Chen Huici a lady from Taiwan was in Beijing on business. She chatted online with her boyfriend into the small hours. At 4am she went downstairs to go out into the city to buy a coke. After walking for a full 20 minutes she just couldn't find a store open anywhere.
?Bookstores, supermarkets and food markets that stay open 24 hours a day are to be found everywhere in Taiwan,? she complained. ?Beijing has so few. It?s not at all convenient.?
According to Li Shunli, vice director of the Beijing Municipal Commerce Commission, Beijing has fewer than 300 convenience stores and of these, only 100 are open right round the clock. These include supermarket chains like Good Neighbor, Timetone, Golden Elephant, Sagawa Express, Wu Mart and PriceSmart. Most convenience stores open 17 hours a day or just have rather longer opening hours than usual. In Shanghai it's a different story with some 3,000 stores operating on a 24-hour basis.
Limited Goods and Services
The 24-hour retail sector has been developing rather slowly in Beijing despite the otherwise rapid pace of life of this bustling capital city with its growing consumer demand. Many 24-hour stores are limited to a single product range like food or daily necessities.
Few convenience stores sell the regular non-prescription medicines which are so often exactly what people are looking for when illness strikes at all hours of the day and night. Many customers have to wait until morning to get something to make them feel better. In Japan such medicines are easily found on the shelves of almost any round-the-clock store.
Chen says Taiwan is well provided for with 24-hour stores so city dwellers can shop, get a book, see a movie or go to a restaurant even after finishing work at midnight. If they want they can also find a laundry open or access FAX and other business services. All these would be difficult to find in Beijing. Even after walking several blocks one would be lucky to find a convenience store open at all and if there was one, it would likely have a very limited range of goods on offer.
Setting up Shop
Beijing is lagging three to five years behind Shanghai. China's second city saw its first supermarket in 1991 when Beijing was still operating within the framework of the planned economy. By 1994 Shanghai's network of convenience stores was already becoming well developed while Beijing was just starting to see them introduced. In addition most providers in Beijing are still in a pilot phase and only testing the market, so there is only patchy coverage across the city.
Beijing clearly offers a huge potential for the convenience store sector. Many domestic and overseas retail groups that had hoped to establish themselves in the market have found things are not turning out as smoothly as they originally anticipated.
7-Eleven with its 24,000 outlets is the largest convenience store retailer in the world. But even after several years of effort, there is still only an expectation that 7-Eleven will open in Beijing some day.
The Shanghai based Hualian Group had planned to open 200 outlets in Beijing but so far it has managed a mere 30. They have run into difficulties in getting the necessary certificates not to mention problems dealing with the relevant departments and taxation issues.
Many supermarkets have found that it is no easy matter to adapt to and cope with local market conditions in the capital.
Eight Bottlenecks
Prof. Liu Jipeng of the Capital University of Economics and Business speaks of the eight areas that militate against the development of 24-hour stores in Beijing.
- High rents especially for stores in commercial areas dominated by luxury office buildings pose considerable difficulties for the retail industry. The current urban per capita Gross Domestic Product (GDP) of US$3,000 is insufficient to support high-rental convenience stores. GDP would need to climb to say US$6,000 for them to become viable.
- Beijing's main streets don't actually have the necessary retail properties available.
- The capital's harsh cold winters tend to keep its residents indoors making it a relatively quiet city by night.
- There is room for improvement in the way convenience stores are operated in the city.
- Extant distribution systems can?t yet meet the needs of the widely scattered, smaller convenience stores. However Beijing has this year launched a project to address problems of the large-scale delivery of goods in the city.
- The convenience store sector would benefit from further support from policies and measures aimed at promoting implementation.
- Opening a new outlet involves complicated administrative procedures. Many different departments are involved and it is often a lengthy process. Consumers expect convenience stores to carry a full range of goods. However in Beijing it is not easy to put new items on the shelves. An enterprise must have 5 million yuan in registered capital to get a license to sell newspaper and magazines. Its customers could raise whole families while it tries to get the 16 different certificates it needs to sell contraceptives.
- Then finally there are the restrictions on the range of goods and services that can be provided by convenience stores. Currently it is not just contraceptives but also pharmaceuticals, books, newspapers, magazines, audio and video products and even photo-copying services that are strictly controlled.
Convenience stores, especially those that open 24 hours a day haven?t become the norm in the capital even though the people of Beijing would naturally embrace the improved level of service which they could provide. Li Shunli, vice director of the Beijing Municipal Commerce Commission sees this as largely attributable to the city?s climate. He points to Beijing's significant fluctuations in temperature. 24-hour stores don't do well in long freezing winters.
Potential for 2,000 Stores
"What consumers want most is to be able to get the goods they need when they need them," said a member of staff at the 24-hour Wu Mart where goods retail at some 15 percent above the prices in regular supermarkets.
The capital's huge population holds out the prospect of a lucrative growth market for the convenience retailing groups. Vice President Wu Jianzhong of Wu Mart suggests that a catchment population of 3,000-4,000 people can support one convenience store. Beijing city proper has 8 million residents who could be expected to support say 2,000 such stores but to date there are fewer that a hundred 24-hour convenience stores in the city.
Vice Director Gong Li of the Beijing Municipal Commerce Commission pointed out that in 2003 Beijing would see growth occur not only in the large convenience stores and supermarket chains but also among the smaller convenience stores serving their local communities.
(China.org.cn Edited by Guo Xiaohong April 22, 2003)
