China Retail

Ningbo Wal-Mart and other observations

I'm back in Ningbo today surveying properties for an investment partner that is developing mid-sized neighborhood retail and hypermarkets. We're finalizing their location selection, and my team is here for a week doing micro analysis studies. The last time I was in Ningbo the paint was still drying on the new Wanda Plaza a little south of the city center. It's a huge complex, with Wal-Mart as an anchor, so I spent a few hours walking around, shopping, eating, talking to people, and being a 2nd tier kind of consumer. I think I can now define the difference between 1st tier and 2nd tier retail in a way most people haven't thought of. You can call it "2nd tier retail" when outside the bathrooms of a fancy new restaurant chain, there is one communal roll of toilet paper dangling from a plastic hook before you get to the squatty potty which doesn't flush properly. The communal roll of tp - for those 1st tier kind of people - is so you can grab a wad in front of everyone before you enter the stall which of course will not have paper, or a hook to hang your bag, purse, whatever, but will have an ashtray and a hi-tech infrared flush sensor built into the wall.

Walking through the mall I was impressed how the lifestyle consumer blend felt right. Kids on rollerblades, families with strollers, students, young couples, and guess what - no lao wai - except for me looking at the giant photo of Sam Walton at the entry way to Wal-Mart with the whole history of their entry into China mapped out stage by stage. I was standing there thinking what a bizarre concept, to put a giant black and white photo of an old guy in a baseball hat who no one in China knows right at the front door. The whole thing felt rather like a bizarre museum piece, a thing of the past, and believe me Chinese don't really like to think about the past too much - especially in black and white. This is a look forward in color culture, and those photos felt more like something out of a war memorial than the new cool Western place to shop in town.

People readily accept the white plasticized image of the Colonel, as in KFC, as a kind of an iconic brand without the history lesson, so I'm wondering why Wal-Mart doesn't do something similarly iconic rather than the weird "we are now invading your country bringing low cost capitalistic products - the same products you see everywhere else in town which are made right down the street - probably by someone you know, but branded by an old white guy in a baseball hat" message at the front door. You don't get to see any pictures of smiling Chinese people buying product until you start going up to the second floor.

Ningbo is happening. The area around this particular complex is filling up fast with new residential high rises, and the people here are all buying. I've seen property prices increase 40% this past year. Whether this means this particular mall location will hit it's desired yield, it's hard to say. I mean why are there six locally branded sports shops lined up next to each other all selling essentially the same product with the same display in the same layout for the same price with similar logos? Go figure.

April 14, 2008

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