China’s retail market is characterized by discounts as well as intense competition between domestic and foreign brands. Brands come and go, and so do some retailers. Even Wal-Mart, the US-based retail giant that has spent over a decade in China, can only obtain a small fraction of the overall of the market. RetailCo Inc is a leading branded sports retailer in Mainland China. Its CEO Garrick Wang talks to Amy Cheung of The China Perspective about the barriers to retailing and franchising in China as well as how his company is going to expand in this rapidly-changing market.

The China Perspective: What is the scope of RetailCo Inc in China?

Garrick Wang: First started in 1997, RetailCo Inc is an operator of special retailing in China characterized by 50 to 500 square meter retail specialty stores. As one of the first and biggest sport retailers in China, we were responsible for the athletic specialty stores of Nike and Adidas. Our hand-on operation gives us the experience to get involved with retail consulting, providing solutions for other companies on how to enter China and select the best retail location.

TCP: What do you think about China\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\&'s retail sector? What is the role of your company in this growing market?

GW: China’s retail market is growing fast but also highly undisciplined in terms of how it operations. Store operators easily engage in price wars. There are an abundance of retail stores and brands but the number of quality locations and brand remains very limited. While the retail industry is undergoing a drastic transformation, maturity will reached in the next five to ten years. The recent influx of foreign retailers and luxury brands have help raise the overall level of operations, especially those from Hong Kong, Singapore, Korea and Taiwan have played a key role in introducing a more disciplined and improved organizational strategy, quality services as well as attitude.

TCP: Do the new regulations, on retail management and the number of retail outlets, influence your company\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\&'s operation?

GW: The new regulations governing the retail industry mainly target large-scale hypermarkets and foreign retailers. RetailCo is a Chinese company registered in China and of comparatively small scale. Therefore, we are not affected.

TCP: Do you think Beijing Olympics will boost the purchasing of sportswear and apparel?

GW: The 2008 Beijing Olympics will boost sport fashion in China but not significantly. This is because of sport and apparel consumption is already growing at an annual rate of 30% or more. However, higher growth in sales will be seen six months prior the event, during the event, and six months afterwards. Undoubtedly, retailers will benefit if their brands are associated with the Olympics, since more attention will be focused on them.

TCP: What RetailCo Inc. are expansion plans?

GW: We are constantly looking for new brands to distribute and potential franchise markets. While we will continue in the sport fashion business, we will also seek to develop our own brand of women’s apparel. We will also expand into the food and beverages sector with the establishment of a new company. Led by a whole new team, this independent F&B entity will adopt the consistent philosophy and strategy that RetailCo has created. We intend to use franchise to create niche restaurants that can still appeal to the general masses. It may be contradictory in a way but sometimes that is what sells.

GW: The premier challenges lie with management, operational structure and human resources. First, the young, one-child generation does not seem to be very hardworking or loyal. Employee turnover is very high, particularly in major cities such as Shanghai, which makes smooth operations more difficult. Our solution is to provide constant training with an emphasis on consistency and a service-oriented approach, assimilating our employees into a culture that nurtures their service mentality. Personal incentives are given to motivate individual performance. Second, information management also proved to be a tricky business: how to guarantee register information is accurate and no employee can manipulate the system. The key is to be very detail oriented, supported by strong point-of-sales and MIS systems. Caution is sometimes required in retail business, and it certainly takes extra effort to operate in China. Third, the fast-changing market dynamic requires flexibility and quick action to implement a business strategy.