Li & Fung Research Centre China Chain Store & Franchise Association Member of the Li & Fung Group 1 2009 Q4 LI & FUNG RESEARCH CENTRE CHINA CHAIN STORE & FRANCHISE ASSOCIATION KPI report for retail chain stores in China Foreword About the KPI report The China Chain Store & Franchise Association and the Li & Fung Research Centre have collaborated and established the Key Performance Index System (hereafter the “KPI system”) for retail chain operators in China since 2007 and published reports on a quarterly basis. The system aims to collect key performance indices of different format retail stores in China. In 2009, the data collection system are further upgraded and revised, and more store samples have been added. The revised KPI report covers over 100 retail stores in China of 5 major formats, including convenience stores, supermarkets, hypermarkets, department stores and home electronics appliance chains, of which supermarkets and hypermarkets are further divided into several categories by operating area for easier references. We hope this report can shed some light on the key development trends of China's retail chain stores. About the indicators Data of the following is collected in the KPI system – 1. Monthly sales ( ) – Pre-tax monthly sales value 2. Total operating area ( ) – Including self-operating area and leasing area 3. Leasing area ( ) – Area leased to other operators 4. Total staff number ( ) – Total number of staff including dispatched employees hired by labor agents ( ) 5. Total number of contract staff ( ) – Total number of staff hired directly by the retailers 6. Total operating cost ( ) 7. Total salaries and wages ( ) 8. Total number of SKUs ( ) 9. Number of SKUs distributing directly through the distribution centre ( ) 10. Average daily number of transactions ( ) 11. Inventory turnover days ( ) 12. Non-operating income ( ) – Income derived from activities other than sales of goods
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KPI report for retail chain stores in China report for retail chain stores in China Foreword About the KPI report The China Chain Store & Franchise Association and the Li & Fung Research
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Li & Fung Research Centre China Chain Store & Franchise Association Member of the Li & Fung Group
1
2009 Q4
LI & FUNG RESEARCH CENTRE
CHINA CHAIN STORE & FRANCHISE ASSOCIATION
KPI report for retail chain stores in China
Foreword
About the KPI report
The China Chain Store & Franchise Association and the Li & Fung Research Centre have collaborated and established
the Key Performance Index System (hereafter the “KPI system”) for retail chain operators in China since 2007 and
published reports on a quarterly basis. The system aims to collect key performance indices of different format retail
stores in China.
In 2009, the data collection system are further upgraded and revised, and more store samples have been added. The
revised KPI report covers over 100 retail stores in China of 5 major formats, including convenience stores, supermarkets,
hypermarkets, department stores and home electronics appliance chains, of which supermarkets and hypermarkets are
further divided into several categories by operating area for easier references. We hope this report can shed some light
on the key development trends of China's retail chain stores.
About the indicators
Data of the following is collected in the KPI system –
1. Monthly sales (月度銷售額) – Pre-tax monthly sales value
2. Total operating area (總營業面積) – Including self-operating area and leasing area
3. Leasing area (對外租賃面積) – Area leased to other operators
4. Total staff number (員工總數) – Total number of staff including dispatched employees hired by labor agents (勞務派遣人員)
5. Total number of contract staff (正式員工數) – Total number of staff hired directly by the retailers
6. Total operating cost (成本及費用總額)
7. Total salaries and wages (工資總額)
8. Total number of SKUs (單品總數)
9. Number of SKUs distributing directly through the distribution centre (統一配送單品數)
10. Average daily number of transactions (平均日交易數)
11. Inventory turnover days (庫存周轉天數)
12. Non-operating income (營業外收入) – Income derived from activities other than sales of goods
Li & Fung Research Centre China Chain Store & Franchise Association Member of the Li & Fung Group
8) Average operating area per employee (員工配置): 41.58 m2/employee
Li & Fung Research Centre China Chain Store & Franchise Association Member of the Li & Fung Group
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2009 Q4
LI & FUNG RESEARCH CENTRE
CHINA CHAIN STORE & FRANCHISE ASSOCIATION
Recent highlights of the retail chain operators (Brief notes from the speech of Ms Guo Ge-ping, Chairperson of the China Chain Store & Franchise Association during
the 11th China Retail Industry Convention)
After years of rapid developments, more retailers in China now pay increasing attention to achieving sustainable growth.
Improving efficiency, instead of solely pursuing scale, is high on many players’ agenda.
1. Growing calls to change retailers’ profit structure
In recent years, the profit structure of many retailers in China has changed significantly. Many retailers no longer derive
their profits from direct merchandise sales. Instead, cumbersome charges laid on suppliers, rental income and other
investment income become predominant source of income. This profit model may help retailers reduce initial outlays
and risks; in the long run, however, it would bring about problems such as lack of differentiation, strained relationship
between retailers and suppliers, and even corruption. These undermine retailers’ capability to effectively address to
consumers’ needs and retailers have to rely on price competition to stimulate sales. More and more retailers now are
trying to change the picture. And we see major changes in sourcing models in the fresh food category. Growing number
of retailers now embark on direct-farm sourcing to improve operating performance. .
2. Improving capability in merchandise management
The current profit structure of retailers in China has weakened their capability in merchandise management. To build
demand-driven supply chains, retailers in China must improve their capability in sourcing and merchandising – retailers
now recognize that more efforts should be paid on areas such as customer research and analyses, supplier
management, inventory control, and sales and marketing. By adding new value to customers, retailers can improve their
profit margin and speed up inventory turnover.
3. Launching private labels
Private labels are relatively new in China, accounting for only 3% of the total retail sales compared with more than 20%
in developed markets such as Europe or the United States. Many Chinese consumers are unfamiliar with or do not trust
private label products. And developing successful private labels requires retailers a lot of professional knowledge in
design, product development and quality control, etc. Nonetheless, as a possible lucrative profit source and a tool to
differentiate from competitors, many retailers are keen to try launching their private labels. It can also help build
customer loyalty and save customers’ money.
Li & Fung Research Centre China Chain Store & Franchise Association Member of the Li & Fung Group
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2009 Q4
LI & FUNG RESEARCH CENTRE
CHINA CHAIN STORE & FRANCHISE ASSOCIATION
4. Managing supply chains
Many retailers have been squeezing suppliers for favorable terms; supply chain relationship is viewed as a zero-some
game. Supply chain management is gaining attention. More retailers now hope to collaborate with their supply chain
partners to lower costs and build win-win relationships with both customers and suppliers. Some ways to enhance
supply chain collaborations include improving logistics and information system, building strategic relationships with
suppliers etc.
5. Improving corporate social responsibility
In recent years, some established retailers in China have been taking key initiatives to improve corporate social
responsibility. Adopting green measures and charitable donations are some examples; and there are growing calls that
socially-responsible retailers must handle well relationships with suppliers as well. Indeed, more players now see a
socially-responsible image help them build their retailing brands and improve customer loyalty.
Li & Fung Research Centre China Chain Store & Franchise Association Member of the Li & Fung Group
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2009 Q4
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CHINA CHAIN STORE & FRANCHISE ASSOCIATION
About the Organizations
The China Chain Store & Franchise Association
中國連鎖經營協會中國連鎖經營協會中國連鎖經營協會中國連鎖經營協會
Founded in 1997, the China Chain Store & Franchise Association (CCFA) is an official representative of the retailing and
franchise industry in China. Currently, there are 800 enterprise members with 160,000 outlets, including domestic &
overseas retailers, franchisers, suppliers, and relevant organizations. The total sales of China’s “Top 100 retail chain
operators”, which are part of the members of the CCFA, exceeded RMB 1.2 trillion in 2008, with more than 12,000
stores in total.
CCFA participates in policymaking and coordination, safeguards the interests of industry and members, provides a
series of professional trainings and industry information and data for its members and establishes platforms for
exchange and cooperation.
Li & Fung Group
利豐集團利豐集團利豐集團利豐集團
The Li & Fung Group is a Hong Kong-based multinational company with three distinct core businesses: export sourcing,
distribution and logistics, and retailing. Founded in Guangzhou in 1906, the Li & Fung Group achieved an annual
turnover of around US$16.7 billion in 2008. Today, the Li & Fung Group operates in some 40 countries and regions and
employs over 35,000 people worldwide. One of its core competencies is “Supply Chain Management” (SCM).
Li & Fung Research Centre
利豐研究中心利豐研究中心利豐研究中心利豐研究中心
Li & Fung Research Centre is the research institute of the Li & Fung Group. It serves as a knowledge bank on China's
economy, industries, logistics and distribution sector, with its research scope covering the whole spectrum of the entire
supply chain, from ideas, production, distribution, retailing to consumers. It also offers research analyses and consulting
services to colleagues and clients to assist them in their day-to-day decision-making.
Though Li & Fung Research Centre and CCFA endeavor to have information presented in this document as accurate and updated as possible, it accepts no responsibility for any error, omission or misrepresentation. Li & Fung Research Centre, CCFA and/or their associates accept no responsibility for any direct, indirect or consequential loss that may arise from the use of information contained in this document. Reproduction or redistribution of this material without Li & Fung Research Centre and CCFA’s prior written consent is prohibited.