Taipei Times: How fast are modern retailing methods expanding throughout China?
Alistair Watts: Fantastically. The total number of modern trade stores -- hypermarket, supermarket and convenience stores -- has been going up by anywhere between 70 to 90 percent per year for the last two to three years. That rate of development is unprecedented anywhere in the world. Admittedly it's coming off a low base as you have to bear in mind that less than 2 percent of the total stores nationally are modern trade. But on the other hand, at that rate of growth, it's having a huge impact on people's shopping habits and what products they're able to buy and where they shop.
TT: Accounting for less 2 percent, modern trade retailing has only just started to scratch the surface.
Watts: But you're got to remember that a huge number of those other stores are little mom-and-pop operations or those hole-in-the-wall outfits selling a couple of cans of coke, chewing gum and detergent so it's got to be kept in context because around 40 to 45 percent of total sales are going through those 2 percent of stores that are modern trade. So it's a huge imbalance between sales and that's because those modern trade stores tend to be concentrated in the cities and the more developed towns and of course that's where most of the action is.
TT: How is modern retailing changing the shopping habits of the Chinese people?
Watts: There's a bit of a paradox. Because a lot of people even in the big cities still go to a wet market. It's an interesting phenomena because I looked at this when I was in Singapore and said here's basically a developed country where the underlining pattern of people going and buying fresh on a daily basis has changed.
As the wet markets disappear they might start going to a hypermarket but the underlying behavior hasn't changed.
We've noticed the same thing in Hong Kong. Now with the total increase in the number of stores, it's not that inconvenient to go to a modern trade store in Shanghai. In Western countries there's been a huge consolidation where there's now a smaller number of large format stores. In the West people say on Friday at 10pm, "I'm going to go and do the shopping for the week." But in China those underlying shopping habits are still there and it's still eight-plus store visits a week for the average person. In China I think it's "I need to buy something today. When should I go?" So it's still a more convenience-based shopping habit. Even though it might not be to a hypermarket or supermarket.
TT: While modern retailing growth rates are strong in the cities, how are they faring in the countryside?
Watts: A lot of the huge rate of growth is being driven by what's happening in the key cities -- the 27 "A" cities. But the rate of growth is very much slower in the countryside. One would assume that over time the ripple will spread, but probably it won't attain rates of growth similar to the cities because we know that even in the developed world rural communities tend to be lower income. But having said that there's a huge number of those people and even a 1 percent increase in their income would have a huge effect.
TT: Growth rates aside, what kind of development are we seeing in rural areas in regards to modern retailing?
Watts: I think there are a number of stores opening up there that we classify as modern trade convenience stores. But in reality if you went inside one there you would see the outlines of a modern trade convenience store but you wouldn't be standing in a 7-11. So the contrast isn't nearly as pronounced as it would be in a city. Even in a place like Harbin for example, the convenience stores there still have a long way to go in terms of range of product, layout and checkout facilities. It's an evolution rather than the revolution that we're seeing in the 27 big "A" cities as we call them. There it's a revolution. People are opening up modern trade formats at an alarming rate.
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