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SCMP Reporter

A stroll at the weekend through the doors of Pacific Department Store's Shanghai landmark is to invite a shoulder-to-shoulder tussle with the city's most stylish men and women as they paw their way through racks of the latest shoes, handbags and clothing.

 The Xujiahui District store - the city's most successful wholly foreign-owned retail outlet - is flush with customers and cash. And that is the way Grand Pacific Holdings deputy chief representative Howard Pang wants things to stay.

 'We've been successful because we offer a wide variety of fashionable clothing and accessories priced for local people,' Mr Pang said.

 That - and Pacific's reputation as a showcase for international trends - has proved a winning combination for the Taiwan-based retailer.

 Since Grand Pacific Holdings opened its Xujiahui outlet in December 1993, business has been growing at a double-digit rate.

 Last year, the shop chalked up turnover of 950 million yuan (about HK$883.59 million), ranking it among the 10 most lucrative retailers in the city.

 Other Shanghai foreign-invested department stores have been less fortunate. In recent months, two of the city's earliest Hong Kong-invested retailers - Wings and Shui Hing - have withdrawn from the market. Others, such as Top Form's Printemps de Paris, may do so in the coming months.

 Mr Pang believes the reason comes down to the rules of market competition.

 'There were only a handful of overseas retailers in the city when we first opened,' he said. 'But in the past five years the municipal government has given about 70 licences to foreigners.'  Although Shanghai is home to the mainland's wealthiest residents and continues to enjoy some of the heftiest retail growth in the country - turnover has increased at more than 20 per cent per annum for the past five years to reach 134 billion yuan last year - the charge of domestic and foreign entrants into the fray has soured the market for many.

 The Shanghai Statistics Bureau said there was one commercial establishment for every 80 people in the city.

 Shanghai's cutthroat retailing competition is, perhaps, best illustrated by the recent explosion of new construction.

 During the 40 years up to 1990, Shanghai's trading and shopping space increased at a rate of about 10,000 square metres per year, according to First Pacific Davies.

 But since 1994, construction has multiplied at a massive rate, with retail stock by the end of 1996 reaching about 7.33 million sq m, or 0.52 sq m of retail space per capita.

 With at least an additional 390,000 sq m of prime retail space set to begin operations between now and the end of the decade, competition for retail dollars can only intensify.

 Much of Shanghai's boom has been in the form of large department stores constructed in the city's primary shopping districts along Nanjing Road, Huaihai Middle Road, Sichuan Road and Xujiahui district.

 The Shanghai Commerce Commission reports that there are 70 department stores of more than 5,000 sq m operating in the municipality. Many are multi-functional stores, combining retailing with entertainment centres and food courts.

 Pacific Department Store is among the best. According to Mr Pang, the store sales policy of targeting medium-range shoppers has been crucial.

 'Our average prices for clothing and accessories are between 200 and 300 yuan, which is fit for local people,' he said.

 Pacific is assisted by its Taiwan-based suppliers, who followed the retailer to locate manufacturing arms in the mainland.

 That means Pacific is able to avoid the extra costs of importing its goods, including the payment of import duties.

 Many Hong Kong retailers have been less far-sighted, said Indosuez W I Carr associate director Alan Wang. Many have mistakenly imported high-end products into the mainland, only to discover the goods are too expensive for local tastes.

 Mr Wang said Dickson Concepts had done very badly in Shanghai because their products were unsuitable for a developing country.

 Researching the market was crucial, agreed Pacific's Mr Pang.

 'You need to know what your customer base is going to be.'  Grand Pacific Holdings apparently knows what it is after.

 The firm, which opened its second Shanghai department store on bustling Huaihai Road in September and operates retail showcases in the Sichuan cities of Chengdu and Chongqing, is considering a third Shanghai location.

 'Even with the economic slowdown we will continue to do alright,' said Mr Pang. 'Other foreigners are getting hurt.' 



Middle road key to Grand Pacific's Shanghai success