China diary: Real opportunities in retail but beware of fakes in Shanghai

Wednesday, May 30, 2012 | Posted by: Barry Knight
Categories: China | Tags: China, growth, UK, retail, wealth, opportunities, commercial property, intellectual capital, China diary, Shanghai, retailers, retail space, fake goods, counterfeit, luxury brands, Intellectual Property

In our fourth post from China, Barry Knight, Head of Retail, profiles the retail landscape of Shanghai and finds that the UK has been slow to capitalise on this fast-growing consumer market.

Shanghai is the closest I’ve been on my trip to a Western shopping city. There’s a main shopping street, Nanjing Dong, with a mixture of mainstream Western and Chinese brands. Then there are the more salubrious parts of the city with the ‘usual’ luxury brands, such as Rolex, Burberry and Chanel, that have become synonymous with my trip to Asia.

The city itself is enormous: it has about 27 million residents, although only about a quarter of those people are likely to have the money available to buy from Western retailers.

Shanghai is growing physically by the size of Manhattan each year and economically at a rate of 27% a year, so the potential for businesses to expand here is phenomenal.

However, while there is a proliferation of American and other Western brands, there is a real lack of UK retailers – in both mainstream and luxury goods – suggesting that UK retailers have been slow to get in the game when it comes to selling goods in China.

One thing that marks Shanghai apart is the large number of shops and stalls selling counterfeit goods, often to Western tourists. This is potentially a major issue for retailers in China because if counterfeit products get, or appear to get, into the actual product range, it will stop the Chinese buying any of the product for fear of it being fake. One retailer, Remy Martin, has gone to the extreme of laser coding every single bottle sold in China – so basically it counts the bottles out and counts them back in again. This solution still doesn’t stop a distributor reusing a ‘valid’ bottle.

Counterfeiting is something that all retailers need to be aware of and, while there is no definitive solution, there are steps that can be taken to minimise the risk. For example, our paper from last year looks at addressing and mitigating the risks of operating in low-cost jurisdictions: Harnessing intellectual capital in China: the next major opportunity for UK businesses. Alternatively, read the post on IP in the links below.

Just one more stop on my trip now – Beijing.

Barry Knight
Head of Retail
For Grant Thornton UK LLP
T +44 (0)20 7865 2150
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Image of a real and fake iPhone in Shanghai: (CC) Robert Scoble

You might also find these posts useful:

* Read more China diaries
* Four must-dos to ensure IP and R&D success in China
* Why businesses fail in Hong Kong and China