Stop 1: Beijing

Beijing by Cecilia Schulz

Day 1:

More Than You Want to Know about Getting Settled in Beijing

Since I don’t know yet what you are familiar with regarding the UF trip to China and for the sake of understanding the perspective, this daily update is written by me, Cecilia Schulz.  I work in the Miller Center for Retailing Education and Research in the Warrington College of Business Administration at the University of Florida.  The purpose for the blog is twofold:  I will try my best to keep readers informed of the activities of 23 UF students and three faculty members.  To the best of my ability, I will include what I am seeing, hearing, tasting, smelling and learning.  Be patient!  I am not a professional blogger.  I just play one on TV.

The flight from Newark was long…and packed.  Luckily there was only one discontented baby, but for most of the trip, mom (or grandma) dutifully held the baby and walked up and down the aisle to comfort him.  Near the end of the flight, I almost threw myself on the floor begging to be carried as well.

The path to Beijing was over the top of the planet.  After several meals and I think two movies (DON’T see The Tourist with Angelina Jolie and that pirate…Johnny Depp.  It was just awful.  I kept watching it thinking “this has GOT to get better”.  It didn’t.)  Anyway, after some length of time, all I could see out of the window was ice.  Lots of it and it went straight to the horizon.  White.  Blindingly white.  No cities or people or heat.  I wanted to scream, “Hey look!” but everyone had their shades pulled and was trying to sleep.  We all tried.  I guess some sleep was better than no sleep.

We flew over Siberia and into China from the north.  At this point everyone was gawking out of the windows.  Beijing looked as if it spread on forever.  There were numerous apartment buildings that looked like Legos.  The architecture was simple, practical, cement, thick, Mao.  I saw blue rooftops which I later learned were the practical and durable rooftops of factories.  We passed the tell-tale hour glass shaped buildings we’ve come to know and love as nuclear power plants.

The airport in Beijing is gigantic, spacious and modern.  The ladies in our group were warned about squat toilets, but the modernity brought on by the Beijing Olympics postponed the experience.  Good.  I was in no mood.  It only took an hour to get our junk, meet out guide Liu (nice guy) and get on the bus.  So far, so good.  During the ride to the Beijing Huabin International Hotel no one said much.   We were all in a fog and I don’t mean smog.  I’ll talk more about smog later.  Liu was gracious and shared pleasantries about buildings we passed, maybe some history and some cultural lore.  I can’t remember much detail here.  He said rush hour was yet to come, but the traffic was already awful.

Checking into the hotel took over an hour.  With passports and room assignments and 14 tired people (the rest arrived on later flligths), it was laborious.  Fortunately we were gentle to each other and thankfully none of us made the 11 o’clock news.

My hotel room is on the 16th floor.  I look north out of the window.  I see office buildings.  Beyond that I see more buildings and beyond that mountains.  The mountains are merely a hint of a mountain.  The air is dirty.  The room key is used to complete a circuit in a small palm sized wall gadget.  Once inserted, the power for the room is engaged and the AC kicks in.  It makes sense for saving energy, but the room isn’t air conditioned unless you are in it.  I like the idea and I am thinking of having chips installed in my teens so lights are extinguished when they leave rooms.  It could be installed at birth.  They’d never know.

For those of you who REALLY want details, the floors in my room are faux wood and good for sliding with socks.  The furniture is a highly lacquered dark wood.  There’s a couch and a chase lounge.  The bathroom does NOT have a squat toilet and the shower is a large, glass walk in.  The walls of the bathroom are tiled from ceiling to floor with what I can best describe a as a subway tile.  The room and the view are very accommodating.  Why am I telling you about my hotel room?  I thought I’d keep you posted on similarities and differences as best as I can.  SO, hotels are about the same as in the States.  Check.

When Steve Kirn, director of the Miller Center arrived, Elinore Fresh, professor of the Chinese language, and I met for dinner at a neighborhood dumpling restaurant, no Americans in sight!  Other students went north on the main boulevard for dinner and sightseeing.  I don’t think anyone was out late as no one had any energy.

First Beijing observations:  The most obvious one was that the air is polluted.  I can see about five blocks before visibility diminishes.  The architecture is Soviet Block style.  I wouldn’t describe the government buildings as beautiful, but they are enormous.  Where the West has skyscrapers that are tall and lanky, these are intimidating because of mass.  It’s like Yogi to our Booboo.  Finally, the traffic is heavy and the drivers are creative!  Watching the traffic dance from behind the bus driver, I felt like I was playing Frogger.  Unless there is a red light and they FEEL like stopping, they might.  It’s likely they won’t.  At all.  Heck, if they want to make a left turn from the right lane, they will.  This isn’t what shocked me. What did me in was the gentle kind attitude of the drivers.  I saw no grimaces, no fists, no fingers, not even a dirty look.  It was respectful attempted vehicular homicide.

Day 2:

Quick! Get on Beijing Time

I guess jet lag made me forget that I only require about 2000 calories a day because breakfast at the hotel was paradise.  I saw everyone scarf.  I saw the students revive.  With full stomachs, we loaded the bus and started our official first day of business.

The tech side of town is cleared farmland transitioned into mega-plexes full of innovative ideas.  The Lenovo complex is comprised of many buildings creatively designed with fun angles, curves, fountains, space and glass.  We met with Leo Curtis, executive senior consultant or marketing and research development.  He told the history of this multibillion dollar company that started in 1984 with the equivalent of $24,000 from the Chinese government.  Initially Lenovo distributed other companies’ computers, but had a difficult time selling them because (as we all know) they are expensive and they couldn’t write with the Chinese characters.  So Lenovo built a computer by the Chinese for the Chinese.  They developed a character insert card to put the Chinese text into the computer.  This intuitive text input is still used today.  It is the software that finishes words when you text.  Recognize this?

China regulated how many foreign PCs could be sold in the country in order to allow the Chinese companies to catch up.  In 2004, Lenovo achieved number one market share in China.  At the time, wealth for a Chinese citizen meant owning a bicycle, a radio and a watch.  The education of a child was the number one priority for a parent, yet a computer was nowhere in the picture.  Lenovo’s strategy was to sell computers cheaply in China to gain the loyalty of the customer.  The strategy worked!  They sold computers and negotiated with banks, Internet and free service for one year.  Well that worked too as it grew sales by 6%.  Six percent doesn’t sound like much, but when you consider the number of people in China, six percent is huge.

Lenovo considers the emerging labor force, new ideas and technology.  Their focus is to educate tier five and six cities, as opposed to tier one and two, keeping in line with their strategy to build loyalty and raise the standard of living for the Chinese.  Again, the strategy has worked as it obtained a 36% market share.  So now Lenovo has market share and trust.  The next step for the company was to manage the reputation that an inexpensive Chinese product is an inferior product.  Currently Lenovo owns ten percent market share globally. Their goal is to move into the number one or two slot within the next two to three years.  How will they do it?  Well, they will focus on BRAC countries.  Last year, 55% of all PC growth was in tiers four, five and six cities as this is where the emerging middle class live. In fact, according to Cutis, out of every 100 births, 97 will be in the BRAC countries.

This amazing company is now fueling its growth on diverse global perspectives.  Ideas come from everywhere such that they do not have one corporate headquarters.  They have several so that the company functions on a time zone called “now”.  They view their market as everywhere by using their best practices, continuing to learn and to grow intellectually through vast innovation.

Our first stop in the afternoon was with Modern Plaza.  I’ll paraphrase directly from their brochure.  Modern Plaza is located in a high tech area of Beijing where it overlooks the Summer Palace.  I didn’t see anything modern about it except the building.  It is near many institutes of higher education and research.  The brochure went on about how the surrounding area is full of schools.  The department store is upscale and they said this throughout the brochure and the meeting.  They focus on providing services to the customer who is in pursuit of a refined lifestyle.  The company features international brands “keeping abreast with vanguard fashion representing honor and vogue”.  Many top global brands have opened stores in the Modern Plaza.

We met with Mr. Zhang Xin, secretary of director board director of president office (directly off of his card) and his team.  It was the first business meeting the students had in China.  Business meeting protocol in China is different from the protocol in the US.  After you walk into a conference room and everyone makes their acquaintance, the host sits on the side of the table with his team.  Their backs are to the door.  The guest and his team are seated across from the host and his team.  The students were expected to be seated behind the guest.  This was tricky as there are twenty three of them.

During our meeting, he talked about the success of their store, and how they have grown because they serve the affluent market. According to the executives, sixteen years ago, here was no competition because of the short supply.  Essentially, goods would disappear as soon as they were put onto the shelves.  Now it is a buyer’s market.  Competition created a need to make merchandise more appealing to buy.  The store was beautiful and well-staffed, but I was perplexed as I saw very few customers…very few.  Initially, I thought it may have been because of the time of day, but our tour guide said it was typical and in fact, when his wife asks him to join her to shop, he declines as he feels embarrassed.  He said the many sales clerks simply have nothing to do and stand there and stare.  I saw it for myself.  There are many with nothing to do, but stand there ready to serve the customer that isn’t there.  Mr. Zhang Xin says they are very successful because of the surrounding market.  They work to utilize CRM to optimize sales to their best customers which led me to believe they are progressing.  Still, with no customers in the store, I can’t see how they make money.

Our next visit was with Mr. Yan Chuan Li, the director and president of the Chaoshifa Chain Store.  This store started in 1958.  It was initially run completely by the government when food was in such short supply.   The format was very simple then.  Customers would come to the counter, tell the attendant what they wanted and the attendant gathered the food for the customer.  We had a similar format in the US, but abandoned it around 1916 when Piggly Wiggly developed he self-service format that we are familiar with today.  It was 1996 when this format came to Chaoshifa.  Now, the customer walks through the store with baskets or tiny carts to hand pick goods and checks them out at the register.  Today, the government owns one-third of the company.

Chaoshifa stays competitive by imitating western grocery markets and understanding their strategies. Even when hearing this strategy, I couldn’t help to think the look and format of the store was antiquated and reminded me of A&P circa 1965. On a more positive note, Mr. Li believes the competitive advantage to Chaoshifa is the focus on the local markets.  He makes a special emphasis on what his customers want and caters to them exclusively.  Occasionally, the store offers promotions; but not often because Mr. Li feels it hurt margins and suppliers’ reputations instead of enticing new customers and encouraging sales.  Go figure.  Fruit and vegetables prices are governmentally controlled.  Li says, “It’s good for the stability of society”.  Each of his stores serves a 1.5 kilometer radius.  The concentration of people living in Beijing is dense so, according to Mr. Li, if Chaoshifa continues to focus on local customers, it can survive.

Chaoshifa believes its customers are well educated and affluent.  Again, I didn’t affluence as I walked around inside and outside of the store, but this is what he said.  He said people shop during the day for different reasons.  For example, older people tend to shop for groceries in the mornings.  Workers appreciate the convenient locations of Chaoshifa stores because they can make a quick stop on the way home from work.  Eventually, the company will add services like hair salons, cleaners, banks, etc. for further serve the local customer.  As they grow, they do so without debt.  Mr. Li even commented how he expands his business “unlike American businesses…accrue no debt”.

As tired as we were, we pressed on and consumed mass quantities at Da Dong Peking Duck restaurant.  Oh yes.  We did.  There must’ve been a million courses that were placed before us upon a giant lazy Susan.  As the works of Asian culinary art passed before us, we helped ourselves and tasted flavors that never before passed over our palates.  It was exquisite, delicious, superb and downright fun.  Finally as the imperial duck arrived at our table, a chef accompanied the foul and sliced it ever so thinly so that we could consume it within a delicate pancake with hoisin sauce and green onions.  Wow…I need a minute.

OK…I’m ok.  Whew…it was amazing.

Day 3:

The Traffic Didn’t Help

Visiting the China Chain Store & Franchise Association (CCFA) assists retailers in China much like how the National Retail Federation serves its members in the US.  Mr. Frank Yang, vice secretary general, told us that they are there to help, represent and advance their member’s knowledge through partnerships and research.  For example, they provide legal information and current statistics about franchising to its members.  They also operate an English website which broadcasts China retail and franchise info around the world.  The CCFA organizes three exhibitions each year as well as forums and seminars.  Finally, they work to facilitate the investment of international retailers and franchisors that may be interested in this special market.

It’s a good thing they exist as China’s retail is moving rapidly.  According to the CCSA, the total sales of the top 100 retailers in China reached 1.66 trillion RMB and have sported a year of an increase of 21.2% which is 2.8 percentage points higher than the growth rate of the total consumer goods sales.  The mission of the CCFA is to lead the industry and keep it “on the right track”. They say they are there to serve their members with “heart and soul”.  Really, that’s what their mission statement says…I copied this directly from their pamphlet.  Their final mission is to contribute to society and to improve themselves as a team and as individuals.

Suning was a visit we had to cut short as the traffic in Beijing did not allow time for the entire visit.  We were only able to see the Suning Elite store which has a format similar to Best Buy.  As you enter the store, all cell phones are merchandised together as opposed to merchandising the phones specifically by brand.  All cameras are together.  All TVs are together and so on.  This concept is new for the Chinese and Suning is taking a chance in doing so.  Like the Modern Plaza, there were not many customers at all during our visit.  This could have been due to the fact that it was the lunch hour for the associates.  In the store, appliances I never saw before were featured like huge wall unit air conditioners, humidifiers (we live in Florida and that’s the LAST thing we’d like to buy) and pink refrigerators with rhinestones embedded in the door.  Personally, I like the look and would purchase a refrigerator with rhinestones…I’m just saying.  It was actually very beautiful!  The back of the store was the service department and their “Geek Squad”.

Our final visit for the day was to hear form the Department of Consumption Economics.  This government agency was behind guarded gates!  Chinese soldiers stand at attention and look somewhere in the distance…kind of like the Yeomen of the Guard.  Once inside the gate, we met in a conference room and heard from Zhao Ping, deputy director and Baosheng Hao, director.

The Department concerns itself retail policy and planning.  They are concerned with stimulating consumers to spend their money.  They assist in helping retailers understand the rules of conducting business and conduct research on the planning of new businesses.  The Chinese government is currently on a five year development plan where they are working with international retailers to expand into tier two and tier three cities.  One thing was very clear to me…China loves Wal-mart as they bring opportunity to the country and get people working.  The Department welcomes foreign companies to invest and makes it easier for them to do so.  For example, taxes are favorable for western companies and they vary depending on the initial investment from the retailer, or the government may charge lower rent for the large western companies.

There are no big shopping days like Black Friday in China.  Interestingly enough, there are no rules regarding promotions because that isn’t how the Chinese conduct business.  If a retailer did decide to offer a promotion, they would need to tell the Department about the sale because the Department feels they need to secure the retailer with extra support to guarantee the safety of the shoppers.  Instead of large promotions, the Chinese are adopting some western holidays to get people to buy.  The purpose is to stimulate consumers to spend money.

That night, Steve and I walked to see what department stores were like near out hotel.  We walked up the nearby boulevard and were amazed at the number of young people.  Steve and I felt OLD!  Very few of the shoppers were even in their forties…wait a minute…that ISN’T old.  Steve and I checked out one that was nearest to us without crossing the boulevard…the traffic in Beijing is very heavy, erratic and dangerous.  We are dazzling urbanites, but we were tired and our street crossing skills were compromised.  So we went into the first department store.  Again, like Modern Plaza, they take the word department literally.  The store is about five stories high with individual stores departmentalized selling specific brands.  There’s a store for Nike.  There’s a store for Nautica.  You get the idea.  It was so boring and old.  Zzzzzzz.  We took the escalator up to the second level because we thought it couldn’t be worse.  Oh yes it could!  The mannequins were from the waste up with no head or arms and there were hundreds of them.  I felt like I was in Lerner’s shopping for knee socks and scratchy slips in say 1968. I was horrified.  Steve and I high tailed it to the escalator.  As Steve was reading the store map conveniently posted on the wall, I innocently hopped on and ascended to hear Steve yell to me that I was entering the department for “middle and old aged women”.  What was I gonna do?…run down the up escalator?  It was like when Captain Kirk tried to back out of a black hole with all engines and shouting, “Mr. Scott, get us out of here!” No matter what Officer Scott did, the gravitational force of the hole exhausted the Enterprise and forced it to surrender.  Yes…that’s exactly what happened to me on that stairwell with Steve calling me to safety below.  I was now on my own.  Well, actually not for long as Steve came up behind me to behold the black hole.  If you’re a retailer and you’re reading this on a full stomach, just walk away.  I couldn’t stop holding my throat.  More maimed mannequins featuring sweaters from what looked like 1977.  What’s worse is there were thousands of them like the terra cotta warriors of Xi’an.  All dressed in a different top with a different color and displayed next to each other.  It was all I could do to not run out holding my head screaming.  Oh…but it gets better (not).  The next floor featured furs…tons of them…in any color imaginable.  I never once saw so many animal skins in one room.  As an animal lover, I wigged.  I just said to Steve, “I’m outta here.”

A short jaunt across the over ass brought us to Joy City.  Really…that’s the name of this mall.  To us, it WAS a joy to see it.  This contemporary department store told us that someone was paying attention…someone “got it”.  The stores were trendy, the sales people didn’t look like zombies, the merchandise was fun and the environment was lively.  Whew!…Beijing, you scared me there for a minute.

Day 4:

Royalty Schmoyalty

Today we took a long bus ride (really?) to visit IBM.  Yolanda Wang, retail consultant, was our gracious host.  She shared how IBM was about brainstorming and envisioning the art of the possible.  She explained how modern trade is new to China and current business is diverse.  Also, the expectations and the behaviors of the consumers are changing.  China is not like the West and will develop into its own entity.  It will reshape the economy and not become a mirror image of the West.  Aside from multinationals, there is no single retailer that rules the market.  In fact, the top retailers have only 6% of market share.  It’s fragmented, but it is young.  Currently, China is the world’s largest exporter and the second largest importer.  Change is coming as the country is focusing on raising the skill level of the population so that it is not a labor based economy.  The government knows the power of how retail can stimulate growth by encouraging domestic consumption.   China supports retail!

China is changing rapidly.  The needs of many are evolving from functional to emotional.  People are trading up. Lifestyles are improving.  Eight hundred million have cell phones.  Four hundred and sixty million have broad band accounts.  Three hundred and seventy five million have TVs.  The change in technology is yielding to retail growth and he focus is the middle class to drive that growth.

IBM is a trusted company in China as it has a long history with China.  The company is helping to develop the country by creating smarter cities by eliminating problems experienced in more developed cities.  It does this by utilizing existing information to eliminate traffic congestion, connecting schools to the Internet, or participating in power grids to reduce overloads.

From IBM, we were driven to the Hutong neighborhood which is a group of grey bricked homes organized in narrow passages that housed the people of Beijing.  We were given a tour through the neighborhood via rickshaw.  One home was opened to us to better understand the lifestyle of the occupants and to ask questions of the owner.  The only part of this that was uncomfortable was that it screamed tourist.  Also, it made me want to diet.

After lunch, out bus took us to the 500 year old Forbidden City, the home to 24 emperors.  It is the largest collection of ancient wooden structures in the world.  It is a small walled city comprised of 980 buildings.  In other words, it’s bigger than you think!  It’s called Forbidden as no one could enter unless you served the emperor…concubines included.  Construction began in 1406 during the Ming Dynasty.  It took 200,000 workers fourteen years to complete.  The typical architecture of China is obvious within these walls despite the numerous facelifts the Forbidden City has endured.

We arrived at the north gate.  There are three entrances.  The center entrance was used only by the emperors.  Do I even need to say which I used?  Upon entering, it is overwhelming by the awesomeness of the structures and by the sea of humanity.  Good grief, it was packed, but once people spread out, it was tolerable.  Even when the City was functioning, it only held about 4,000 people.  It felt like 4,000 at the north entrance!

The treasures displayed were few in comparison to what once was.  When the Nationalist Party fled China (I forget…1948?), they took a good part of the treasures with them.  The rest are safe in the National Palace Museum.  Still, what was left to see was tremendous…beds, thrones, wood carvings, jade sculptures, paintings and silk quilts.  To keep from deteriorating, all of it was dimly lit and protected from us by smudged Plexiglas.  All I really would have done was to sit on the throne.  Oh well.

I felt like we were rushing, but I suppose it would have taken a year to see it all anyway.  In just a few short hours, we walked southward to the front gate which led to Tiananmen Square.  Woah…big.  It is the largest public meeting spot on the planet and also quite famous for political commotion during the last several generations.  This is where many of you distinguished readers will remember the lone student confronting an Army tank in June of 1989.  The Square is supposed to be a place to recognize and honor the heroes and victims of the past, but during our visit, one student commented to me that he didn’t know how to feel while on the Square.  He was right…it was overwhelmingly large and encompassing, yet empty and unembellished.  National and municipal buildings filled the perimeter.  They’re not sexy buildings either.  They’re thick, practical and blocky.  The Square was busy with souvenir peddlers who featured postcards, pens and Mao watches.  One the south side of the Square was Mao Zedong’s mausoleum.  I wanted to see him, but it is only open in the mornings.  I hear he is waxy-yellow.

Of course the traffic kept our bus from being available when we were ready to head back to the hotel, so we decided to walk.  Could we have walked it?  Of course, but we were rescued midway.  The weather has been accommodating with temperatures in the low 80s and always a breeze.  Nice for a stroll.

That night, I accompanied Elinore to a local pharmacy.  She was sporting a head cold.  Pharmacies in China are a little different than in the States.  When you enter, you are greeted by the pharmacist who immediately asks about the symptoms that ail you.  The pharmacist listened to Elinore, told her she did not need an antibiotic (yes, they hand them out without a prescription) unless her throat pain didn’t subside.  Instead, she gave Elinore medication with snake bile.  No doubt in my mind that snake bile would kill any virus or bacteria.  Sure enough, she felt better I the morning.  Go figure.  Ssssssssssss.

Day 5:

To Persist is to Succeed

 

With a long day ahead, we left early and headed into the mountains to the Mutianyu section of the Great Wall. The Wall stretches to about 5,000 miles in length.  The project started in the 5th century BC to protect China from barbarians and Mongolians.  Our guide Liu said it didn’t do much good as the bad weather still comes in from Mongolia (LOL).  The drive was long, but became more and more beautiful as the landscape changed from the downtown hustle and bustle of Beijing to a more gentle country side.  The part of the Wall we visited was about 1400 years old.  I thought it looked pretty good!  I was told from our guide it wasn’t the case before Nixon’s visit in 1972.  In fact, our guide worked as a teenager in the countryside and often carried stones from the Wall in a cart to build a pig sty.  He said he isn’t proud of it, but that the Chinese people had other things on their minds during that time.   When the West saw the treasure, the Chinese government put effort toward the Wall’s repair.

Upon arriving, the bus dropped us at the base of a steep hill crowded with trinket mongers.  I mean steep.  The local business folk called me pretty lady about fifty times.  I was tired, probably smelly and it was a bad hair day, but by-golly, it felt grand to hear I was pretty. The walk past the retail section of our trip felt like it was at a forty five degree grade.  Once at the top, we boarded small cable cars to carry us up the mountainside.  From the cable car, we could see hiking trails below…we could’ve walked!  Our time was limited; the mountain was steep so, I appreciated the lift.

After the “oohs and ahhs” of the initial view, I headed up the more challenging route with the goal being the highest peak that one could travel on the Mutianyu section of the Wall.  I started at a healthy clip.  The scenery was rejuvenating; the feeling grand.  But…the sun was out and the air was thin and the incline wasn’t like Florida and I thought I was gonna die.  I swore I wouldn’t come this far and give up because it was hard to breathe.  No way.  No how.  I forged forward passing supportive onlookers as they were descending.  “You’re getting closer!”  Gee, thanks.  But sure enough, I could almost throw a ball at my destination.  This really was incredible.  Near the top were a few of the students (ahh…youth).  I HAD to make it to the top at this point.  The last twenty steps were the worst.  They were narrow and tall.  I had to walk up like a dog.  Why not?  I was panting like one.

When I made it up, one of the students said he was surprised I could do it.  Trust me, no one was more surprised than me.  The wind was blowing.  Those who were there was joyous.  Believe it or not, there was a trinket monger planted at the top and she was trying to sell me a gold medal to commemorate my success.  They think of everything!  Just moments after my arrival, Elinore made it as well.  It was a successful afternoon.

That night, back in Beijing, we walked through the Silk Market.  I must’ve been the most beautiful woman who walked the planet as ALL the vendors addressed me as “pretty lady”.  I guess I was tired (Guess!?  What am I saying?  I was exhausted), but I thought the bargaining was hilarious.  I would ask a price and ALL of the retailers would complain that I was trying to put them out of business and that I was “killing them”.  That killed me.  I did walk away a few times because they wouldn’t budge.  What I learned was to first ask a price that is ridiculously low and work up from there.  They WILL say your bid is too low, so start low. I bought some silk items, but I could have gotten basically anything there from high end jewelry to a loaf of bread.