CGF 2013 Global Summit explores how Asian market will change global retail

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Delegates at the Consumer Goods Forum (CGF) 2013 Annual Global Summit heard a series of best practice case studies and plenary sessions on business success, drawn from Asia and around the world; plus insight into how the Asian consumer market will change the global retail and manufacturing sectors.

The conference themed – Asia: Shaping Your Future – saw several speakers share different models for successful international expansion anchored from Asia, including:

  • Japan’s Tadashi Yanai, chairman, president and CEO, Fast Retailing Co
  • Kishore Biyani, founder and group CEO, The Future Group, India
  • Geping Guo, chairperson, China Chain Store and Franchise Association (CCSFA)
  • Jie Hong, chief executive officer and executive director, China Resources Enterprise 

Ryuichi Isaka, president & CEO, 7-Eleven Japan

Ryuichi Isaka explained how the growth of the 7-Eleven business in Japan had been based upon a resolute focus on customers, even though, as he noted, “convenience for the customer is often inconvenient for us”.  

7-Eleven had taken on food preparation for time-poor households, pioneered bill payments in store and introduced a range of banking and other services. Nowadays, one third of utility bills in Japan were paid in convenience stores.

Isaka ascribed the success of its business in part to the franchise model it had adopted, relying on local knowledge and careful attention to detail and benefiting from central systems and scale. Thus a local franchisee could tailor their fresh food order by 11.00am for delivery that evening from production facilities owned and managed by the company. Franchisees had also enthusiastically adopted home delivery systems, a major growth area given Japan’s ageing population.  

Kishore Biyani, founder & group CEO, The Future Group

Kishore Biyani said India was the most heterogenous market in the world. It was complex, it was inspiring – and it contradicted every theory you might have. His prescription for success in India was based upon winning hearts, getting mindshare and understanding the market.  

He explained that Future Group’s segmentation strategies were multi-dimensional, and reflected community identity as much as socio-economic measures, lifestage, region and occasion.

As pioneers of modern retail in India, Future Group had needed to build its own infrastructure and train people with knowledge that couldn’t be found in the marketplace.

In questions afterwards, Biyani said extraordinary growth in India was sustainable for those consumer companies who could provide products at a price that triggered massive category demand.

Geping Guo, chairperson, China Chain Store and Franchise Association

Madame Guo of the CCFA said that after 20 years of rapid development, there were distinct changes in speed, format and channel in the Chinese retail market.

There had been a marked slowing in retail sales growth in China, partly because the most recent expansion had been in less well understood and smaller cities and towns, where in turn there was less experienced management capacity.

In terms of format, traditional supermarkets were being steadily replaced by modern, fresh food-driven supermarkets. There was a significant pipeline of new shopping centres and department stores. In some regions, saturation would be reached in the next few years.

Madame Guo also emphasised the speed and scale of the online opportunity in China, with RMB 1.2 trillion of sales (almost US$200 billion) in 2012 and an estimated RMB 4.2 trillion bought online by 2020 (around US$675 billion). But Chinese retailers had to master online while changing from a business logic based on scale and quantity to one of efficiency and effectiveness.

Luan Xiu Ju, chairman, COFCO

Luan Xiu Ju described the evolution of COFCO from a small business trading in edible oils and other foodstuffs to a diversified conglomerate with a presence throughout the value chain for most of its products.

She set out the major market trends COFCO had identified from their research as ones of premiumisation, ageing, health, the effects of a fast-paced lifestyle and increasing demands for corporate social responsibility policies.

In commenting on the prospects for online retail in China, Luan Xiu Ju said that the growth in food retail was set to be explosive, with forecast growth rates of 64% in the coming five years. By 2017 it was forecast it would account for 7.3% of the Chinese food market by sales.  That in turn reflected a rapid increase in the internet user base, especially using mobile devices, and continued increases in online shopping frequency.

Jie Hong, CEO and executive director, China Resources Enterprise 

Jie Hong said that the growth of the previous years had been spectacular: disposable income per capita had increased more than 10 times in 20 years. In that time, consumer understanding and usage had been transformed. As an example, shampoo had replaced soap across China; from being a gifting item in the early 1990s, it now enjoyed 92% market penetration. 

Nevertheless, the Chinese market and consumer behaviour remained very diverse, whether looked at from a regional perspective or in comparing urban with rural behaviour. That was reflected in different preferences for pack type and size, as well as price sensitivity.

Hong noted that while most of the world’s largest retailers were active in China, some of the fastest growing players were local retailers.  To potential market entrants, his recommendations were to be prepared for continuous investment and to accelerate localisation.

 Takahisa Takahara, president & CEO, Unicharm

Takahisa Takahara said that Unicharm was operating in a society in which ageing citizens had radically different health and personal care needs, but in which they could and should be enabled to live active lives

While much attention was paid to total life expectancy, Takahara said it was as important to minimise the gap between average and healthy life expectancies.

Pioneering Unicharm products had included pad-type diapers, which were faster and easier to change, and incontinence underwear designed for physical therapeutic purposes, encouraging aged people to exercise and get to the bathroom by themselves. In doing so, Unicharm aimed to meet both the necessities and enable the dreams of physical activity.

Li Weilong, chairman, Xinglong Happy Family Business

Li Weilong said that his early experiences of collective life in a family of Liaoning oilfield workers had only strengthened the importance of family as the central concept in business as well as personal life: the idea of working and sharing together lay at the heart of Xinglong Happy Family.

He described a major award-winning customer service initiative, Xinglong Happy Family’s Kung Fu Master List series, in which the retailer had defined 360 areas of customer service and then encouraged, trained and celebrated mastery of each amongst their workforce. That was embodied in butchery skills – “a big show on a small stage” – where customers were more than happy to queue for service by someone with evident skill.

Li Weilong made a powerful case for the continued relevance of the physical store in the digital age: interaction and sharing experiences remained the core competence of the company.  

Dick Boer, CEO, Royal Ahold

Dick Boer explained how developing a comprehensive multichannel strategy had emerged from Ahold’s broader Reshaping Retail initiative

Ahold was facing competition not so much from other retailers as from the customer; for the mobile phone and its many apps had already set the standard that retailers would have to match. The new business models retained three core elements of the existing business: providing access, personalisation and the management of physical flow.

In the first two areas, online competitors had a structural advantage. But delivery presents more of a challenge, so as an incumbent food retailer Ahold had a great opportunity. They now offered a choice between going to the store, collecting at dedicated pick-up points with centralised picking or full home delivery.

Boer explained how buying bol.com had given Ahold access to digital assets and capabilities. It was also running successful cross-promotions for products as diverse as barbecue supplies and e-readers.  

Tadashi Yanai, chairman, president & CEO, Fast Retailing

Tadashi Yanai described Uniqlo as representing a toolbox to create style and lifestyle, and the company’s mission was to help everyone in the world have access to good quality, low priced clothes to do that.

Yanai argued that whereas success stories were boring, you could actively learn from mistakes. He cited the example of Uniqlo’s first efforts in the United States, opening three stores simultaneously in New Jersey malls with very little consequence, renting temporary premises in SoHo to clear overstock and almost inadvertently learning there was latent demand for the brand in New York City.

Yanai explained that Uniqlo’s success was integrally connected with its management philosophy, which was to use a very flat organisation structure and to require everyone to “wear the boss’s hat” – to think like and act on behalf of the most senior manager in the business.  

Dr Shinsuke Muto, chairman of Tetsuyu Institute Medical Corporation

Shinsuke Muto explained how the calamitous events of the 2011 earthquake and tsunami had helped develop thinking about the delivery of multiple services to the rapidly rising number of Japanese households comprising just one or two older people. 

By visiting thousands of homes directly to assess medical and social needs, he and his team had managed to collect detailed information about the status of 10,000 households in the area.  

That experience supported the idea of a cloud system of home medical support – for it was clear a full picture of needs could only be obtained by direct visiting.  Equally, however, the sheer range of services required could not be funded for much longer by central government, nor provided by any single private organisation.

Dr Muto said Japan had the opportunity to create a new global industry in senior care; one which encouraged activity in seniors but also pre-empted health crises by routine monitoring. Delivery drivers could work alongside doctors in such a networked solution.

Kjell Nordström, associate professor

Kjell Nordström said that profound changes had already been brought about by globalisation and knowledge development. Even if the first force of globalisation was slowing down, it was not about to go backwards. The spread of democracy would continue. But as to this second force, he said “we ain’t seen nothing yet”. The effect of digitalisation in knowledge would be as dramatic as the mechanisation of agriculture a hundred years before.

Nordström said a separate force acting globally was the rise of women in education. In conjunction with a tendency to greater economic disparities generally, it was hard not to conclude that we were creating a new underclass of young, stupid or undereducated men. A less appreciated consequence of this gender shift was a generalised difference between men and women with regard to risk. Lehman Sisters would have been an entirely different bank.