Issue 1 Retail Category Management in China

Category Management newsletter

Newsletter number 1: Retail Category Management in China

Welcome to our first issue. It has taken us a while to publish it, but we have worked hard to build up a selection of articles and information which we hope you will find useful. Please provide us with feedback on anything else you would like to see in this newsletter.


Contents

Category management in China

You may have heard many reports about the forecast explosion of China's economy. Stories such as; China will be the biggest economy in the world, and that China has the greatest potential. Well, this brought me to question the opportunity for Category Management in this vast country. Will it be a huge market for the Category Management profession and if so, when!

How big is China's economy?

Before we begin, its worth establishing how big China's economy is. It may surprise some readers that China has a GDP roughly the size of Italy’s. You probably thought it was bigger! However, it's growing fast, and by latest estimates it will be the size of Germany's by the year 2010. Many say that China's economy will take until 2040 to match the USA's, assuming that growth continues.

This ensures that China is very much at the centre of many CEO's playing fields. Tesco's Sir Terry Leahy recently stated, "China is one of the largest economies in the world with tremendous forecast growth,".

At what stage is the adoption of Category Management in China and what does the future hold.

I posed this question to Kosta Megaloconomos, Director, Retailer Services at ACNielsen, Shanghai. He told me "the development of true Category Management in China has been slow, most retailers and manufacturers are creating planograms, however little or no analysis of these planograms takes place. I believe that what we see in China is directly linked to the stage of the retail market development, i.e. the focus at this point is on mass marketing, mass appeal with little effort placed on optimization. If you draw this as a parallel to China's economy which is trying to move from productivity led to marketing led development it makes sense, at least intuitively."

As an aside, he also mentioned that ACNielsen was not recruiting in it's Category Management Consulting arm at this time. I was quite intrigued by this considering China is developing so fast, and that retailers who embrace Category Management will surely have a distinct advantage.

My personal experience has led me to believe the same. A few moons ago, I lived in Hong Kong, and with a background in Space Planning from my time with a world-wide food company, I thought I'd explore the adoption of it, in the region, at the time. I met with a few different stakeholders in the industry; a retailer, a FMCG supplier and a Retail research company. At that time I was hoping that some may wish to use my skills on a project basis.

I was pleasantly surprised that it was quite easy to meet decision makers, and I put this down to the rareness of somebody focusing on Space Planning. On my first meeting with a software supplier, ACNielsen, they explained that the regions retailers focussed on the macro level. That is, retailers were still struggling with other decisions such as, what are the expanding market, and what is the best range for them. Store optimisation, incl. Space Management and Category Management, was far down the totem pole of priorities. A large retailer with a few hundred stores in Hong Kong, named 'Welcome', explained it's like trying to hit a dartboard, but your blind folded and the dartboard is moving. I did have some sympathy for them, as their store formats couldn't be consistent due to the non standard buildings available in Hong Kong.

Retail Developments in China

However, some interesting developments have occurred recently. Tesco has signed a joint venture with Ting Hsin, the largest food supplier in China, who own the Hymall chain of stores. Now Tesco owns 50%. Other rivals in China include the French chain Carrefour and US owner Wal-mart. Combining their talents, Ting Hsin will offer its local knowledge and operating expertise, while Tesco will add its supply chain, product development and store operation prowess to "improve the shopping experience". One would assume Tescos's will try to introduce good Space Planning practices, which may focus other retailers on it's benefits too.

The Hymall business serves around two million customers a week and is valued at £280m, with sales of £330m. Most of its stores are located in "high quality" shopping mall developments in the east, north and northeast of China. This new strategic partnership with Tesco will bring new management expertise and technology know-how.

Is there room for Category Management

I genuinely see opportunity from this lack of knowledge. Perhaps a consultancy business based in Shanghai may be of use, but you'd certainly want to learn the language, Mandarin, to get a bit more recognition from the locals.

Andrew Mackintosh
Editor

Feedback

Do you have any comments on space management software or what you would like to see. If so, view or contribute to the discussion on this newsletter here Category and retail Management in China