Unfamiliar foreign outlets flop in China
Staff Reporter 2012-10-30 16:49
An outlet in Beijing. (File photo/Xinhua)
Switzerland-based retailer FoxTown Factory Store is planning to sell its investments in China. The store is just one of many foreign outlet operators who have failed to replicate their domestic success in the Chinese market.
FoxTown has put 30% of its shares in its Chinese shareholder Orient International Enterprise up for sale on the Shanghai United Assets and Equity Exchange for 53 million yuan (US$804 million) but very few buyers have showed interest, according to Shanghai's First Financial Daily.
A person in charge of the deal said the Swiss company is "testing the waters" and if a suitable buyers shows up, the company plans to sell the remainder of its shares and then pull out of the Chinese market.
Four hundred outlets, similar to the Swiss firm, have been struggling in China. Many stores in the Meilanhu outlets in Shanghai have been replaced by restaurants. Dongyan Era outlets in Beijing closed down after just two months. Aika outlets, also in Beijing, has become a gathering place for small shops after opening for nine months. In the city of Wenzhou in Zhejiang province, three of four outlets in the area have closed due to poor sales, according to the First Financial Daily.
The reason that these outlets did not fare as well as they have in other countries was the remote location of the outlets, often inaccessible by public transportation. Cars are still not as common in China as in other developed countries, making it a hassle for the average shopper to go there, said an industrial insider cited by local media.
FoxTown's store in Shanghai's Songjiang district has been troubled by the issue. It was located in a remote area and its customers have been drawn to nearby Bailian Qingpu outlets, where shoppers can visit without having to pay a 50 yuan (US$7.90) freeway toll, according to First Financial Daily.
Li Dingguo, the general manager of Friendship, a joint-stock company, said the success of Bailian Qingpu lies in its partnership with Hong Kong property developer The Wharf and its choice of stores. The FoxTown Factory Store adopted a similar business model but it only rented space to businesses without considering their brands and management. Therefore, some of its stores have been short of stocks or might not be popular brands or goods.
Outlets can choose two business models: running stores directly or only serving as agents for the stores. The former model would be difficult for outlets that are not well-known or have strong financial support since popular brands may reject their offer. The latter depends on the relationship between the outlets, the brand and brand popularity, said Hu Liwei, procurer for Green Milan Plaza City Outlets.
The outlet's founder Luo Xin said many outlets fail because their investors are not interested in the stores but target properties around the outlets, according to First Financial Daily.
