Spar China

December 1, 2009

Journey to Dongguan City
By Dan Munford, partner, Insight Research

I have always been interested in China and the Far East in general. So after a very competitive and close battle, when SPAR China's Hongtu store in Dongguan city, Guangdong province won the Insight NACS International Convenience Retailer of the Year Award, I must admit to some excitement, knowing as I did that this meant Peter Knott and I would soon be going out to visit the business and make a film of what we found.

The Journey to China

Airplay MD Peter Knott elected to stay overnight at Heathrow but I made the 4 hour drive from Wales on the morning of our flight to Hong Kong having had quite a lot of time away from my wife Sian and the children in recent months. Peter had picked up my passport and China visa from the embassy in Manchester and greeted me with his usual cheeky grin at the Cathay Pacific check-in, which he deployed with maximum effort for an upgrade to business class. It was to be one of the few occasions on our trip when Peter's charm didn't work its usual magic as the flight was packed full.

To people who know him "Knotty's" tremendous abilities in creative film production also hide real talent for human/electronic impersonation. I discovered this on a travellator when being shoved from behind by an airport official pushing a wheelchair. Peter cupped his hands over his mouth and produced a superb imitation of a tannoy announcement asking people to move along quickly. The flight was made all the shorter with regular unofficial "this is your captain speaking" commentary on the progress of our flight much to the amusement of fellow travellers. As often happens Peter was swiftly "adopted" by the Basingstoke Chinese lady sitting next to us who by the end of our journey had offered detailed advice on what to avoid regarding Hong Kong nightlife. Luckily, this was not part of our plan for the trip but I think she found it hard to believe we had flown all this way to film a convenience store!

Landing at Hong Kong's huge new airport after an 11 hour flight, we moved swiftly through customs and immigration and found our driver Ayong waiting for us with a "Daniel Nicholas" name board. Ayong was to be the first stage in the beginning of an unbroken human chain of translators and support staff all organized with supreme professionalism by Mr. & Mrs. Hu's company SPAR Guangdong and Tobias Wasmuht, Gary Harris at SPAR international and SPAR China. It was my first time in Hong Kong and I was struck by the immensity of the landscape with narrow 60's era accommodation blocks balanced on the edge of sharply rising rocky shores. We caught a glimpse of the awe inspiring Hong Kong harbour before hurrying over brand new suspension bridges on our way to the "frontier" between Hong Kong and China. The crossing passed without incident although we were struck at all stages by the precautions taken over swine flu transmission, something entirely lacking on the British side.

We swapped people carriers in no man's land and met our first SPAR Guangdong colleague; Sue our translator and also our driver for the whole trip. Despite a lack of sleep, the adrenalin took over and Sue managed to teach us how to introduce ourselves in Chinese and hand over business cards before we arrived at our hotel, the immense, beautiful but rather empty, five star Sofitel Dongguan Royal Lagoon. After a 20 hour journey (in my case) we opted to repair to our rooms for a couple of hours sleep before meeting for lunch at the hotel. Two hours later the alarm dragged me from the depths of sleep and I staggered out to find Peter and our trio of SPAR China and SPAR Guangdong aides: Tracy Jiang, Phoebe and Jin Dandan. After a slightly formal beginning we swiftly got to know these three highly professional and accomplished young ladies who were to plan every step of our film shoot and social functions over the next 2 days.

Despite a certain lack of sleep, we immediately ploughed on to go and see the Hongtu store and were greeted outside by Wu Zhengyi the store manager and at least 5 more of the SPAR Guangdong team including Leon - Translator, Xie Kesong - Fresh, Huang Hanhui - Operations and others. We shook hands western style and awkwardly deployed our business Chinese "wa da minn pienne" (here is my business card), to much amusement. Then first impressions of SPAR Hongtu!

Notes from Spar Hongtu

If it hadn't been for the Kanji over the door and the fact that we hadn't travelled such a long way to a city of 10 million Chinese, I would have easily imagined I was in a Dublin EUROSPAR looking at the shopper mission layout, Kitsu noodle bar and "essential kitchen" on the food to go island dominating the store as we walked in. As I was shown round the store by the bouncy and ebullient store manager Mr. Wu, one of the key questions for me was how Irish style "super-convenience" really worked on the other side of the World in a nation with a quite different food history and culture? The first answer to this question has to be really well and in fact, maybe a bit better right now than in the recession hit European market. This SPAR Hongtu large C-store format brings a greater return on investment for Mr. & Mrs. Hu's business than the hypermarkets they also own and the proof for this is the family's plan to roll out the format to 300 more stores within the next five years.

What was also immediately apparent was that we don't have much to teach the Chinese in terms of customer service and interaction. They are masters of it. It was also clear that this business loves technology, offering free Wi-Fi for customers; self weighing systems, self checkout, electronic ordering systems for food to go and a wine scanner. As I walked round the store I started asking a few questions to find out what made it tick. The busy times are from 9.00-10.00 am in the morning and 5.00-6.30 pm in the evening. As outside food markets are part of all shopper experience here, the "market fresh" type merchandising in the store, coupled with a very high level of quality, good value and choice of product is essential to success. The strongest impression here had to be the fish "aquarium" providing a basic everyday needs range at the back of the store - essential to assure maximum freshness for demanding Chinese consumers.

But one of the big questions for me was whether and how the Kitsu bar worked here. Back home, consumer down-trading has meant some food to go offers have struggled and I wondered whether shopping and eating habits and spending power in Dongguan was going to be ready for convenience food to go. The answer, slightly to my surprise, was that the Kitsu bar and essential kitchen was the beating heart of the store and extremely successful. Although McDonald's and Starbucks are also in Dongguan, it seems clear that SPAR's high standard of food to go development has hit the market early enough here to do really well. What I have learned over the years is that the timing of market entry is crucial to the success of convenience store development in food to go. One other illustration of this is BP South Africa's introduction of Wild Bean Cafe in South Africa early in coffee market development in that market securing them a really strong position and share.

Having said that, the SPAR food to go island seems to work differently here in China. One of the major advantages seems to be the incredible standard and quality of the chefs behind the counter. The noodle bar is done to the best standard I have seen anywhere in the World, the Chinese buns are fabulous and watching the chefs making Chinese dumplings to restaurant quality standards from scratch in 5 minutes, I realized that SPAR international may soon send all Kitsu bar staff to train here! As you'll see in the video, I had a go at this and it isn't easy! Less traditional Chinese foods are also working well off the food island - freshly baked cakes from the scratch bakery are big sellers although the coffee or smoothie bar offers are probably not anything like as important as they are in the European or North American markets.

The SPAR wine offer was clearly working pretty well and the wine scanner system advising customers on the background of the products and what to eat with them was welcomed by shoppers perhaps more willing to learn about wine than Western counterparts. This was just one of the many added value services for customers introduced by the SPAR Guangdong and SPAR China team. The store also offers a free delivery service within a designated zone, free umbrellas when it rains, a free copy service and an innovative free glasses and jewellery washing service which we have case studied in the video.

While I had been taking these notes, Peter had been roaming the store with his hand held Sony camera building up a library of shots ahead of our scheduled film shoot the next day. Despite only about 4 hours sleep, in 48 hours we had completed much of our preparatory work and finished off the afternoon visiting and filming a few shots of SPAR Guangdong's largest hypermarket, the largest SPAR hypermarket in the World at 21,000 sq metres. Accompanied by our group we were met by the store manager and his security team outside on the pavement and shown around. Having watched SPAR International's CEO Gordon Campbell's presentation featuring the incredible video shot when this store first opened a few times, I was delighted to have the chance to visit this store for the first time. We finished the day up with a visit to the second of SPAR Guangdong's large C-stores, which had just opened.

Later on, accompanied by a large party of SPAR China and SPAR Guangdong personnel, we spent the evening at an excellent local restaurant and had a wonderful night.

At the end of a long day I reflected on the incredible achievement all this represented. SPAR international's Gordon Campbell, Tobias Wasmuht and Gary Harris, have truly brought the very best of global retailing here to Guangdong province, as well as to 6 other provinces in China serving a total of 380 million consumers out of the 1.3 billion Chinese population. And on this international platform, the retail magic that is SPAR Guangdong then "happened". Over many years I have visited independently owned family businesses all over the World and a few names like Cadieux, James, Sheetz and Sewell have stood out. Mr. Hu and his company are without a shadow of a doubt in this same premier league of retailers who will have a transformative impact upon the markets they operate in. 17 years ago the Hu family started their original Jia Rong business with a 60 sq metre store and 3 staff. Today, they operate 26 hypermarkets with 300,000 sq metres of selling space and 7,000 staff. I would predict that in 17 years SPAR Guangdong will be one of the largest and most successful family owned retail and wholesale operations in the world.

The unique retailing "essence" that will drive this ongoing miracle was apparent in every aspect of the SPAR Guangdong business and it was no surprise that Mr. Hu's team were already focusing on the next challenge of becoming the most advanced grocery wholesaler in China - at dinner I met a representative from SPAR International who was working closely with Mr Hu to build a modern food distribution centre which the company plans to have operational by the end of the year. Using this new DC, SPAR Guangdong will diversify themselves from food retailing into food wholesaling and serve SPAR independent retailers in Guangdong province. As we toasted each other and made polite speeches in the Chinese tradition, Peter and I were invited to return again soon and I must say I will be looking forward to it immensely!

Watch the Airplay's video of Mr. Hu's SPAR Hongtu Insight NACS international award winning convenience store soon. (Sponsored by Imperial Tobacco).