By Todd Guild and Daniel Hui
Big box stores and malls in China’s top cities are growing fast—14 percent a year. But here’s the surprise: Traditional retail in lower-tier markets are often much more profitable.
Many global retailers have dived into the China market—and landed badly. The realities on the ground, such as fragmentation and competition, can be daunting. Too often, that leads to inconsistent go-to-market strategies. One common approach has been to focus on the higher-tier, more prosperous cities (Tier 1 is Beijing, Guangzhou, Shanghai and Shenzen). This has worked in the past, but now that the richest cities are nearing saturation, companies need to look harder to find the next wave of growth.
To put it another way, managing channels is increasingly important. In our experience, an effective go-to-market strategy can raise revenues 50 to 100 percent and more than 30 percent on profitability.
It's not easy to get it right, right away. But with a flexibility and and perseverance, the rewards are there. Here's what happened to two big winners: Lenovo and Kangshifu. The lessons that can be drawn from their experiences are instructive.
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