Page 296 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
first one is choosing to want to align with Alibaba or go diverse in everything from Lianhua supermarkets to
with Tencent? For any retailer hoping to earn its slice of Intime department stores to electronics retailer Suning.
China’s expanding retail pie, at least for now, there is no Alibaba is now working to connect China’s millions
alternative but to play alongside one team or the other. of mom-and-pop stores with their internet-based
The second decision involves the partnership model. distribution network, an initiative called Ling Shou Tong.
When partnering with China’s leaders, you can choose It has opened futuristic Hema Xiansheng supermarkets,
from three basic strategies: Do you want to use the big where consumers use the Alipay app to order groceries
partners as a way to test and learn in this vast market or prepared food for delivery to their home. Tencent took
or to enhance a core business or to fully integrate? The a different path to becoming China’s other retail leader.
answer to this question depends on your starting point It began life as a social networking services company,
and your ultimate goals. A test-and-learn strategy is and then added gaming, electronic payments, media
most suitable if you do not already have a presence in content, cloud computing and devices. With successive
China. Costco, the U.S.-based store, took this approach, investments into Chinese e-commerce company JD.com,
using Alibaba as a way to test its offerings and learn it has become China’s No. 2 online retailer only four years
about China before fully committing. In 2014, it opened after entering the retail industry. It invested in Yonghui,
an online warehouse store on Tmall Global, Alibaba’s one of the fastest-growing Chinese grocery chains, and
cross-border e-commerce channel. By the following partnered with Carrefour and Walmart (which also owns
year, Costco had made it into the top 10 sellers on Tmall 12 percent of JD.com). Among many other advances,
Global during the 11/11 Singles Day sales promotion. In with JD it created the fresh-food supermarket chain
2017, Costco obtained a license to open a flagship store 7Fresh and invested in social commerce app Pinduoduo,
on Tmall. Other companies already have a presence in a rising e-commerce company targeting the country’s
China but want access to a leader’s data and technology booming smaller cities (Root and Cheng).
without losing control of your brand or operations.
Through a strategic partnership, Walmart now uses Many other large format retailers in China are
Tencent’s technology to both upgrade its in-store enjoying steady growth through expansion. Retailers
customer experience and help it learn more about its are continuing to invest to gain new customers. Large
customers. Other companies opt to integrate fully with format stores are continuing to feel pressure due to
one or the other. It allows a retailer to gain full access to a the changing shopping habits in China. Chinese food
leader’s user base, insights, data and technology. It also consumers tend to shop little but often. Due to their
opens up opportunities to gain scale benefits or share increased spending power, they are turning more
processes such as purchasing. The drawback is that toward convenience and online grocery channels. Large
the leader becomes more involved in the operations format stores still have an important role in developing
of the store. Even as they carve up China, both Alibaba markets and regions. Building a national chain can
and Tencent are poised for global expansion. When be challenging because the market is so fragment in
that happens, retailers on other continents may find regions and sizes (Wan).
themselves with the same set of options: choosing a
partner and determining their own best partnership Beverage
strategy if they hope to play in this high-speed game
(Root and Cheng). China’s beverage manufacturing industry saw its
profits rise 25 percent in the first five months of 2018.
Food During this same time, the export delivery value of
China’s alcohol, drink, refined tea manufacturing
China’s two retailing powerhouses, online commerce industries climbed 7.7 percent to 9.23 billion yuan.
pioneer Alibaba and social media-gaming pioneer The remarkable performance of the beverage industry
Tencent, have systematically established a duopoly is attracting new players. Several companies that are
of record proportions in record time. Combined, they primarily known for selling fruit such Pagoda are feeling
have spent more than approximately US$20 billion for the squeeze to market juice. Through a collaboration
two years by the end of 2018 to change the way people with Sichuan Chai Meei, Pagoda has started to sell non-
in China shop. It started when online retailer Alibaba fruit concentrates under the brand Hou Guo Zi. The
made the seemingly counterintuitive expansion into brand fetched 45 million yuan within three days of its
the brick-and-mortar world and heavily invested in launch. Dairy milk is also seeing substantial gains. Dairy
296
first one is choosing to want to align with Alibaba or go diverse in everything from Lianhua supermarkets to
with Tencent? For any retailer hoping to earn its slice of Intime department stores to electronics retailer Suning.
China’s expanding retail pie, at least for now, there is no Alibaba is now working to connect China’s millions
alternative but to play alongside one team or the other. of mom-and-pop stores with their internet-based
The second decision involves the partnership model. distribution network, an initiative called Ling Shou Tong.
When partnering with China’s leaders, you can choose It has opened futuristic Hema Xiansheng supermarkets,
from three basic strategies: Do you want to use the big where consumers use the Alipay app to order groceries
partners as a way to test and learn in this vast market or prepared food for delivery to their home. Tencent took
or to enhance a core business or to fully integrate? The a different path to becoming China’s other retail leader.
answer to this question depends on your starting point It began life as a social networking services company,
and your ultimate goals. A test-and-learn strategy is and then added gaming, electronic payments, media
most suitable if you do not already have a presence in content, cloud computing and devices. With successive
China. Costco, the U.S.-based store, took this approach, investments into Chinese e-commerce company JD.com,
using Alibaba as a way to test its offerings and learn it has become China’s No. 2 online retailer only four years
about China before fully committing. In 2014, it opened after entering the retail industry. It invested in Yonghui,
an online warehouse store on Tmall Global, Alibaba’s one of the fastest-growing Chinese grocery chains, and
cross-border e-commerce channel. By the following partnered with Carrefour and Walmart (which also owns
year, Costco had made it into the top 10 sellers on Tmall 12 percent of JD.com). Among many other advances,
Global during the 11/11 Singles Day sales promotion. In with JD it created the fresh-food supermarket chain
2017, Costco obtained a license to open a flagship store 7Fresh and invested in social commerce app Pinduoduo,
on Tmall. Other companies already have a presence in a rising e-commerce company targeting the country’s
China but want access to a leader’s data and technology booming smaller cities (Root and Cheng).
without losing control of your brand or operations.
Through a strategic partnership, Walmart now uses Many other large format retailers in China are
Tencent’s technology to both upgrade its in-store enjoying steady growth through expansion. Retailers
customer experience and help it learn more about its are continuing to invest to gain new customers. Large
customers. Other companies opt to integrate fully with format stores are continuing to feel pressure due to
one or the other. It allows a retailer to gain full access to a the changing shopping habits in China. Chinese food
leader’s user base, insights, data and technology. It also consumers tend to shop little but often. Due to their
opens up opportunities to gain scale benefits or share increased spending power, they are turning more
processes such as purchasing. The drawback is that toward convenience and online grocery channels. Large
the leader becomes more involved in the operations format stores still have an important role in developing
of the store. Even as they carve up China, both Alibaba markets and regions. Building a national chain can
and Tencent are poised for global expansion. When be challenging because the market is so fragment in
that happens, retailers on other continents may find regions and sizes (Wan).
themselves with the same set of options: choosing a
partner and determining their own best partnership Beverage
strategy if they hope to play in this high-speed game
(Root and Cheng). China’s beverage manufacturing industry saw its
profits rise 25 percent in the first five months of 2018.
Food During this same time, the export delivery value of
China’s alcohol, drink, refined tea manufacturing
China’s two retailing powerhouses, online commerce industries climbed 7.7 percent to 9.23 billion yuan.
pioneer Alibaba and social media-gaming pioneer The remarkable performance of the beverage industry
Tencent, have systematically established a duopoly is attracting new players. Several companies that are
of record proportions in record time. Combined, they primarily known for selling fruit such Pagoda are feeling
have spent more than approximately US$20 billion for the squeeze to market juice. Through a collaboration
two years by the end of 2018 to change the way people with Sichuan Chai Meei, Pagoda has started to sell non-
in China shop. It started when online retailer Alibaba fruit concentrates under the brand Hou Guo Zi. The
made the seemingly counterintuitive expansion into brand fetched 45 million yuan within three days of its
the brick-and-mortar world and heavily invested in launch. Dairy milk is also seeing substantial gains. Dairy
296
