Citigroup 花旗—中国消费品及零售行业研究月报

23 August 2007 | 30 pages

Heard on the Bund - China Retail & Consumer July/August 2007

 Our recent department store field trip — We have conducted a department store
field trip in a number of cities in China and we have walked away with good
conviction of positive local consumer sentiment. Department stores have
generally been able to record higher per ticket sales and grow same store sales
by adjusting merchandise/brand mix in favor of higher end positioning.
 Parkson — Its stores are doing well in Shanghai, Beijing and Wuxi, but stores in
Yangzhou, Chongqing and Dalian are less than ideal due to less favorable
locations. Chengdu is a mixed city where Parkson is launching a new high end
store. New site in Hangzhou appears to be off the prime retail area and
accessibility may be affected as it is on the other side of the canal.
 Golden Eagle — Its Suzhou store has to cope with rising competition to move
down its market positioning given its small size and difficulty in renovating the
façade on an owned property. Stores in Nanjing, Yangzhou are doing well, while
new store in Taizhou is ramping up fast in sales and is likely to be profitable in
its first year of operation.
 Shoes — Belle and other brand names within the group are consistently
mentioned as one of the best selling brands at most stores. Daphne (Prime
Success)’s market positioning is not high enough for some department stores we
visited and has either been marginalized in terms of store space/location
granted or removed from the stores.
 Apparels — Feedback on Ports Design is mixed. It appears to be doing only fair
in most of East China stores, but doing better in inland cities like Chongqing
and Chengdu. Esprit appears to be seeing weaker momentum than other
popular names esp. the likes of ONLY and Vero Moda. Many domestic brand
names in apparels are rising in quality & design and not priced at the low end.
 Sports — Nike and Adidas are consistently named as the two best selling
sportswear brands. Li Ning appears to be generating sales of 1/3 to 1/4 of Nike
and Adidas. Kappa and Puma are seeing strong momentum. Anta is mostly
seen in street stores.