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Foreign retailers rush to adapt to Chinese marketplace
By Ni Tao |
March 12, 2012, Monday
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Print Edition
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EDITOR'S note:
Shanghai Daily reporter Ni Tao briefly interviewed Edwin Keh, lecturer at Wharton School of Business and former Chief Operating Officer of Wal-Mart Global Procurement, on Wednesday about China's retail industry and its supply chains.
Q: Wal-Mart is not as successful in China as elsewhere in the world. Neither is Carrefour or other big retailers. What holds them back?
A: I would always characterize Wal-Mart as a very patient company, who has a very long view of the market. I agree the first 10 years of Wal-Mart in China was a good learning experience for the company.
Perhaps you'll understand what's important, what's in the DNA, what's central to the Wal-Mart brand and what is important for its success in China, where did you find the good balance between these factors.
And I think it took Wal-Mart several years to manage that, and some of that has to do with developing Chinese talent, Chinese leadership, and the other thing is to learn and understand Chinese consumers.
I expect Wal-Mart to be more and more successful in many years ahead, if they can understand some of the nuts and bolts of operating in China, like solving the supply chain operations and attracting talent, and looking for opportunities to grow in Tier 2, Tier 3 or Tier 4 cities.
Q: Can international retail giants learn from the practices of local retailers?
A: Absolutely. I'm here in China with MBA students from Wharton, and the whole point of bringing students to China is for them to understand the Chinese supply chain operations and also to understand the local marketplace.
China is very different from a lot of international retailers' home markets, and I think there is a lot here unique to this marketplace and there are also a lot of strengths and constraints that are different in China than in the US.
Q: In an interview with Knowledge@Wharton, you said there's a degree of challenge in China's transition to a consumer economy. Could you name some of the challenges?
A: China is a rapidly developing marketplace. It has a very fast pace of change. A lot of legislation and consumer behavior is also changing rapidly.
We know China is a rapidly urbanizing country. There will be 50 percent of the Chinese living in the cities [Ed: 51.27 percent of Chinese already live in cities now.], whereas not so long ago most people lived in the countryside.
And the urban Chinese have a very stressful lifestyle and less extended family support, and they really understand quality.
So there is a need to serve these customers that didn't exist 10 to 15 years ago in the Chinese marketplace. They are very different customers than traditional Chinese customers.
And in that lifestyle, the traditional marketplace that worked for those customers may morph into a modern shopping mall, also maybe an online solution, in which they buy from the telephone or from their laptop. It's very different consumer behavior. So I think it's a huge demographic change that China is going through right now.
Q: What influence will e-commerce have in retail industry here?
A: E-commerce is a great solution to the lack of infrastructure and logistics services in China's west, in faraway, remote provincial towns. Because of e-commerce, people there have access to everything you would have in Tier 1 cities. That's a great way to develop the Chinese retail market.
Shanghai Daily reporter Ni Tao briefly interviewed Edwin Keh, lecturer at Wharton School of Business and former Chief Operating Officer of Wal-Mart Global Procurement, on Wednesday about China's retail industry and its supply chains.
Q: Wal-Mart is not as successful in China as elsewhere in the world. Neither is Carrefour or other big retailers. What holds them back?
A: I would always characterize Wal-Mart as a very patient company, who has a very long view of the market. I agree the first 10 years of Wal-Mart in China was a good learning experience for the company.
Perhaps you'll understand what's important, what's in the DNA, what's central to the Wal-Mart brand and what is important for its success in China, where did you find the good balance between these factors.
And I think it took Wal-Mart several years to manage that, and some of that has to do with developing Chinese talent, Chinese leadership, and the other thing is to learn and understand Chinese consumers.
I expect Wal-Mart to be more and more successful in many years ahead, if they can understand some of the nuts and bolts of operating in China, like solving the supply chain operations and attracting talent, and looking for opportunities to grow in Tier 2, Tier 3 or Tier 4 cities.
Q: Can international retail giants learn from the practices of local retailers?
A: Absolutely. I'm here in China with MBA students from Wharton, and the whole point of bringing students to China is for them to understand the Chinese supply chain operations and also to understand the local marketplace.
China is very different from a lot of international retailers' home markets, and I think there is a lot here unique to this marketplace and there are also a lot of strengths and constraints that are different in China than in the US.
Q: In an interview with Knowledge@Wharton, you said there's a degree of challenge in China's transition to a consumer economy. Could you name some of the challenges?
A: China is a rapidly developing marketplace. It has a very fast pace of change. A lot of legislation and consumer behavior is also changing rapidly.
We know China is a rapidly urbanizing country. There will be 50 percent of the Chinese living in the cities [Ed: 51.27 percent of Chinese already live in cities now.], whereas not so long ago most people lived in the countryside.
And the urban Chinese have a very stressful lifestyle and less extended family support, and they really understand quality.
So there is a need to serve these customers that didn't exist 10 to 15 years ago in the Chinese marketplace. They are very different customers than traditional Chinese customers.
And in that lifestyle, the traditional marketplace that worked for those customers may morph into a modern shopping mall, also maybe an online solution, in which they buy from the telephone or from their laptop. It's very different consumer behavior. So I think it's a huge demographic change that China is going through right now.
Q: What influence will e-commerce have in retail industry here?
A: E-commerce is a great solution to the lack of infrastructure and logistics services in China's west, in faraway, remote provincial towns. Because of e-commerce, people there have access to everything you would have in Tier 1 cities. That's a great way to develop the Chinese retail market.
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