CCID Consulting has delineated several main characteristics of the cross- national enterprises investing in China: large-scale investment, wide-ranging fields and concentrated investment regions. From 2004 to 2006, the numbers of cross-national enterprises investing in China were 1700 in 2004, 2602 in 2005 and 4664 in 2006. Effective investment revenues were respectively $0.74 billion in 2004, $1.039 billion in 2005 and $1.79 billion in 2006. The retail industry has become the most rapidly developing industry for cross-national enterprises investment in the past three years.
Currently, the market that cross-national retail industries face has many facets. Cross-national retail industry's business performance is better than that of Chinese enterprises. China's retail enterprises are developing rapidly. Small-scale retail such as retailers and convenience stores are gradually maturing. The retail industry chain is anfractuous. Finally, because the megalopolis market has a high saturation, retail enterprises have shifted their attention to the second and third tier cities and small towns.
- Diversification and complication
CCID Consulting believes that the cross-national retail industry faces a complicated competitive pattern. First of all, bazaars and supermarkets own their own brand and designs. Secondly, shopping malls and convenience stores have become hotspots for business development. Thirdly, modern shopping centers have formed certain scales. Fourthly, depending on the various brands, goods and services, speciality stores have expanded to the national market in depth.
- Islands of stability on the market
Currently, the structure of China's retail industry is composed of foreign capital and domestic enterprises, creating a their own market pattern. With opening up of China's retail industry and the great attraction of the profit surely to ensue, many international retail giants are investing in China. Meanwhile, international companies are meeting a challenge from the domestic retail industry's rapid development. This leads to furious acquisition, elimination and cooperation among the enterprises in this industry.
Bright Future for Cross-National Retail Investment in China
As for market scale, CCID Consulting forecasts that thanks to the lasting investment in China, cross-national retail enterprises will invest $7.5 billion in China in 2007, with a 15% amplitude; and cross-national retail enterprises will invest $7.98 billion, with a 6.4% amplitude.
CCID Consulting forecasts that as for investment and profit, cross- national retail enterprises are expected to increase their investment in East China, North China, South China and Central China. Northwest and Southwest China are expected to meet a new investment upsurge. Cross-national enterprises' profit revenue in East China will accounts one-third of the total revenue. The profit revenue in North China, South China and Central China will each exceed 10%, while the Northwest is sluggish, so the profit revenue won't exceed 5%.
CCID Consulting's research on WAL-Mart's development in China shows three clear stages of development: entrance, conformity and expansion. These stages encompass many of cross-national enterprises' common concerns upon entering the Chinese market: the flexibility of a company's logistics system, the implementation of localization, a crueller, more competitive environment, and the possibility of sporadically-distributed stores. All of these factors restrict the development of cross-national enterprises in China from different aspects. However, cross-national enterprises can evade market risks to achieve profits because of their advantages and the continuing growth of China's economy.
CCID Consulting believes that cross-national retail enterprises investing in China should pay attention to the policies related to their company. The Chinese retail industry is going through a period of extreme competition. Enterprises should also pay attention to steadying the upstream sources, satisfying the downstream consumer demands and firming up the distribution center and logistics system.
Therefore, cross-national retail enterprises should aim for the following strategies: use China's intrinsic logistics and information systems; invest to establish unattached logistics and information systems; take full advantage and converge both China's and private enterprises' pre-existing logistics systems; be cautious when controlling the scale and choosing the investment regions; adjust strategies in order to incorporate local strategies; strengthen the convergence of acquisitions; make full use of their own advantages in order to avoid risks.
