Stop 5: Beijing

Company Brief

United States Embassy

US Commercial Service- Department of Commerce

The US Embassy is the second biggest embassy next to Iraq. This department is the export arm of US government, and finds opportunities for the US—distribution, promotions, and partnerships. The embassy promotes your firm to target markets, trade show support, market research, and screens Chinese companies. It organizes/leads Chinese delegation, find distributors/ agents for exports, consulting to open opportunities for US and Chinese markets.

The 12th five-year plan consists of a restructuring economy, promote social equality, protect environment, economic target (7% GDP), energy saving, and create “social harmony.” The representative discussed how shoppers in China are young, fashionable and spending more money. China has only been an open market for a decade and yet a significant retailer presence exists already.

China ranks 5th out of all international markets, in terms of the presence of international brands with Beijing and Shanghai being the highest. Sales and consumer goods in China totaled 15.7 trillion RMB ($2.4 Trillion)—up 18% from 2009. Department stores in China are increasing as fast as supermarket chains. Lessons learned: enter markets organically, research the market, and invest in on going multi channel marketing.

Some of the best prospects entail green building, renewable energy, water and pollution. In China, the online shopping industry is exploding. There are over 200 million online shoppers with revenues of $114 Billion in 2011. Some challenges and opportunities for the ecommerce platform: large customer base with large potential, price competitions, strict regulations, immature payment systems and delivery systems.

China Chain Store and Franchise Association

The China Chain Store and Franchise Association (CCFA) is the official representative of retailing and franchising industry in China. It has over a thousand enterprise members with over 200,000 outlets throughout china. The CCFA offers research information and government lobbying to its members, and participates in policy making with the goal of safeguarding the interests of the industry. The CCFA also provides professional training and industry data for its members.

The mission statement of the CCFA is “to lead the industry on the right track to serve our members, without heart and soul, to contribute to the progress of society, and to improve ourselves as a team of individuals.” The CCFA is a very good public company due to its good relationship with the government. While the CCFA offers these services to its members, it is the government’s responsibility to ensure food safety and regulations.

Additionally, the CCFA helps small retailers from third and fourth tier cities to promote development. It also teaches forging companies how to do business in those cities. The members of the CCFA are comprised of 75% Chinese brands and 25% foreign brands. RT Mart and Yum Brands have had the most benefit from joining the CCFA because they have strong headquarters, leadership, and local presence. The presence of companies like these is so strong that eventually, these convenience stores and supermarkets will cause street vendors to disappear.

Lenovo

Lenovo’s marketing slogan is “for those who do.” This implies that the company makes products that are effective and allow people to do more with their time. By speaking with the director of marketing for Lenovo China, we received great insight on how Lenovo markets and positions its products around the world and in China. With such a large market in China, if Lenovo wants to launch a product, China is the best place to start and see how it’s accepted. Lenovo has had significant success globally; Lepad is #2 in the global tablet market and Lenovo also has the largest phone manufacturing unit in the world. While Apple is the fastest growing electronics company in the U.S., Lenovo is the fastest growing PC vendor worldwide, with 10.2% market share. Lenovo aims to surpass Apple as the number one vendor of computers in the world. In fact, PC World stated that Lenovo’s Lepad is a “serious challenger to Apple’s iPad.”

The Chinese market has two types of customers: middle class (probably technologically savvy) and traditional (living in rural areas). Most companies in Lenovo’s space are targeting the middle class. Companies coming into China need to consider the high end of the market to be successful because the low end of the market simply doesn’t have the buying power nor technological savvy to be major consumers in the computer market. Lenovo has a top ten advertising capability in China due to numerous advantages, including a global and local team that understands Chinese, creativity, holistic capability, speed, simplify, attention to detail, strong government and community relations, integrity, and versatility. Due to these advantages, Lenovo was rated as the eighth most recognized brand in China in the second quarter of 2011. This success is not only limited to China, however; Lenovo is the largest computer company in Japan and Germany as well. In addition to marketing its products themselves, the company has to market itself as one of the greenest companies in order to be effective.

3S Lift, Division of Ficont Industry

3S stands for Safe, Simple, and Specialized. The company is experienced in the wind power industry. 3S Lift is dedicated to developing complicated Suspended Access Equipment, which is primarily used in building maintenance, facade access, thermal boiler maintenance, bridge maintenance, etc. It is one of the world leaders in development and manufacturing of wind turbine service lift.

The company is dedicated in providing high quality service lift, climbing Sid system, ladder and fall protection systems. The company is seeking to export to overseas markets in the near future. 3S has 200 employees, of which over 50 are engineers. This is due to the company’s emphasis on R&D and quality control, which ensures 3S lift products maintain a leading position in the market. The company provides numerous other maintenance products for the wind power industry. In addition, the company also provides custom designs for some clients. The company is rapidly gaining a high profile; GE is one of 3S’ customers and the company is number one in the industry in China.

Suning

Founded in 2002 in Beijing, Suning is a leading company in electronics retailing. In 2004, the company went public in Shenzhen. The company has undergone significant growth in the past decade; it currently has 1,700 stores, 10 billion RMB in revenue and the highest market value of any company in China. The company’s business strategy is based on store scale and different business models. Its marketing strategy has positioned it as the number one appliance store in Beijing.

Suning engages in both business-to-business and business-to-consumer operations. It ranks third in its industry in B2C operations. The company engages in numerous business practices that further its competitive advantage. It opened a company website in May of 2011, built a logistics center storage house in 2007, and was the first to use Enterprise Resource Planning (ERP) software. The company plans to expand significantly in Beijing, opening 130 stores. This is over a 100% increase in store volume in the city.

The company divides its stores into four types: flagship, standard, community, and elite. The payment method in each kind of store is different. Sunning’s products are split evenly between domestically produced and imported goods. The company arranges its products by brand; they are reconsidered if the brand doesn’t do well in the market. The company utilizes market research to develop solutions to make specific products more profitable.

360 Buy

The objective of 360 Buy is to become number one eCommerce business in China and 5 in the world, as well as to make a happy and easy shopping experience online. It was founded in 1998 and started online business in 2004 maintaining a 2% growth rate. 360 Buy sells more than 2 million kinds of products. It set up their platform modeling off of Amazon.com. The premier service is a barrier for competitors to come into the industry. They have a GIS system to monitors in real time for consumers to check the status of their order. In 2011 they experienced 200,000 orders a day.

This year that number is projected to double. 360 Buy has an open platform, including third party suppliers, they have 32% of market and 10,000 suppliers. Users of 360 Buy are at the age of 18-39. More than one million types of products are available on the site so they have a partnership with almost every major company. They don’t view Amazon as a direct competitor and compared to Taobou, they don’t sell fake or second hand products. They also sell almost all the international brands if they are already in China and have integrated with social media to promote their site and products. 360 Buy is a fast growing company making facilitating transactions easily for consumers in the market.

Cultural Analysis

Wednesday, May 23rd

This morning I fished down into the bottom of my luggage for my most official, business-chic outfit. Today we would be visiting the US Embassy in Beijing. Official, I know right…right? After intensive and extensive screening and background checks, we were stripped of all belongings and electronics. We were led into the building, five at a time of course, and brought upstairs into their meeting room.

Our first meeting was with a representative from the US Commercial Service, Joshua Harper, who gave us an extensive overview of economic prospects in China. As Mr. Harper was finishing, there came a knock at the door of the meeting hall, and the door immediately opened. It was none other than the US Ambassador to China, Gary Lock. We all stood in awe, shocked that he had made time out of his busy schedule to come and share a few words with us, followed by any questions that we had for him. We stood and applauded as he entered the room. It was so interesting to hear his perspective and insights into China-United States relations.

Our next meeting was with the Chief of Staff and then with a young Foreign Service Officer. I learned so much during my visit at the Embassy that day. When we left the Embassy, they returned our passports and belongings to us and we boarded the bus, once again, and headed to lunch. The plan for lunch was to have a traditional hot pot lunch. We entered the restaurant, and like always, were lead into a private room to eat…classy right? Even classier was the twenty-three person table at which we sat for lunch, with a ‘lazy susan’ big enough to cover the entire table.

In front of all of our place settings was a miniature stove with a miniature pot. It was a do-it-yourself kind of lunch. We were to choose our meats and vegetables and place them into the boiling water in the pot in front of us. After lunch we visited the China Chain Store and Franchise Association. Our quick and not-so-informative meeting with them gave us enough time to visit the Pearl Market.

Keshia, Christine, and I were so exhausted and not quite in the bargaining-till-your-blue-in-the-face type of mood, so instead, we hit up the nearby McCafe and enjoyed some coffee while we waited for the others to emerge from the market carrying newly acquired knockoffs and souvenirs. We were refueled and ready to shop after our McCafe coffee break. After we got back to the hotel, we got into something more casual, and headed out for the real knockoff arena – the Silk Market.

Within the seven-floor market are rows and rows of little stores, as they so call them. Each store sells about the same thing but usually at a different price. They had everything – from purses and electronics to clothes and shoes. Each ‘employer’ of each ‘store’ tried to persuade and coerce each naïve-looking, foreign passerby to approach, look, and shop in his or her store. A few purchases after hours of bargaining, we were exhausted and headed back to the hotel. On our way back Fang, Keshia, Chen Chen, Patricia, and I stopped into a quick fast food joint for dinner and enjoyed some dumpling soup. We then headed out and were back on our way to the hotel. It wasn’t long before we were all in bed and asleep as well.

Thursday, May 24th

We visited Lenovo this morning. Today, Lenovo is a $21 billion personal technology company and the world’s second-largest personal computer (PC) vendor. Lenovo is the number one PC Company in China and the number one PC Company in the world. We learned so much about their products, their development, and their commitment to their customers. Much to our surprise, James S. Rutledge, Research Director for Lenovo, recognized as one of the top electrical engineers for the company, actually graduated from the University of Florida in 1999. Go Gators!

Our next visit was with 3LS, a company that manufactures wind turbines. Later that day, we decided to head back to the Silk Market. We hadn’t bought enough in Beijing’s Silk Market, so obviously, we would have to return that night. I bargained for a dress that I had my eye on since my first visit to the Silk Market. Without a dressing room, mirror, or knowledge of its authenticity, I went ahead and purchased the dress after an hour of bargaining with the shop owner. I used every trick in the book. I conversed with the young Chinese shop owner in Chinese – I told him that it was my birthday and I had hoped to wear it for that occasion, that I was a Chinese student and that I didn’t have a lot of money to pay for the dress. I used every excuse I had, until I had the dress at the price I thought was ‘the best price.’

The bargaining got very heated as I attempted to get the price even lower. I even decided to pretend to lose interest in the purchase and walk away from his shop. That got him. He yelled down the aisle telling me he’d sell it to me for the price I wanted. Success! With dress in hand, I was done for the night. We all met back up and returned to the hotel. However, the night wasn’t over. We figured we’d hit up a local, popular club, considering we were nearing the end of our trip. We taxied over to the club, MIX, a club quite similar to the one in Shanghai. It wasn’t long before all of us girls were dancing on the stage.

Friday, May 25th

We were all quite tired this morning and it may have been due to our late night at MIX. On this day we visited the Suning Electronics Sales Center. We seemed to focus more on their furniture availability than their electronics, making ourselves right at home as we stretched out on the chairs and couches of the showroom. Suning Corporation is a local Chinese specialty retailer of household appliances, computers, and communication electronics in Mainland China.

The manager of Suning briefed us on the history of Suning, including its business scheme as well as its future goals as a company. He encouraged us to explore the business layout, showrooms, and merchandise. After our meeting at Suning we had lunch at TGI Fridays, expected right? After lunch and on our way to our next company visit, 360Buy, we passed the 2008 Beijing Olympic Stadium – the water cube and bird’s nest. It was quite magnificent. Our meeting with 360Buy was quite interesting. 360Buy is one of the most influential and popular e-commerce websites in China, and it is the biggest B2C (business to company) online shopping platforms.

At present, 360Buy has 25 million registered users and 6,000 suppliers around China. It’s the amazon.com of China. Our meeting with 360Buy was our last business meeting in China. We headed back to the hotel. I was mentally and physically preparing myself for our trek up the Great Wall of China early the next morning.

Saturday, May 26th

A day of culture. This morning we visited Tiananmen Square, the largest central city square in the world. We walked the square, learned so much about its history, and took even more pictures with strangers and their babies of course. We then made our way over to the Forbidden City, the imperial palace from the Ming Dynasty to the end of the Qing Dynasty. An enormous painting of Mao Zedong (Chairman Mao) hung at the entrance of the Forbidden City.

We entered the old palace and walked the courtyards. We learned more about the importance of the palace and its seclusion from the outside city of Beijing. After lunch we visited and conquered the Great Wall of China – the Mutianyu Pass. We took the one-way ski-lift up and the toboggan down. The ski-lift took us up halfway and the rest was up to us. We walked and jogged the steps of the wall until we made it to the top. We were all sweaty and exhausted from our feat. That was definitely my exercise for the day.

The view from the Great Wall was magnificent and so impressive. Everything beneath us seemed so small and insignificant. We spent time at the top and took a lot of pictures, then made our way back down, making sure not to miss a step. On our way back down, Shane and I couldn’t resist a local vendor off to the side of the wall. We made it back down and then waited in line for the toboggan to bring us the rest of the way. A toboggan is a sort of seat with a lever used to control the speed that one travels down a large metal slide. It’s as fun as it sounds! I would highly suggest any potential-Great-Wall-walkers to try the toboggan route instead.

After our day of culture, we headed back into town for our final dinner in China. We celebrated our farewell dinner at a traditional Peking duck restaurant. The trip was incredible. I learned so much more about the retail and marketing world in China because of this China Retail Study tour – the pre-trip, class I had been enrolled in all semester, as well as the trip itself. I’m so incredibly happy when I’m in China. It’s the people, the culture, the traditions, that make me continue my studies of Chinese and want to visit again each year. I was so happy to be back in China this summer, especially traveling with the University of Florida. Everyone got along so well on the trip and all of us formed wonderful friendships. What a great way to finish up such a fabulous trip. It wouldn’t be long, okay eighteen hours, before I was back in my own bed in Tampa.

 

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