CHINA FRANCHISE NEWS
Vol. 3 , No. 13 - December 02, 2002
TOPICS THIS ISSUE:
- Dairy Farm Buying IKEA Stores in Hong Kong and Taiwan
- German Schattdecor AG Entering into China Home Décor Market
- National Retail Chain Set Up for Farming Materials
- Franchise Law to Come Out Next Year
- Foreign Retailer's Expansion In China
- Giordano to Open 100 China Stores Next Year
Dairy Farm Buying IKEA Stores in Hong Kong and Taiwan
Recently, Dairy Farm, which operates supermarket and convenience stores, signed an agreement with Jardine Pacific to purchase several IKEA chain stores in Hong Kong and Taiwan at the price of USD $2,700,000,000.
According to the agreement, Dairy Farm will buy four IKEA stores in Hong Kong and one in Taiwan, with a total shopping area of 440,000m2 and around 600 employees. The project is financed with funds from internal resources. It is estimated that the shift in business will be carried out from next month.
IKEA, a Swedish-based company, is the biggest furniture store chain globally. Jardine Pacific has owned the license for operating IKEA stores in Hong Kong and Taiwan since 1988 and 1994 respectively.
(Source: International Finance)
German Schattdecor AG Entering into China Home Décor Market
German Schattdecor AG has entered into the China home décor market by opening its first factory in Shanghai, which will be the major manufacturing base for the Asia region.
It cost Schattdecor about US $28 million to build the new plant, one of seven in the world. It is estimated that the plant, located in Shanghai's Kangqiao Industrial Zone, will produce 2,500 tons of materials for decorating surfaces in kitchens, furniture and flooring next year. The factory will manufacture products specifically for the Chinese market by using the imported raw materials and German technology.
Walter Schatt, the President of Schattdecor AG, explained that the practice of running an overseas wholly owned enterprise is consistent with the company's foreign investment policy, which endeavors to create a peaceful environment inside the company.
According to Schatt, setting up a factory in Shanghai will enable local clients to get materials in time rather than wait for six to eight months for products shipped from Europe. He further added that Shanghai is the right place for gaining understanding from Chinese partners and with respect to the conditions they need to run the factory.
Schatt regarded the opening of the plant as a demonstration of the initial success in China.
Zhu Yi, the general manager of Schattdecor Shanghai Co. Ltd., estimated that the possible annul maximum output could be 4,000 tons by 2004.
Bernd Reub, a spokesman for Schattdecor AG, also anticipated possible export of some decorative materials to other Asian countries, such as Australia and New Zealand. According to Reub, the company will decide whether to add three production lines based on the actual market demand, and the company would be able to produce 10,000 tons of decorative materials annually with the installment of four production lines.
(Source: China Daily)
National Retail Chain Set Up for Farming Materials
China is to build a national retail chain of farming materials and animal medicines.
Late last month, in northwestern Shaanxi Province, a total of 1,200 farmers signed up to become Hengtong chain store owners, which marked the establishment of China's largest retailer of farming materials and domestic animal medicines.
The project was introduced with the support from the State Development Planning Commission and is to cost RMB 885 million (107 million US dollars).
The 1,200 farmers will open their chain stores in townships in Shaanxi Province within this year, and more will be opened in other parts of the country next year. It is expected that the number of the chain stores will finally reach 30,000 nationwide, with 150,000 employees, earning RMB 11.88 billion (1.45 billion US dollars) in sales income annually and paying RMB 1.08 billion (130 million US dollars) in taxes.
According to the announcement of Hengtong Chain Store Management Co., Ltd. in a recent press conference, the stores will use the same operation mode as that of Wal-Mart, a leading chain store retailer of the United States. The project's planners are hoping the Hengtong chain stores will play a role in promoting rural economic growth, readjusting rural economic structure and raising farmers' incomes.
The biggest shareholders of the Hengtong chain store retailer are Xi'an Hengtong Guanghua Pharmacy Co. Ltd. and Shaanxi Hengtong International Industrial Co., Ltd.
Xi'an Hengtong Guanghua Pharmacy Co., Ltd. is China's largest tylosin producer and the largest producer of antibiotics in northwest China. The company is located in the State-level Yangling Agricultural High-tech Development Zone. Shaanxi Hengtong International Industrial Co., Ltd. is one of the leading foreign traders in Shaanxi Province, with a registered capital of RMB 460 million (US $55.6 million).
(Source: Xinhua News Agency)
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Franchise Law to Come Out Next Year
During the recent Fifth International Franchise Forum, Men Xiaowei, the vice director of Bureau of Market of State Economy and Trade Commission (SETC), revealed that the draft Regulation on Managing Franchise of Commercial Business has been completed. The draft will be submitted to the State Council for approval by the end of this year. It is anticipated that the regulation shall be promulgated next year.
According to Men, the issuance of the Regulation is aimed at controlling the illegal practices of franchising activities and conforms to the international commercial practice.
The upcoming Regulation includes eight chapters and 47 articles. Regarding the requirement of information disclosure, the Regulation provides that the franchisee shall disclose to the public the information about its own capital, finance, operation, required franchise fees and conditions for franchisors. Meanwhile, franchisors will also be required to provide to the franchisee the materials substantiating the franchisor's operational abilities. The Regulation put further emphasis on the supervision of franchise activities, which will establish a registration system. The franchise businesses shall register with the local competent agency as required by the Regulation. Foreign franchise businesses shall register with SETC, with supporting materials showing successful experiences in running at least two stores overseas.
(Source: Beijing Youth Daily)
Foreign Retailer's Expansion In China
The recent application filed by Macro, a Holland-based retailer, for opening chain stores nationwide, has been approved by the Chinese government. By the end of this year, Macro is going to open a new store in Tianjin. Shijianzhuan Macro and Shenyang Macro will be opened next year. The goal of Macro is to open 30 units in China by 2010.
The Dutch Macro is the third multinational commercial business, after US Wal-Mart and German Metro, that has obtained approval for opening stores in other cities. It took Wal-Mart and Metro more than 2 years to obtain government approval, while Macro's application only required 7 months.
China has sped up its opening in the retail sector after joining the World Trade Organization (WTO). The China market has therefore attracted more and more foreign retailers to join or to further expand the business in an attempt to hold larger market share. In Beijing, one Wal-Mart store will be opened in Xuanwu District by the end of this year and the one in Shijinshang District is under construction. In Shanghai, Metro has been approved to open 8 chain stores and is currently negotiating with its Chinese partners to open 4 stores in Beijing next year. Carrefour, the first retailer entering China, has already opened about 30 chain stores in 16 cities. Statistics show that the number of stores opened by foreign giant retailers has reached 300.
Currently, foreign retailers are aiming at only large- and middle-scale cities and are interested in opening supermarkets, chain stores and shopping malls. Therefore, analysts predict that the future Chinese retail market would be shared by foreign capital and local enterprises (State-owned and private owned).
(Source: China Business Times)
Giordano to Open 100 China Stores Next Year
Because of the sluggish sales in Hong Kong, Giordano, the No. 2 clothing retailer in Hong Kong, is considering opening as many as 100 stores in China next year.
China is already Giordano's largest market, with 532 stores as of September 30, accounting for a quarter of sales. Hong Kong, Taiwan and Singapore are the next largest. Giordano closed its only European venture in September.
China's urban consumers are spending more as economic growth boosts income. Retail sales in China increased 9.1 percent in September, compared with a 4.6 percent fall in Hong Kong, where consumer expenditure has declined for 14 of the past 15 months.
Alison Law, the assistant to the chairman at Giordano, said in an interview, "We are planning to open about 80 to 100 unisex stores a year in China. In the near term, the growth driver is still the greater China market."
The company is also negotiating with prospective European partners as it still looks for reentering the continent after ending its 6 million euro (US $5.9 million) venture because of disagreements with Germany's SB Warehaus Gmbh in September.
"Ultimately, Giordano still wants to be a global retailer, so we are still very interested in Europe, " Law said. According to her, the company may announce its new partner around the end of the year.
Law also revealed the company's plan to enter the US market soon. The company is ranked after Esprit Holding Ltd., which is the largest Hong Kong based garment retailer by sales.
(Source: North Asia News)
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