JD.com shareholders are getting nervous - Shaun Rein

Shaun Rein

While the criminal case for sexual harassment against JD.com CEO Richard Liu is still unclear, to say the least, its shareholders are getting nervous, says financial analyst Shaun Rein, and author of The War for China's Wallet: Profiting from the New World Order to the Nikkei Asian Review.  "Worries will grow over time if the stock continues to slide."

Nikkei Asian Review:

That doesn't mean JD.com's shareholders are sitting quietly. While Walmart declined to comment on whether it has queried the company about the allegations against Liu and Google did not respond, institutional investors are worried. 

"Shareholders are hugely concerned," said Shaun Rein, managing director of China Market Research Group in Shanghai, who said he had recently spoken with about 20 funds which have invested in JD.com or Tencent. "The uncertainty is bad for stock prices and bad for partnerships. Worries will grow over time if the stock continues to slide." 

Funds are likely to query the company about the criminal case, said Jamie Allen, secretary-general of the Asian Corporate Governance Association. "They won't refrain from talking to JD about it," he said. "They would have some opportunities to raise it."

More in the Nikkei Asian Review.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Foreign firms target for food scrutiny - Paul French

Paul French

Shocking food scandals in China were mostly domestic affairs, but government agencies now focus on foreign firms, tells retail analyst Paul French in Ethical Corporation. With some success, the empire strikes back. Paul French:

However, following several minor scandals involving Chinese brand bottled waters, it just so happened that the AQSIQ investigation only found foreign brands to have dangerous levels of nitrate – including the French brands Evian and Volvic – and no domestic brands. Despite the media being told to report the story heavily, anecdotal evidence suggests that few Chinese consumers fell for the ruse. 

We’ve also seen the Wal-Mart organic pork scandal – another “strike back” campaign by Beijing. Wal-Mart did mislabel pork and this was widely reported. But when local journalists found the same problem in domestic supermarket stores they were told not to report that by the government. That’s “strike back”. 

The scandals keep coming – benzopyrene-laced sesame oil and cadmium-stuffed squid, for example. Foreign brands are now looking for strategies to avoid being caught up in both food scares and “strike back” campaigns.

More in Ethical Corporation.  

Paul French is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Why global brands fail in China - Shaun Rein

Shaun Rein

While some brands like Nike and Intel make neat profits in China, the country has become a corporate graveyard for many other global brands. Why do global brands fail in China, wonders business analyst Shaun Rein in CNBC. They should focus on China.

Shaun Rein

Best Buy  and Home Depot shut their stores in 2011. Google, eBay and Amazon have been trounced by local competition. Walmart  faces dwindling market share. These great firms, which dominate their home markets and are widely successful internationally failed to grab profits in China... 

In China, revenue and profit per square feet of retail space is too low to justify giant stores selling low margin products. Brands need to think whether their traditional business models fit China and, if not, either skip entering the market or adjust accordingly. 

The second theme that emerged was that senior executives sitting in foreign headquarters often ignore what local country heads, who are more attuned to local conditions, have to say. Or they hire the wrong country heads in the first place. One eBay executive, for example, told me that his seniors ignored the advice of local employees to run servers out of China and switched hosting to America. 

“The day they switched to the US servers despite our protests, traffic dropped 50 percent because access speeds were too slow. We never recovered. It is a myth that local auction site Taobao won because they don’t charge fees. We lost because headquarters tried to implement what worked in the US, from interface design to customer service help," the executive said. 

Businesses need to hire senior executives who understand how to operate under local market conditions and delegate decision-making authority to them... 

China has become the must win market, so billions of dollars a year are being invested in the country. The reality is that many companies will end up failing there, or missing expectations, because they don’t localize their business models and management teams enough to compete with fast emerging domestic players.

More in CNBC

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch, or fill in our speakers' request form.

Shaun Rein is the author of the upcoming book The End of Cheap China: Economic and Cultural Trends that will Disrupt the World. Read more about Shaun Rein and his book at Storify.

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Is Wal-Mart a chicken to be killed? - Shaun Rein

Killing a chicken to scare the monkey, is a famous saying in China. Giving Wal-Mart trouble might be a way for Chinese authorities to send a signal to foreign companies in China, tells business analyst Shaun Rein in Business Week.

Local protectionism is on the rise. Attacking US retailer Wal-Marts for mislabeling its food products and arresting its staff, might be a signal things are changing for foreign companies in China, says Shaun Rein:

The new protectionism stems from a broader change in Chinese attitudes: Where once localities vied for the prestige and money a big foreign investor brought, today multinationals are taken for granted. In a 2011 survey by the American Chamber of Commerce in the People’s Republic of China, almost a quarter of American companies cited “increased Chinese protectionism” as their greatest risk. “It is going to get harder to get permits, and these foreign companies won’t be as welcomed coming into important neighborhoods,” says Shaun Rein, managing director of China Market Research Group. “That’s because their capital isn’t as needed as it once was.”... 

Wal-Mart didn’t help itself by selling mislabeled pork. Crises over melamine-tainted milk, exploding watermelons, and hormone-injected meats have pushed food quality concerns into the national spotlight—and into the crosshairs of politicians eager to show they’re serious about safety. “By cracking down on a high-profile foreign retailer, their message is being sent throughout the country to consumers and supply chains,” says China Market Research’s Rein. “They realize they can get the same traction by detaining a few dozen Wal-Mart people as with a national crackdown.”

More in Business Week

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.


More links on Shaun Rein

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Wal-Mart not bullied by China authorities - Shaun Rein

Shaun Rein

Unlike Wall Street Journal's columnist Bussey Shaun Rein does not think Wal-Mart - or any other foreign retailer in China - is bullied by the authorities. It's Wal-Mart who betrayed its customers. Foreign retailers gain more and more market share, he tells in CNBC.

Shaun Rein:

Contrary to Bussey’s position that the government is treating foreign retailers unfairly, the largest hypermarket chains, Wal-Mart, RT Mart, Carrefour,Tesco, Auchan, Lotus, are all foreign owned because consumers trust foreign retailers more not to cut corners. Combined, they control the majority share of the modern retail market. Where are the barriers to foreign retail investment? 

Most consumers, before the incident, told my firm they “trusted” Wal-Mart to sell good quality products. The government supports foreign retailers because they positively impact the food supply chain. So when even a trusted Wal-Mart sells bad products, it destroys public trust more and the government needs to make an example of them. 

As one 30-something woman shopper in Shanghai told me, “If Wal-Mart did this, I shudder to think what domestic chains will do. The government needs to stop the problem now by arresting people, not just issue little fines.”

More in CNBC  

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Wal-Mart cannot win on prices in China - Shaun Rein

Shaun Rein

Low prices might be Wal-Mart's key marketing tool in the US, in China you lose as a foreign company from domestic competition if you try to beat them on prices, tells business analyst Shaun Rein in Reuters.

Reuters:

After entering China in 1996, Wal-Mart's expansion gathered steam in 2007 when it bought a 35 percent stake in Taiwanese hypermarket chain Trust-Mart. It has 353 stores in the mainland. 

Wal-Mart's market share in hypermarkets was 11.2 percent in 2010, in second place after China's Sun Art, but spending for the expansion has weighed on its profitability. 

Wal-Mart's problem is that it is trying to compete with domestic chains on price, said Shaun Rein, managing director at Shanghai-based China Market Research Group. 

"If your strategy is 'cheaper than Chinese companies', you are never going to win the market," Rein said. 

"But that is what Wal-Mart is trying to do. The strategy is all wrong since the very beginning, and that is why it has never been profitable here."

More in Reuters

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Why Wal-Mart loses in China - Shaun Rein

Big store in China are not cheap via Wikipedia

Top management of Wal-Mart in China is leaving 'for personal reasons', signalling all is not well at the major retailer. Shaun Rein explains in CNBC why the US firm loses market share in China and how it can rethink its strategy.

Wal-Mart has lost market share from 8 to 5.5 percent, according to Shaun Rein's China Market Research Group:

Wal-Mart made the mistake of leaning too heavily on the big box retailer format like in the U.S., rather than smaller, conveniently located retail outlets. Expecting China to develop the same way towards big box retailing, as America did, is the same mistake Home Depot [HD  34.77   0.24  (+0.7%)   ] and Best Buy [BBY  31.54   0.53  (+1.71%)   ] made. Both of those retailers ultimately retreated from the market. China may have high compound annual revenue growth rates, but traffic and the lack of free parking means consumers often prefer to shop in neighborhood stores. A government ban on free plastic shopping bags has also resulted in consumers shopping more often, and buying less each time, further fueling the popularity of stores closer to home...

Wal-Mart surprisingly has struggled with consumer perception and their branding. They espouse the 'everyday low price' concept, yet are positioned relatively high in the market when compared to street vendors that are truly low price. Our research suggests that the consumers who spend the most at Wal-Mart and account for most of their revenue tend to be upwardly mobile, middle class, or wealthy. They are not looking at Wal-Mart as a low price destination but rather as a location where they can buy safe, high-quality products...

Rising costs and more demanding consumers are changing the retail landscape in China. Wal-Mart needs to adjust its strategy by shrinking the size and locations of its stores, going upscale in product selection and ambiance, and by differentiating its product lines. Unless it does that, Wal-Mart might end up another casualty of the fast growth but hard to win Chinese retail market.

Shaun Rein

More arguments in CNBC.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Why strengthening of the RMB is wrong for the US - Janet Carmosky

Image via Wikipedia

China played a key role in the emotions surrounding the US midterm elections. Janet Carmosky explains in Forbes why strengthening of the Chinese currency is wrongly on the wishlist of US politicians. And why it scares her when the US is losing its economic position.

So unless Wal-Mart wants to take a patriotic hit on its mark-up margins, a strengthening of the Yuan is just going to put consumer electronics, apparel, and housewares out of reach for America’s already depressed middle class. The manufacturing jobs will move to Vietnam, the Philippines, Bangladesh, Malaysia, and other such countries with lower wage costs than China.

The US should do what it is good at, she argues:

I’ll admit that the prospect of America losing its way scares me too. But I would counter the fear and discontent with a simple message: America never can and never will out-Chinese the Chinese. China saves. America spends. China runs its economy top-down, from highly strategic single-party rule. America creates new models, believes in bottom-up genius finding its way through an obstacle course to a market shaped by human desires rather than government purchase orders.

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Janet Carmosky is a speaker at the China Speakers Bureau. When you need her at your meeting or conference, do get in touch.

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