Gymboree conquest of the education and childrenswear markets in China
With the economic development in China, family spending on education and children clothing is steadily increasing. Gymboree, known as 金宝贝 (jin bao bei : golden baby) in China is an american corporation owning both retail stores of children's apparel and Play and Music centers where parents go with their children for early-learning classes.
In 2003, Gymboree saw in China a huge potential for its Play and Music centers and brought the franchise to Shanghai. In 2009, noticing that only 20 % of the chinese parents enrolled their children in education programs, it decided to target the 80 % leaving one. Not only interested in top-tier cities,Gymboree aimed at setting up centers in smaller cities (around one million inhabitants), the strategy being to reach the bourgeonning middle class.
There are no doubt that the education market is growing and that chinese parents are ready to do a lot to provide their children with the best possible education, namely because the birth control policy made children become the center of the family. But in 2003, entering the chinese market with play centers was challenging for Gymboree because Chinese parents were not familiar with the concept of children learning by playing in a funny environment, enjoying what they do and discovering what they really like. Today, with more than 200 centers, Gymboree's Play and Music centers are well established in China. The company now sees opportunities in the children's apparel and is starting from scratch a business in that area.
A French high fashion house
conquering the Chinese clothing market
Already present in Xidan's Galeries
Lafayette in Beijing, Faconnable is taking a new step in its establishment on
the Chinese market : it opened shops in Shanghai and in Chengdu. Still
unknown to the Chinese public in
comparison with luxury brands such as Dior, Armani or Burburry, the brand is
called 法康娜布 in China (fa
kang na bu, with kang meaning healthy and abundant and bu meaning clothes), a
positively-connotated name sounding as Faconnable.
The French brand is determined to
seduce Chinese consumers with its authentic French Riviera style: the
blue-and-white-striped sailor design of the shops arouses the curiosity of
Chinese people who enter the place spontaneously. Faconnable intends to
convince Chinese buyers by making them understand the connection between the
way of life of the South of France, tourist place they surely know and the the
clothes it sells. The influence of Picasso in the creation of clothes could
also seduce consumers. Faconnable aims at targeting people practising sports
such as golf, polo or yachting for such networks generate word-from-mouth and
can help the brand make it known. This establishment is challenging and if this
step proves to be successful, Faconnable will not hesitate to invest even more
in China...
The wine industry in China is
drastically soaring recent years with the rapid growth of economy. The Chinese
wine consumption market is also booming since an increasing number of people
nowadays are seeking for a life of higher quality. According to the survey by
2010, the annual growth speed of global wine industry is less than 1%, however,
the figure is 10% in China. In four years’ time, the growth rate is still
accelerating. Therefore, China has undoubtedly been the most potential wine
market in the world.
As the latest report pointed out,
the Chinese wine market consumption has been continuously increasing and it’s
already the fifth biggest market in the world, with the compound annual growth
rate of around 25%. In the meanwhile, the statistics also demonstrate a rapid
growth of wine from world to mainland China. China is a populous country of
1.33 billion, among which there are 19 million upper middle class drinkers of
imported wine. And that middle class is growing. That is to say, the current
situation is favorable for imports.
The largest market for imported
wine consumption is “on-premise”, at top end hotels, restaurants night-clubs
and bars. In these occasions, people tends to impress their guests at a dinner
banquet or to use as a gift.In order to satisfy demand of the consumers, the
retail market for imported wines is also growing. The number of foreign
countries is springing in China and they normally have a wine corner located in
middle to high-income districts. High-end domestic department stores also carry
imported wine, as do independent wine shops. At present, the market share is
divided by three groups. There are local brands with some history, newly coming
brands and joint brands in Chinese wine market. Generally speaking, foreign
brands take up the high-end market, domestic wine enterprises with some history
are dominant in middle-end market and some newly coming brands and other brands
are mainly in the low-end market.
Over the past decade, China's per
capita wine consumption has risen from 0.25 liters in 2002 to 1.31 liters in
2013. During the same period, Chinese consumers' understanding of wine has also
improved. Chinese used to consider wine consumption as a luxury, so they set
brand name and high price as the standard of good wine. But now the situation
is changing. More people can afford to buy wines but the purposes are quite
different from each other.
As for most consumers, wine
consumption is for the purpose of collection, taste and banquet respectively.
The grade and orientation of wine varies from group to group. In China, as a
symbol of fashion, wine is related to health and romance. Various data also
provide basis for peoples’ expectation on wine healthcare, showing it can
prevent cholesterol, heart disease and diabetes.
In comparison with foreign wine,
Chinese customers don’t drink diverse wine to match diverse dishes. Instead,
they like to drink up one bottle of wine and sometime open anther bottle.
Taking white wine as defective products, Chinese customers reject to drink
white wine. For many customers, only red wine is wine and white wine only
refers to Chinese local grain alcohol.
Despite the rapid development of
wine industry in China, there are tough challenges as well to meet with, like
the competitors from European countries, which are the original producers of
wines. There's a general consensus that the quality of domestic wines needs to
be improved. In today's market environment, we must compete with wines from
Europe and other countries, so the first thing we need to do is to improve our
own competitiveness. The most important is to go back to the quality from the
brand name building as before. To make better quality wine, Chinese wine
enterprises need to upgrade the industry, in grape planting, mechanization and
cost reduction.
However, instead of really
focusing hard on the taste and quality, marketing is also of significant
importance. Chinese major wine producers poured their investment and efforts
into marketing. As said by RUAN SHI LI, Senior Manager of ChangyuMozel Winery
“I think there is a certain gap between Chinese Wine industry and Wine
industry, in those major wine producers around the world. The first is in the
raw materials, the second is in the marketing.” Major change in marketing
pattern of wine enterprises is the shift from competing in the end market to
establishing and operating end market on their own. Wine marketing in China
used to be shopping malls, supermarkets, restaurants and clubs. But now, wine
salon and franchised stores are the major marketing places. Thus the market has
been more optimized.
Generally speaking, the wine
market in China can be described as promising, competitive and tough as well. With
the government regulations restricting government spending on banquets, perhaps
more emphasis should be placed on personal consumption. Based on this, the
Chinese wine market will be converted into a more healthy and mature one.
MARKET CHINA: Can you tell us more about yourself?
A: I am
born and raised in Nanjing, China. Being passionate about both economics and
business, I went to France after high school at Sciences Po Europe-Asia Campus
for my bachelor degree with a concentration on economics and Europe-Asia
relations. There, I met people from different parts of the world and enjoyed
talking with them, which really widened my horizon and helped me better
understand this world and the people. In my spare time, I play guitar and
basketball.
MARKET CHINA: What brought you to Daxue Consulting?
A: As
part of the Sciences-Po third year curriculum, I have to do an internship
outside of France. I saw the announcement on our school’s website. Being
curious about consulting, I found that this start-up company has some really
big clients, such as Sumsung, European Commission, etc. After talking with some
staff n this company via Skype, I found staff here is really multi-cultural,
and really excellent with various professional background, such as Nielsen,
German Chamber of Commerce, etc. Even the part-time assistants are from top
universities such as ESCP, LSE, Imperial College, Manchester University, Fudan
University, Shanghai Jiaotong University etc. Everybody has certain autonomy to
do things that are challenging, and the atmosphere is very dynamic. It would be
a great experience working with them. Thus, I chose to come to Daxue
Consulting.
MARKET CHINA: What is your vision of market research
and consulting in China? What do you like about it?
A:
Personally, I found the data is more difficult to get in China than European
markets. By the time I managed the project of electric bicycle in China, the
data collection costed much time. This is partly due to the opacity of SMEs,
the entreprises are reluctant to show their financial situation to the public;
also due to the unregulated market, the enforcement of law, regulations are
very weak in a local level. The more time we spent on data collection, the less
time we have on market analysis. Thus, normally a market research project in
China is expected to have a longer duration than the one in Europe. I like
doing market research and consulting because I feel a great achievement and I
love working together with smart minds, the process of brainstorming is
something I appreciate a lot.
MARKET CHINA: Which business verticals do you
specialize in?
A: I
have an education of general courses including economics, corporate
finance.
MARKET CHINA: What is your consultant’s adage?
A: (I
don't think I have an adage so far, but if I have to say, I would say
"being efficient, being organized" )
At the
beginning of 2002, tablets drives made in China were blocked in customs in
several countries of Europe, because the manufacturers had not settled the
rights of the used patents. Afterward, Philips, Sony, and Pioneer began a legal
battle in front of the European Court of Justice, pressing the Chinese
manufacturers of tablets drives so that they pay the rights of the used
technologies. Initially, the wanted payment was 20 US dollars by reader, sum
considered as too high by the Chinese part which put forward an only 90-dollar
sale price by device. Later, they also reached agreements with other companies
for the payment of rights: 4 % of the sale price or 4 dollars by reader to NEC,
Panasonic, Toshiba, JVC, Mitsubishi, and Time Warner, 10 dollars to DTS, 4,95
dollars to Dolby Laboratories, and 2,5 dollars with Mysimax.
More recently, Thomson, the partner of TCL, asked for the payment of 1 or 1,5
dollars by reader, according to his place of sale, in China or abroad. According
to Daxue Consulting, at least 50 million tablets were made in China in 2003,
the total sum in game is thus very important.
Daxue Consulting provides market research tools to analyze high-tech sectors in China
Practices in Chinese
economy
Such
practices are typical of the Chinese industry during the last ten years.
Multinationals gradually relocated the manufacturing of their electronic
consumer goods of the United States and Japan towards Singapore, South Korea,
Taiwan and Hong-Kong, and then towards China and other countries to the cheap
workforce. They use the patents of key technologies as levers and concentrate
on the development of the technologies of the next generation of these
products.
China is
supposed to absorb and to assimilate these technologies imported to develop
gradually national products and progress in the technological scale.
Unfortunately, it does not so take place. Situated at the end of the chain, China
has other choice no than to continue to pay for the use of foreign
technologies. At the same time, the homogenization and the everyday acceptance
of these products pull the Chinese firms in valuable wars.
Example in manufacturing
sector in China
According
to SJ
Grand, the phenomenon does not limit itself to the industry of electronic
consumer goods. Let us take the example of Legend, the main Chinese
manufacturer of tablets staff. In 1998, it exceeded IBM and became leading on
the Chinese market. But as said by Liu Chuanzhi, his president, the company
especially played a role of "locomotive (banyungong)" for the technologies.
For the
French specialists of retirement homes, China market is the new El Dorado as
well as China market of mini cars in China. Companies as Coliseum, Orpea and
DomusVi already try to become established on this market in the immense
potential, but have to be patient and of humility in front of cultural gap to
be filled.
China market of nursing
home and mini cars are huge in China
«The
expansion in China is a logical solution for groups which can feel cramped in
France ", judge Pascal Brunelet, Deputy Chief Executive Officer of the
Group Coliseum, who participated in the 14th Congress of the national Labor
unionof establishments and residences deprived for the elderly, organized on
June 5th and 6th in Antibes. He is also an important person of the market of
mini cars in China.
In spite of
its small size (3000 beds for 54 establishments in France), Coliseum dashed
into the Chinese adventure 8 years ago, by creating the Coliseum Beijing
subsidiary China, based in Beijing. Its objective: create 50 nursing homes in
the Middle Kingdom before 5 years.
But in
China, «patience and humility are the key words ", mister Brunelet warns.
In June, the group of Bordeaux " is going to put down the statuses of a
joint-venture with a Chinese partner and a building permit should be granted in
September, for the opening of a first establishment of 200 beds to Guangzhou at
the end of 2015 ", he specifies. The China market of mini-cars are
expending in line with nursing home.
Other example in the China
market
Following
the example of Coliseum, Orpea signed in March a protocol with living districts
and hospital in Nankin, for the development of a nursing home of 180 beds.
At the same
time, DomusVi (number three of the sector in France) signed a partnership
agreement with Hanfor, a Chinese investment fund, creating the Duomei company,
which will allow him to manage in China 100 retirement homes and 20 agencies of
home help before five years.
China market of milk see
foreign brands taking control
The reasons
of the outperformance of the powdered milk for baby on China market are known:
a context of suspicion around the Chinese producers, arisen from the scandal of
the melamine in 2008; a rush towards products imported or made by the foreign brands
which see their China market share doubling, of 35 about 70 %; in front of this
peak of demand, rises in prices repeated during the last five years, which
positioned this category at levels of gross margin very superior to the rest of
the market; in view of this profitability, of big investments granted in
marketing and promotion to stimulate an extremely profitable demand.
Authorities want to
protect China market
This
dynamism urged the Chinese authorities to react: launch of a public campaign on
China market to encourage the breast-feeding; penalties for the actors practicing
promotion drives considered too aggressive in hospitals; fines for the
producers accused of price fixing, who had to lower the price rate of certain
references; implementation of new regulations relative to the marketing of
these products, to eliminate the small opportunist producers incapable to
assure quality and traceability; financing brought to the consolidation of the
Chinese actors, to reconstruct a sector capable of rebalancing market shares
with the international producers.
New products on China
market
All in all,
54 international companies obtained this year a license to import some
infantile milk in China, where they are going to face hundred local producers.
If this wild competition can support the growth of the category for the next
years, on the contrary its profitability, in particular for the new incomers,
is not assured. On the other hand, outside this emergent very competed segment
of numerous doubtless more attractive opportunities of value creation for the
international actors on China market.
For
example, new categories of products appear and benefit from a fast growth. The
best illustration is maybe the yoghurt to drink UHT marketed by the Chinese
Bright Dairy.
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