Source:
https://scmp.com/article/589112/foreign-retailers-take-new-ideas-mainland-market

Foreign retailers take new ideas to mainland market

Foreign retailers in the mainland are no longer content with expanding their traditional outlet networks. With their investments bearing fruit, they are opening various types of stores to tap niche consumers.

For some players, Hong Kong is often a testing ground for their new store formats before they take these concepts to the mainland.

Ports Design, a high-end fashion apparel retailer, is showing more confidence, opening its first two accessories stores in the mainland this year.

The strategy of having stores specifically focused on selling handbags, wallets, scarves and diamond rings, will help lift Ports' brand image, says managing director and chief executive Alfred Chan Kai-tai. Financially, it will boost margins.

The move follows a satisfactory response to handbags that the company began selling three years ago. Gross margin on the products is 5 percentage points higher than for apparel products, lifting Ports' gross margin 4.27 percentage points to 65.27 per cent last year.

Ports, which makes products in the mainland, will build a factory this year with a monthly output of 3,000 handbags to cater to the new stores, says Mr Chan.

Ports also aims to extend its geographical presence on the mainland. It will open a store in Dandong, Liaoning province, this year to tap affluent South Korean tourists and businessmen, and another store in Qingdao, Shandong province, a popular destination for Korean investments.

Retailers are seeking to diversify to capture a bigger a share of the country's booming consumer spending, driven by rising incomes and government steps to spur consumption. Retail sales in the first two months this year rose 14.7 per cent year on year, the National Bureau of Statistics said.

Where Ports is taking its new strategy direct to the mainland, luxury retailer Dickson Concepts aims to open a Harvey Nichols store on the mainland in two years, or about four years after it opened one in Hong Kong's Central district, chairman Dickson Poon says.

Dickson operates Seibu stores in Hong Kong and the mainland, where the network covers second-tier cities, including Chengdu and Shenyang.

Mr Poon said Seibu stores were absent in Beijing and Shanghai because 'for first-tier cities, it's difficult to find appropriate store locations'.

'For our Seibu stores in Chengdu and Shenyang, we aim to capture tourist spending because these two cities are popular tourist spots,' he said. Mr Poon declined to specify where Dickson aimed to open its first mainland Harvey Nichols shop.

Aeon Stores (Hong Kong), formerly Jusco Stores, also tested the Hong Kong market with a Japanese supermarket before using the concept for its first supermarket north of the border, which opened on Saturday in Shenzhen.

Japan-based Aeon already runs department stores in the mainland, where its operation turned around to a HK$14 million profit last year from a HK$5 million loss in 2005. The company opened its first Hong Kong supermarket at Kwun Tong's APM shopping centre in May 2005.

The retail giant's Hong Kong flagship plans to invest HK$20 million to open a 31,000 square foot supermarket at Grand Waterfront Plaza in To Kwa Wan this year.

Managing director Soul Lam Man-tin said: 'Our supermarkets have the niche in offering Japanese food to customers.'

The firm, which in Japan specialises in shopping malls though it has none in Hong Kong, this year opened its first mainland mall in Shunde city, Guangdong, at a cost of 60 million yuan. It has been fully occupied from the outset, says Mr Lam.

Aeon Stores' parent, Tokyo-listed Aeon, is also expanding in the mainland beyond its two existing supermarkets in Qingdao. It will soon announce a supermarket project in Beijing, says Mr Lam.

B&Q Asia, a unit of British home improvement retailer Kingfisher, has chosen Hong Kong as a base for its smaller stores before opening similar outlets in Beijing and Shanghai.

The group will open a store of 10,000 to 15,000 square feet in Hong Kong in the first half next year, after opening a 120,000 sq ft flagship store in Kowloon Bay in June, says B&Q Asia chief executive Steve Gilman.

The company aims to open one more mega store in Hong Kong and at least 10 smaller stores, probably in shopping centres, Mr Gilman says. He declines to provide a timetable. B&Q, which acquired a 13-store retail chain in 2005, has 58 mainland stores and plans to open up to 100 by 2010 as it faces competition from the larger Home Depot.

The US retailer, which like B&Q offers design and installation services, entered the market in December, buying the mainland's The Home Way for US$100 million.

The Home Way, China's first home-improvement retailer, has 12 outlets in Beijing, Qingdao and others cities.

Sportswear retailers are also looking to profit from the mainland's growing consumer market, particularly with higher-margin branded products. Win Hanverky, which makes and retails sportswear, is using its Hong Kong base to test the response to its FutbolTrend stores before opening similar outlets in Beijing and Shanghai later this year.

It has 800 Umbro franchised outlets and aims to grow this number to 1,200 this year and 1,500 in 2008.

Li Ning, the leading homegrown sports brand, has made it clear that it will not sell other brands in its 4,300-odd shops across the country.

Merrill Lynch says Nike leads China's sportswear market with a 30 per cent share, followed by Adidas and Li Ning at 13 per cent each.

What's in store

Ports Design is opening its first two accessories stores this year

Dickson Concept plans to open a Harvey Nichols in two years

Aeon Stores opens its first supermarket in Shenzhen on Saturday

B&Q has 58 mainland stores and plans to open up to 100 by 2010

Home Depot acquired The Home Way with 12 outlets

Win Hanverky has 800 Umbro franchised outlets and aims to increase this to 1,200 this year

Li Ning has 4,300-odd shops across the country