, 12:00am
UPDATED : Wednesday, 23 June, 2010, 12:00am

Major retailers in the mainland's inland provinces are boosting their investments in advanced distribution systems to drive expansion, meet customer demand and stay competitive against larger foreign rivals, industry experts said yesterday.

'When you go inland, you'll find a whole lot of regional retailers used to defending their turf just against each other,' said Keith Dolling, managing director for logistics at Hunan-based supermarket and department store operator BuBuGao Trade Chain Share Co. 'But that's now changing because of the growing presence of multinational retailers.'

Dolling, one of the featured speakers at this week's Retail Asia Expo event at the Hong Kong Convention and Exhibition Centre, said the efficient business models run by multinationals such as Wal-Mart Stores, Carrefour and Tesco on the mainland had served as a wake-up call for regional retailers to upgrade the technology behind their distribution systems.

'These regional retailers look at these multinationals and they worry about their markets,' he said.

The stakes for local and foreign players are high. According to a survey by the China Chain Store and Franchise Association, an industry group representing around 800 members, revenue last year by the mainland's top 100 chains increased 13.5 per cent year on year to 1.36 trillion yuan (HK$1.55 trillion).

Shenzhen-listed BuBuGao, with about 125 stores in Hunan and Jiangxi provinces, has bet on an improvement in supply chain efficiency using software from retail specialist Manhattan Associates to streamline operations, reduce costs and expand into neighbouring provinces.

'We've got a five-year plan to expand in seven provinces and have three distribution centres to support stores,' Dolling said.

BuBuGao expects to optimise its entire replenishment process by automating time-consuming steps such as order preparation, stock-checking and data analysis.

Beijing's economic stimulus efforts have encouraged consumption in the countryside, which has prompted retailers to expand into lower-tier cities and villages.

'We're seeing an evolution,' said Jeff Baum, senior vice-president for Asia-Pacific operations at Manhattan Associates. 'Retailers in China are keen to get more competitive and sophisticated very quickly because of the multinationals.'

Advanced retail technologies can handle high-volume and unique merchandise. 'We don't see in the US, for example, the live fish tanks you see in mainland supermarkets,' Baum said.

But that comes at a hefty price. Baum said retailers could spend 'tens of millions of dollars' in key distribution and management software. Typical return on investment on these technologies are three to four years, but 'mainland customers want to see a two-year payback', he said.

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