Liang Hongfu

Retailers need not look back in anger

By Hong Liang (China Daily)
Updated: 2010-03-27 07:55

Domestic supermarket chains, together with some major suppliers, have been calling on the central government to check what they see as the encroachment of foreign retail giants in their own backyards.

The long running battle pits hundreds of relatively smaller domestic operators against a couple of foreign retailers, namely Carrefour of France and Wal-Mart of the United States. In this fight, it looks like the native Davids are losing ground to the alien Goliaths.

The strategies and tactics of the contestants on both sides have been exhaustively dissected and discussed by industry experts. They seem to agree that size matters in the supermarket business. This has apparently prompted the Shanghai municipal government to take the positive step of combining several State-owned enterprises in retailing to create a conglomerate deemed big enough to compete with the foreign behemoths.

Retailers need not look back in anger

As consumers, we care only about the service, convenience and availability of merchandise. Pricing is important, of course. But in large cities like Shanghai, where the average income levels are relatively higher than in other areas, the usually small price difference between competing supermarkets is of much less significance than the other factors.

For that reason, to gain price competitiveness through economies of scale should only be seen as the starting point. The deciding battle will be fought on the services front. My personal experience as a consumer in Shanghai has shown that the domestic retailers are still trailing behind their foreign counterparts in this crucial area.

Although no consumer expects much personal service from supermarkets, there are a few basic requirements, such as speedy checkout. It has remained a mystery why such a simple customer expectation is seemingly ignored by the management of a high-end supermarket in a swanky shopping mall across the street from where I work.

In San Francisco where I used to live, many supermarkets followed the practice of activating a new checkout counter whenever there were more than three people in any one queue. Not so in the one near my office in Shanghai. The closed counters there remain stubbornly closed no matter how many shoppers are waiting in line at the other counters that are open.

I've had worse experience at the ticket counter at Hongqiao airport. But Hongqiao is a monopoly and that supermarket in the swanky mall has competitors just one subway stop away.

Supermarkets belonging to domestic chains seem to have problems in inventory management leading to occasional short supply of merchandise that are in strongest demand by customers. Things as common as tomatoes are often out of stock at the supermarket near my office. There is no certainty that the brand of rice bought last time will still be available the next time.

The attendants are polite most of the time. But they are as clueless as their customers about the store's delivery schedules. If I need something that's not available there in a hurry, the only alternative is to go to the nearest Carrefour market where supplies are almost always assured.

If the managements of those domestic retail chains still can't understand why their foreign competitors are pushing them out of their own turfs, they should ask their customers for feedback on how to improve service rather than going hat in hand to Beijing for government protection.

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(China Daily 03/27/2010 page5)