Posts Tagged ‘Qingdao’
January 10 – Qingdao
Tesco, oddly enough, was the first supermarket I visited when I arrived in China in June 2008. The store inside the Luwan stadium was next to the block of serviced apartments where we stayed in our first month.
It was a dire store. The vegetables looked limp and old, the meat gave off a strange smell, the layout was indecipherable and no one seemed to be buying much. I quickly gave up on Tesco’s China strategy and never went back.
Until last weekend, when I arrived in Qingdao and saw the new Tesco hypermarket and the shopping centre that Tesco has built around it. It seems the supermarket giant has got serious. It invested £500 million (5.4 billion yuan) in China last year and plans to spend even more next year.
The money is going on a series of 23 giant shopping centres, some of which have blocks of apartments and cinemas attached. Tesco is going into the property development game (hohum, sometimes I think this is the only game to play in China). This way, it can have its pick of sites for its stores and lay them out a bit better than that store in Luwan (which is being renovated, apparently).
One Tesco executive tells me that they are opening four more shopping centres in the south in November, December, January and then February. The cinemas, in particular, should do well. “In the US, there is a cinema for every 400 people,” he says. “In China, there is one for every 180,000, so you can see there’s a growth potential”. The rush to open these stores is because WalMart and Carrefour are far ahead of Tesco.
The new Tesco store itself is impressive. It spans two floors and is laid out to focus on the core items that Chinese shoppers look out for: cooking oil, eggs, pork, toilet paper, rice etc. However, it also stocks a mind-boggling array of produce. Tesco says it has 2,000 suppliers for the store, who make 800 direct deliveries each week. The logistics of running that many suppliers is mind-boggling and Tesco is busy building distribution hubs so that it can mastermind its supplies better.
The “marketplace” is much cleaner than in the old Tesco, with fewer iffy smells, but retains all the chaos that Tesco insists makes Chinese shoppers happy. The store refers to the shouting and shoving as “theatre”. And there is one innovation that has come from Korea, apparently. A fine mist is constantly sprayed over the vegetables from overhead, making them look fresh and just out of the fridge. The system appears to have been rigged up, shanzhai-style, from a length of drainpipe painted green and I imagine it won’t be long before it is replicated across stores elsewhere.
The boss, Ken Towle, has a remarkable command of every price and every product he stocks. He discusses the elasticity of demand for eggs, which are sold loose in the store and sometimes decanted into plastic bags for customers who just want the liquid to take away. He says that a tiny fluctuation in the price of eggs can spark mad rushs. A 20 per cent price drop, he adds, would cause a stampede in store (the store is already packed out – the police restricted the entrances but around 60,000 shoppers were expected to pass through).
Meanwhile, the store has also reached out to the local community. Through the neighbourhood committees, Tesco invited locals to do their morning exercises in the forecourt, set up a CD player, handed out warm coats and also hot drinks. This sort of thoughtfulness costs nothing and generates a lot of goodwill.
It is early days, and Tesco clearly doesn’t have the guanxi in Qingdao to fill its shopping centre with the big name shops. Much of the mall looked like it had been filled with mom-and-pop shops that were happy to upgrade to shiny new premises. The only really recognisable Chinese brands on offer were Li Ning and Erke. It will be interesting to see if the bold strategy works though, and with the speed Tesco is expanding, it shouldn’t take long before the results are evident.