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Home >> Business
UPDATED: 08:53, April 01, 2005
Chain stores' expansion spotlighted
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The China Chain Store & Franchise Association recently released a report on the development of the country's chain store operators in 2004. Following are some excerpts from the report.

The China Chain Store & Franchise Association has ranked the sector's top 100 enterprises in 2004, based on figures provided by most of the nation's chain store operators.

Coming out on top was Bailian (Group) Co Ltd, with a sales revenue in excess of 67.6 billion yuan (US$8.16 billion) in 2004.

It was followed by Gome Appliances, Dalian Dashang Group, Suning Home Appliances, Carrefour (China), Beijing Hualian Group, Shanghai Yongle Home Appliances, Suguo Supermarkets, Shanghai Agriculture Industry Commerce Supermarket Co Ltd (NGS Supermarket) and Beijing Wu-Mart.

The total sales revenue of China's top 100 chain store companies rose 39 per cent year-on-year, reaching 496.8 billion yuan (US$60 billion).

Last year also saw an expansion in the number of stores run by the top 100 firms to 30,416, up 49 per cent from the previous year's 20,424.

The 100 companies had a total sales area of 25.8 million square metres and 810,000 employees, year-on-year rises of 35 per cent and 27 per cent respectively.

The performance of these companies reflected the sector's basic development trends last year.

Firstly, the chain store operators' business scope continued to expand last year.

Hebei Guoda Chain Commercial Co Ltd, at the bottom of the list, saw its annual sales rise to 480 million yuan (US$58 million), 17 per cent higher than the 410 million yuan (US$49.5 million) recorded by the 100th-placed company in 2003.

The top 100 chain store companies' sales have continued to witness rapid growth in recent years.

Although the 39 per cent growth in 2004 was slower than the 45 per cent growth rate in 2003, it was much faster than the overall growth of the country's retail sales, which was 10.2 per cent last year.

And their sales accounted for 9.3 per cent of China's total retail sales last year, up from just 2.9 per cent in 2000. This figure was an impressive 37 per cent in Shanghai and 29 per cent in Beijing.

Second, the sector's good performance showed that market regulation had improved.

Last year saw the central government draft and implement the Administrative Regulations on Foreign Investment in the Commercial Sector, the Administrative Measures on Commercial Franchising, and the National Standards on the Classification of the Retail Business Modalities.

In the meantime, the government has conducted studies on fields such as the commercial layout of urban areas and the direct-selling sector, and is drafting new regulations related to these sectors.

All of this has served to boost the sector's healthy development.

Consumers also have a greater awareness of chain enterprises. Consumers think chain supermarkets are the best place to shop, according to the association's survey.

Safer place to purchase And with many consumers increasingly wary about the quality of the food that they eat, they believe that chain supermarkets are the most reliable places in which to make their purchases.

The capital market's positive attitude towards chain enterprises also reflects the growing importance of the chain sector. Last year, many chain companies, including Gome and Suning, were listed in the domestic or Hong Kong stock market. Some also attracted investment from international venture capitalists.

In reverse, the injection of a large amount of capital accelerated the development of chain store operators.

Third, chain enterprises started to expand into the country's central and western areas and smaller cities.

Major domestic and foreign firms are shifting their focus from the saturated market in eastern China, and increasingly looking towards the nation's vast central and western regions. Local firms are also accelerating the pace of their development in order to cope with intensified competition.

The chain operating model is also being adopted beyond the traditional business fields like supermarkets and convenience stores, becoming increasingly popular for the sale of garments, toys and office equipment.

Retail companies' sales currently account for 74 per cent of the total of the top 100 chain companies. The figure is 17 per cent for home appliance chains, 6 per cent for catering companies, 2 per cent for home furnishing markets, and 1 per cent for chain drugstores.

In addition, some new business models appeared last year, such as supermarkets selling fresh produce and stores specializing in the sale of personal care goods.

Fourth, enterprises are attaching greater importance to business performance, rather than a simple growth in the number of outlets.

In 2001, the number of outlets operated by the top 100 chain companies increased by 85 per cent, but sales grew by just 56 per cent.

The business management and operation capability was obviously unable to catch up with the rapidly increasing business scale. This situation has gradually improved, with a narrowing of the gap between the growth in store numbers and sales.

But the opening of new stores remained the major means of the chain companies' expansion last year. Some companies also develop through mergers, acquisitions and franchising.

Fifth, the sales of foreign-funded companies increased greatly among the top 100 chain companies.

Foreign-funded companies' sales accounted for 23 per cent of last year's total sales of the top 100 chain firms, compared with 16 per cent in 2003.

The sales of State-owned enterprises and private firms accounted for 32 per cent and 45 per cent last year.

Among the top 100 companies, 17 are foreign-funded and 49 are privately owned.

Development trends this year Hypermarkets, convenience stores and specialized stores like home appliance chains and home furnishing outlets will still be the hot spots of this year's competition.

Regional enterprises with a relatively high local market share and more effective management will enjoy more rapid development, compared with nationwide enterprises, in 2005.

Innovation in business models, management systems and employment of advanced technologies is key to development.

The capital market will forge closer links with the chain sector.

There will be more mergers and acquisitions between foreign-funded companies and domestic players and among the Chinese companies in the industry.

An increasing number of chain companies will seek public listings to gain capital support. Chain retailers like Trust-Mark, Jingkelong Supermarket Chain, Yongle and Home World have made plans for listings.

Source: China Daily

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