Retail Consolidation with Reference to the Convenience-Store Industry in China.

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From the 1980s to 1990s, “there was a significant change occurred in the economic power in supply chains with the trend toward retail consolidation and the emergence of giant retailers” (Coyle et al 2003). In other words, this shift gave large retailers more power and was able to make manufacturers change their supply chain strategies. In China, only till to mid 1990s, this trend in the retail industry started; especially in 1998, there were more than 1,000 chain-store companies including 21,000 outlets in China with the total sales increase up to 70% compared with the sales in 1997 (Infomat 2006). Looking at the specific convenience-store industry in China, in 1999, due to the consolidation, the growth rate of convenience stores reached the peak of 25.38% during the time from the 1980s to 1990s (Ho 2003). It was claimed that this sector would experience further consolidation; one example is that only in one month, July 2003, FamilyMart said that it was acquiring 43 convenience stores.

In the Shanghai Liangyou’s case, this consolidation had a big impact on its supply chains. At the first period of this trend, Shanghai Liangyou had more power when bargaining with their suppliers – manufacturers. This brought more profit for the company. However, after several years, the dramatic increase of convenience stores in Shanghai made Liangyou’s profit as well as gross margin fall considerably. Specifically, the gross margin decreased from 21% in previous years to only 15% in 2002 (Chang 2003). Therefore, in the end of 2002, the company had some strategy to enhance their competitiveness. One change of the company related to logistics activities was that it had been installing computer systems to allow store managers to check inventory and analyze sales data (Chang 2003). This system helped the stores’ managers avoid mistakes, improve in customer’s service as well as keep relationships with manufacturers which were referred by customers through analyzing data....
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