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Shanghai Commerce

 

Commerce has played a key role in Shanghai's development and prosperity. Since the city became a trading port in 1843, commerce has expanded fast here, attracting tens of thousands of merchants. In the 1930s, Shanghai was already the trading centre of the Fast East. After the founding of the People's Republic in 1949, especially over the past 20 years, Shanghai has witnessed unprecedented growth of its commerce, which is a driving force behind the city's economic development.

Retail Sales

Shanghai's retail sales of consumer goods have been growing by an average of 15% a year since 1992. The city achieved a high economic growth and low inflation in 1997 and its retail market posted a total sales of 132.5 billion yuan (US$16 billion), the biggest among all mainland cities and a surge of 16% from 1996, which was 5 percentage points higher than the country's average growth rate.

Value in GDP

As the commercial sector keeps growing each year, its contribution to the city's GDP also increases each year. In 1997, it generated 38.11 billion yuan (US$4.6 billion) or 11.4% of the city's GDP, 3.68 percentage points higher than in 1992.

Business Space

The gross business space of local commercial enterprises increased by 6.59 million square metres between 1992 and 1996. In 1997 the figure reached 1O.06 million square metres, 2.6 times the 1992 figure. Per capita shopping space was 0.76 square metre, equal to that of a developed country. Shop buildings with a floor space of over 10,000 square metres each increased from four before 1992 to 66. Four major shopping streets and four shopping hubs have emerged in Shanghai.

Employment

The work force employed by the city's retail and catering businesses has been growing each year. By the end of 1997, the commercial sector had employed 1.5 million people, a net increase of 570,000 people compared with 1992. The sector absorbs about 100,000 new workers every year.

Consumption Pattern

Big changes have occurred in local people's diet, clothing and spending habit as a result of the city's fast. economic growth and risiing living standards. Shanghai residents now spend less of their income on food but more on other consumer goods and recreation. While the spending on cereals has dropped, the spending on non-staple food and snacks has increased. People also spend more on ready-made clothes than on fabrics for tailored clothes. Meanwhile, the replacement rate of home appliances gets faster than before.

Administration

The Shanghai Commission of Commerce oversees the development of the city's commercial and catering trade. Its main functions include:
- Devising local policies and regulations on commerce.
- Supporting the development of markets
- Setting plans for the supply and reserve of commodities, especially essential goods
- Acting as a coordinator in the reform of Stateowned commercial enterprises
- Assessing the fixed assets and foreign investment of commercial projects
- Providing guidance on the development of commerce in urban and rural districts of Shanghai
- Designing and implementing job training programs

Growth Targets

Shanghai is trying hard to push its commercial sector to the world advanced level. The sector is expected to yield about 13% of the city's GDP by the end of this century; its retail and wholesale businesses are expected to reach 180 billion yuan (US$21.7 billion) and 220 billion yuan (US$26.5 billion) a years, respectively; and its retail space will total 13 million square metres.

Retail Business

Rapid progress has been made by the city's retail and catering sectors since 1990. In 1997, the number of retail outlets in Shanghai topped 163,000, employing more than 949,000 people. The city has developed a multilevel retail network that comprises major shopping districts, local shopping centres, convenience stores and specialized streets.

Major Shopping Districts

A group of large shopping districts have emerged in Shanghai in recent years, including Nanjing Road, Huaihai Road, Xizang Road, Sichuan Road N., Yuyuan shopping area, Xujiahui shopping area, the Kerry Everbright City near the Shanghai Railway Station and the New Shanghai Commercial Centre in Pudong. These shopping districts teem with people during the day and are a symbol of prosperity at night with neon lights.

Local Shopping Centres

Currently, there are 32 local shopping centres in 14 urban districts and five suburban counties. The Caojiadu and Wujiaochang shopping centres cover a large area and have well-developed retail facilities.

Convenience Stores

Shanghai has 65 residential areas, which accommodated a quarter of the city's urban population. Retail outlets in these residential areas have a total space of 1.2 million square metres. They were built to serve the needs of local residents.

Special Streets

Shanghai has more than 30 specialized streets, such as the Hardware Street of Beijing Road E., the Cultural Street of Fuzhou Road, the Auto Parts Street Of Weihai Road, the Garment Street of Shimenyi Road, the Food Streets of Zhapu Road and Yunnan Road, and the Antiques Street of Tongtai Road.

Wholesale Business

Through the continuing reform of the city's commercial sector, an efficient and standard wholesale system has taken shape in Shanghai. The number of registered wholesalers exceeded 24,000 in 1997, employing more than 434,OOO people. Their gross business turnover stood at 148 billion yuan (US$17.8 billion), a 1O.1% rise from 1996. The wholesale of industrial goods reached 14.46 billion yuan (US$t.74 billion), a surge of 35% over 1996.

Wholesale of Industrial Goods

Shanghai's wholesale companies are actively exploring new marketing strategies, such as finding general agents, promoting brand names, leasing warehouse facilities, looking for business partners, providing brokerage service to manufacturers suffering material shortages, seeking co-operation with foreign multinationals, and opening membership wholesale centres and warehouse-style shopping malls. They also set up a number of distribution centres to serve local supermarkets and chain stores. Small wholesalers were merged to form large companies.

Wholesale of Farm Produce

Since 1985 when the commercial sector began to practice market economy dramatic changes have taken place in the distribution of farm goods. A diversified marketing network was established. Shanghai currently has 329 wholesale markets for farm produce, with a total business area of 788,000 square metres. These markets reported a combined wholesale volume of 2.6 million tons of agricultural products in 1997, representing 44% of the all the farm goods sold in Shanghai.

Catering and Services

There are 45,000 restaurants and food shops in Shanghai with more than 300,000 employees. In recent years, these catering businesses have made efforts to serve different groups of consumers and introduced standardization and brand strategy to improve their services. Chinese restaurants, fast food chains, hotel restaurants and food streets have all flourished.

Chinese Cuisine

Chinese restaurants in Shanghai serve a variety of regional cuisines -- Peking, Cantonese, Sichuan, Hunan, Huaiyang and Shanghainese Besides the long-established Shanghai Old Restaurant and the Lao Zheng Xing Restaurant, a number of new eateries have appeared in re-cent years. Mei Long Zheng, Lu Yang Chun, Lu Bo Long, and Xing Hua Luo were rated top-class restaurants in China in 1997.

Local Delicacies

The city has made active efforts to develop snack restaurants for local residents. Between 1996 and 1997, 256 snack shops were opened around Shanghai and 1OO fast food vans were put on the street. This basically solved the problem of inadequate supply of breakfast food. Meanwhile, the city began the "Public Kitchent" project to supply ready-to-cook dishes, dumplings and other fast food items.

Hotel Industry

Shanghai's hotel industry has developed rapidly in recent years. Four- and five-star hotels owned by the city's commercial enterprises include the New Asia Tomson Hotel, Yangtze New World Hotels Hotel Sofitel Hyland, Jianguo Hotel, New Asia Great Wall Hotel and New Asia Plaza Hotel.

Other Services

Shanghai has a well-developed network of barbershops, laundry shops, photo stutlios, hostels, public baths, printing shops and repair shops.

Commercial Development

Rapid economic development and rising living standards have brought changes to Shanghaits commerce. The Lianhua Supermarket Co, founded in 1991, was the first of chain stores in Shanghai. By the end of 1997, the number of local chain stores had increased to 2,600 with combined sales approaching 14 billion yuan (US$1.7 billion). The chain stores have become a major force in the city's commerce. They include supermarkets, convenience stores, fast food restaurants and exclusive shops.

Supermarket Chains

Shanghai has 14 supermarket chains with over 900 outlets and combined sales of 1O billion yuan (US$1.2 billion) in 1997. These companies have expanded their operation through across-region acquisitions, mergers, joint investment and franchise. A management system for chain store operations has been established. The Hualian, Lianhua and Nonggongshang became the country's top three supermarket chains.
Shanghai Hualian Supermarket Company is a subsidiary of Shanghai Hualian Corp. It had 248 outlets in 1997 and some of which are in Jiangsu, Zhejiang and Anhui provinces. Its business turnover approached 2 billion yuan (US$240 million) in 1997. The company's head office and goods distribution centre have introduced computerized management and they offer around-clock goods delivery.
Shanghai Lianhua Supermarket Co Ltd was established in May 1991. In September of the same year, it opened its flagship store in QuYang Residential Area. By the end of 1997, the company had opened 230 outlets in Shanghai and 30 other cities in Jiangsu, Zhejiang and Anhui provinces. Its annual sales topped 2 billion yuan (US$240 million). The company has advanced chain store management a computer centre, a staff-training centre and a large goods distribution centre.
Shanghai NonggongShang Supermarket Corp was established in late 1994 to serve the needs of ordinary citizens. The company now has nearly 60 outlet and achieved a business turnover of almost 1 billion yuan (US$t20 million) in 1997.

Convenience Stores

Most of the convenience stores in Shanghai evolved from small grocery stores. There are more than 1,000 convenience stores around the city with total sales reaching 1.75 billion yuan (US$211 million) in 1997. Major chain operations include Hongliang, Jieqiang and Kedi Food. Lawson and Basics are foreign-funded convenience stores in the city.
Invested by the Shanghai Qilin Enterprise Company and managed by the Hong Kong Basics Inc, the Basics convenience stores provide all kinds of daily necessities, instant food, medicine, periodicals and other services. The number of Basics stores has exceeded 50 in Shanghai. They are open 24 hours a day all year round.
Shanghai Hualian Lawson Co Ltd is a joint venture between the Shanghai Hualian Corp and the Lawson Co Ltd of Japan. It had opened 30 outlets by the end of 1997. All Lawson stores are open 24 hours a day. The company has its own goods distribution centre and a food processing centre that supplies Japanese lunch boxes, sushi, sandwiches and bread to its outlets.

Fast Food Restaurants

Shanghai is witnessing a growing competition between Chinese and Western fast food companies. The city now has 1O popular fast food chains with 240 outlets. Among the Chinese fast food chains are Sun Ya, Ronghua Chicken, Ni Wo Ta, Duo Wang and Magnolia. Among the Western fast food restaurants are KFC, McDonalds and Pizza Hut.
Founded in 1989, the Shanghai KFC Co Ltd is a joint venture between the Shanghai New Asia Corp and the PepsiCo Inc of the United States. It has 38 outlets throughout the city and has won several top awards at the annual meetings of PepsiCo Inc. The KFC store at People's Park broke the world record three times in daily sales by a single restaurant. On June 1, 1997, the KFC store in Xujiahui broke the world record held by the People's Park store.
Ni Wo Ta is a 24-hour fast food restaurant that specializes in Shanghai-style breakfast and snacks. Ni Wo Ta now has 21 outlets and a 1,200-square-metre food-processing factory. It is one of the largest restaurant chains in Shanghai.
With the development of a socialist market economy, consumer goods have increased both in quantity and variety. Stores that sell one kind or one brand of products have flourished. There are more than 200 exclusive shops in Shanghai selling anything from food, suit, underwear, shirts, and wool sweaters to household appliances.
The Shanghai Croissant Food Co Ltd is a joint venture between the Shanghai Home Appliances Corp and the Bright Vaney Co Ltd of Singapore. Founded in July 1993, Croissant now has 16 shops in the city and a few outlets in Beijing, Hangzhou and other Chinese cities. Its main products are puffy pastry, bums, bread, cakes and cookies.

Manufacturing Enterprises

Shanghai's commercial enterprises have diversified their businesses by investing in more than 20 manufacturing and processing sectors, such as grain and edible oil processing, butchery, ashery5 brewery, confectionery, food processing, garment making, pharmaceutical and machinery manufacturing. There were 876 factories owned by local commercial enterprises in 1997 with a combined output value of 1O.18 billion yuan (US$1.2 billion).
In recent years9 these factories have concentrated on improving the quality and packaging of their products and increased the output of refined cereals and cooking oil, quality garments, jewelry, health products, ready-to-cook dishes, condiments, pastry and confections.

Food Factories

Shanghai's food industry achieved an output value of 18.45 billion yuan (US$2.28 billion) in 1997. Factories owned by local commercial enterprises contributed about 7.4 billion yuan (US$894 million) or 40.4% of the total. In 1997, the city launched the so-called "Kitchen Project" spurring factories owned by commercial firms to develop more nutritious, convenient and inexpensive food products.

Garment Factories

Shanghai has 45 garment factories owned by commercial enterprises, include 15 shoes and hats producers. Many of these factories hold old brands. The Dragon & Phoenix qipao (a tight-fitting gown for women), for example, is made with traditional skills and modern techniques. The Pengjie women's suits, the Wing's fashion clothes, and suits under the brand of Baromon, Hengshen and Qifa are all popular products because of their fine fabrics, good tailoring and superb craftsmanship. The Lantang-brand women's shoes are famous for their fine leather, stylish design and delicate workmanship.

Market Development

Shanghai has witnessed a rapid growth of consumer markets in recent years. By the end of 1997 the city had established 1,043 markets and malls, which deal in all kinds of consumer goods and combine shopping with dining, entertainment and recreation. Some of the markets specialize in the sale of brand-name products and some deal in second-hand goods and warehouse clearance products. There are three salient features in the development of consumer markets: 1.) Their business space keeps growing with the largest market being over 1OO,OOO square metres in size; 2.) Markets with professional management are thriving; 3.) Market investors have become more diversified, coming from various trades, regions and ownership backgrounds. This boosted the development of Shanghai's consumer markets.

Markets for Industrial Goods

Shanghai has a multi-level marketing system for manufactured goods. The city has 194 markets specializing in daily necessities, stationery, textiles, clothes and shoes, home decoration materials, electric appliances, and furniture. Manufactured goods worth 7.66 billion yuan (US$925 minion) were sold in Shanghai in 1997.

Markets for Farm Produce

Shanghai has 329 farm goods markets with a combined business area of 788,000 square metres and an annual wholesale volume of 2.6 million tons, 44 % of all farm products sold in Shanghai. These wholesale markets achieved 6.5 billion yuan (US$785 million) in transactions in 1997.

Special Markets

While promoting the construction of large consumer markets , the city also gave active support to the development of some special markets, such as those selling small household items, second-hand goods, warehouse clearance products, arts and antiques, flowers and auctioned items.

Commodity Fair

Shanghai has been holding an annual national trade fair since 1992 and the scale of the East China Fair is growing each year. The fair in November 1997 covered over 70,000 square metres in space and had 1,000-plus standard stalls. About 1O% of the exhibitors were from abroad. The fair attracted more than 50,000 businesspeople and reported signed deals worth 3.32 billion yuan (us$400 million).

Brand-name Strategy

Commerce is well developed in Shanghai and the city boasts more than 1,000 product brands, including about 400 old brands and 30 famous brands. In 1997 the Shanghai Commission of Commerce put forth the "Brand-name Strategy" to boost the local commerce and selected 50 top brands for promotion. As a result, the city's retail
sales exceeded 6 billion yuan (US$724 million) in 1997, a 35% jump over the previous year.

Famous Trademarks

Shanghai has nine famous trademarks. Most of their owners are also the market leaders. Kai Kai, for example, is the largest shirt manufacturer in China; Old Temple is the largest dealer of gold jewelry in Shanghai while Sea Lion holds 65% and 85% of the local market with its bottled and unbottled refined cooking oil, respectively.

Brand-name products

Through years of market competition, the city's commercial enterprises have developed many brand-name products. Twenty-one of them were awarded national medals for superior quality; another 300 products received quality prizes from the Ministry of Internal Trade and the Municipal Government. They include soy sauce, cooking oil, rice wine, pastry, suits and shoes.
Brand-name products owe their popularity to high quality. Variety is another ingredient for the success of brand-name products. Technological input also made some traditional products more competitive. The Shanghai-brand cold meat is processed using modern equipment to guarantee its fresh taste and texture.

Foreign Investment

By the end of 1997, Shanghai had registered 624 for-eign-funded commercial projeets9, involving US$3.8 billion of overseas capitals. These include 82 retail joint ventures with a total investment of US$1.63 billion. Their combined business space is 880,000 square metres.

Major Joint Ventures

Ecko Lotus Supermarket is a joint venture between Shanghai Vegetable Corp and the Ecko Investment Co Ltd of the Chia Tai Group of Thailand. It has a registered capital of US$32 million. The first store is located in Pudong New Area with a business space of 15,000 square metres. The second store is located on Zhoujiazui Road with a space of 8,000 square metres.
Shanghai No.1 Yaohan Co Ltd is the first Sino-foreign retail joint venture in China approved by the State Council. It is owned by the Shanghai No.1 Department Store Co Ltd and the Yaohan International Ltd of Japan. Its main store, the Nextage Department Store, is on the busiest street in Pudong. The building has a floor space of 100,000 square metres, the largest for a department store in Asia.
Shanghai Times Plaza is located at the intersection of Pudong Road S. and Zhangyang Road in the Lujiazui Finance and Trade Zone. Invested by the China Resources Co Ltd of Hong Kong and the Hualian Joint Stock Co Ltd of Shanghai, the building is managed by China Resources Shanghai Ltd. It has nine floors ror shopping and recreation and one floor for office leasing.
Shanghai Jusco Co Ltd is jointly owned by the Jusco Co Ltd of Japan, Kerry Department Store Co Ltd, Shenghua Horizon Co Ltd, Huayue Merchandise Co Ltd and the Mitsubishi Co Ltd. Its first Japanese-style supermarket opened in the Kerry Everbright City in September 1996, with a retail area of 10,000 square metres.
Shanghai Carrefour is a joint venture between the Carrefour Corp of France and the Shanghai Lianhua Supermarket Co Ltd. Its first store opened on QuYang Road in December 1995 with a business space of 4,000 square metres. Its second store opened on Wu'ning Road in December 1997 with a business space of 9,000 square metres.

Commercial Corporations

In 1997, the number of commercial corporations in Shanghai was cut from 63 to 56 through mergers. The Shanghai No.1 Department Store Co Ltd and the Hualian Corp became the country's largest retailers. The Hualian Corp was chosen to experiment with the reform of key State-owned enterprises in China. The No.1 Department Store Co Ltd, Hualian Corp, Friendship Store Corp, New Asia Group, New World Holdings, Yuyuan Commercial Corp and Huaihai Group were listed by the city government as key enterprises for support.

No.1 Department Store

Shanghai No.1 Department Store Co Ltd is a state-owned conglomerate with diversified businesses ranging from retail, foreign trade, industrial investment to real estate development. It has more than 1OO subsidiary companies, 800,000 square metres of properties and gross assets of 6.45 billion yuan.
In 1997, the group chalked up a business turnover of 1l.56 billion yuan (US$1.39 billion) and foreign exchange earnings of US$12 million. The Shanghai No.1 Department Store has been the largest retailer in China for 13 years in a run. The Nextage Department Store in Pudong has the largest shop space in Asia.

Hualian Corp

The Hualian Corp is a large chain store company and one of the major enterprises supported by the municipal government. Since its founding, the Hualian Corp has adopted the "group strategy" for business expansion. It now operates supermarkets, convenience stores, exclusive shops, department stores and goods distribution centres. It also has investment in real estate, advertising, interior decoration, restaurant, auction and ocean-liner catering businesses. In 1997 the company achieved a business turnover of 1O billion yuan (US$l.2 billion), a net profit of 124 million yuan (US$15 million) and total assets of nearly 5 billion yuan (US$600 million)

Shanghai Yuyuan Corp Ltd

The Yuyuan Corp Ltd is a large enterprise group with diversified business. It was created through the merger of the Yuyuan Tourist & Commercial City Ltd and the Shanghai Old Stores Corp. The group has 31 companies, 831 retail and catering outlets, 200,000 square metres of properties, and total assets worth 2.74 billion yuan (US$330 million). Its 1997 sales turnover was 5.51 billion yuan(US$665 million).

Shanghai New World Holdings Corp

The New World Holdings Corp is among the first group of industrial and commercial companies selected nationwide to experiment with the modern enterprise system. It has total asset of 4.44 billion yuan (US$537 million), 1O subsidiary companies and 230 retail outlets, including 33 specialty shops and 41 old-name stores, all located in downtown streets. The group's sales turnover was 7.63 billion yuan (US$92t million) in 1997.

The New Asia Corp Ltd

The New Asia Corp Ltd is one of the 54 enterprise groups supported by the city government. Its subsidiary, the Shanghai New Asia Share Holding Co Ltd, is a listed company with stocks traded in both A-share and B-share markets. The group owns 24 hotels with 5,402 guestrooms. Half of them are four-star and five-star hotels. It also owns 39 KFC franchise restaurants.

The Friendship Store Corp

The Friendship Store Corp is among the 54 enterprise groups supported by the city government and was chosen to pilot the modern enterprise system. Its total assets have accrued to 3.38 billion yuan (US$400 million), including 1.15 billion yuan (US$139 million) of net assets. Its sales totaled 5 billion yuan (US$600 million) in 1997 and foreign trade topped US$70 million. The group has 22 companies: 1O wholly-owned companies, eight holding companies and four joint-stock companies. Among them, the Shanghai Friendship Overseas Chinese Ltd, the Lianhua Supermarket Co Ltd and the Shanghai Interior Decoration Company are large companies.

The Fishery Corp

Shanghai Fishery Corp is a modern enterprise with a business scope ranging from fish production and processing to commerce, foreign trade, scientific research and education. It has a total asset of 547 million yuan (US$66 million), 20,000 or so employees, nearly 200 offshore and deep-sea trawlers; cold warehouses with a capacity of 43,000 metric tons, 17 processing plants capable of making 1OO-plus aquatic products. The Jiangpu Road Fish Market is one of the largest fish markets in China.

Corporate Culture

Shanghai is one of the oldest port cities in China with close contacts with the outside world. Through many years of trade activities, the city has developed its own distinctive culture characterized by a marriage of Eastern and Western cultural values. Shanghai is receptive to new ideas, new styles and new methods. This makes it a trend-setter in China. The bustling Nanjing Road, Huaihai Road and Sichuan Road each has its own style. Various cultural festivals also help boost the local commerce.

Professional Ethics

During the transition from the planned economy to the market economy, Shanghai's commercial enterprises put a big emphasis on the education of professional ethics and held various activities aimed at raising service standards. In 1995, the sector introduced the slogan of "dedication, honesty, fine service and contribution" as a way to improve customer service.

Service Standards

Starting from 1995, a "customer satisfaction" campaign was carried out first in chain stores and shops on Nanjing Roads Huaihai Road, Sichuan Road and in the Yuyuan and Xujiahui shopping hubs. The next year it was extended to 14 district shopping centres and to the whole city in 1997. The city selected 114 large retail companies for public appraisal and a poll showed that 96% of local customers were satisfied with the commercial service.

Model Workers

Shanghai's commercial sector elected 84 model workers and 24 advanced units in 1997.

Shopping Environment

A great number of new department stores and shopping malls are combining traditional Chinese culture with modern art design, creating a beautiful and cozy environment for shoppers. window shopping has become a pastime for many local residents.

Education and Training

Shanghai has 114 vocational schools to train workers for the commercial sector. They include one college, four full-time technical schools and a dozen part-time schools, and they employ over 1,600 teachers, including 80 professors, associated professors and lecturers. In 1992, the city launched a training program to ease the acute shortage of skilled workers in the commercial sector. A job qualification system was also introduced and workers must have skill certificates to go to job. The goal is to implement the qualification system in 1OO major professions by the year 2000, such as jobs in the marketing, catering, warehousing and transport businesses.

 

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