The Franchise Centre

China Myth Busting – on the ground lessons from our China franchise tour

By Kerry Miles

China Myth Busting – on the ground lessons from our China franchise tour

China is not what you think it is. That’s my biggest takeaway from our recently completed franchise delegation to the two major China growth cities of Shanghai and Chongqing.

Whatever pre-conceived ideas you have about China, leave them behind. As a first time visitor for business or leisure, you will be surprised and your misconceptions shattered when you get there.

The best way to truly understand China, its consumer and retail trends and franchise potential, is to visit and see for yourself exactly what is happening on the ground.

That was the purpose of our recent franchise study tour to Shanghai and Chongqing, organised in conjunction with Albert Kong of Asia-Wide Franchise Consultants.

For those that couldn’t join us on this valuable franchise-focussed, fact-finding mission, here are my top six observations, lessons learnt (and myths busted) from the trip:

 

Technology

China has leapfrogged us in retail technological capabilities and take-up by consumers. Everyone pays on their phone on WeChat and they are well ahead of us in this regard. Technology is also being utilised to facilitate new levels of customer convenience that are not yet in practice in Australia. For example, we observed food outlets where customers place orders online and then arrive at the store to collect it from a cubicle which they access by scanning their purchase code. There is no waiting or staff interaction required.

 

Infrastructure

While the common perception is China is dirty and chaotic, in the cities we visited the reality was very different.  The infrastructure is phenomenal and everything is super organised. There is a lot of investment in new roads, the traffic flows well, the footpaths are clean, there are lots of police and the crowds are very orderly, even on a very busy Saturday night.

 

Sophistication

I was blown away by the sophistication of the home grown franchises we visited in China. The fit-outs are superb, blending the traditional with the modern, and with the latest technologies at the core of their offerings.

 

Cost

Generally speaking, China is not a cheap country from a visiting customer’s perspective. For example, a Starbucks coffee costs approximately $6, a KFC meal $7, and 4-star hotel room around $200. So as a traveller, don’t put China in the same cost category as developing South East Asian countries such as Thailand or Vietnam. However, what is very cheap in China is mass transportation, with public transport costing the equivalent of approximately 90c per trip, highlight the advantages of high volumes that flow from a huge population base.

 

Growth

The growth that is possible in China is incredible and very evident in major Government investment in roads and other city infrastructure. When the Chinese Government decides to invest in a city, it can go from zero to hero in a very short space of time. Chongqing is a perfect illustration of this. In the year 2000, the tallest building in the city was only 1-2 storeys high. Just 17 years later, the Chongqing skyline is dominated by high-rise buildings. Our driver, who was less than 30 years of age, remembers a city with no tall buildings. This shows that even young people in China have already experienced dramatic changes in their young lifetimes. This is hard for Australians to get our heads around, as we never see that much change in such as short space of time.

 

Language

The lack of English language in China is still astounding. Very few people in retail settings speak English and those who can, don’t do so with much confidence. This means there is a lot of communication based on pointing by foreign shoppers. Language is still a huge barrier.

 

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Joint liability starts this Friday – here are some actions you can take Kerry Miles is the General and Business Manager for the Franchise Centre at Griffith University and has over 15 years of experience in the franchise sector. She is responsible for developing franchise educational products and events and is the editor of the Centre's enewsletter.

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