Poo-ne calls?

I am not sure about you, but I have always thought that toilet stalls (and lifts, for that matter) were "quiet zones" where any sort of conversation with your neighbours was taboo.

However, in China, it seems that no visit to the traps is complete without a phone and pre-scheduled conference call.

I recognise that the Chinese are not so sensitive to preserving their (or your) personal space, but full volume phone calls whilst relieving one's self is something that after 11 years in China I still cannot come to terms with.   Add smoking to the mix (despite the signs forbidding it) plus the corresponding spitting on the floor next to where they are sitting (do they do this at home too?) and you are left with a most unpleasant bathroom environment, even in modern Grade A office buildings and 5 star hotels.

I am wondering now if "Poo-ne calls" are unique to China or if this is common elsewhere?  Either way, it is one of the few memories that I will happily leave behind in China when I one day return the UK.

HOW LONG CAN B&Q LAST IN CHINA?

Over the last 10 years I have watched B&Q grow from a couple of stores in Shanghai to a National chain of superstores.

Their growth fed on the property bubble and, for a while, their stores were busy as the emerging white collar  middle class enjoyed the BIY shopping experience.  (In China,  "Do it Yourself" is an alien concept, but "Buy it Yourself" has resonated in a land of fake or low quality decorating materials...and then they pay someone else to actually do all the work using the materials they have bought).

However, today, their stores have more staff than customers.  And yet the staff are unhelpful and lazy.  Yesterday I had two painful conversations with two different B&Q assistants in the space of 5 minutes:

1.  When I asked a nearby assistant if they had a smaller size metal clip than the one I had found, she said "No!". Then I eventually found it myself!

2.  When I asked if a demonstration fan unit could be switched on, she said no because there was no power. I then looked behind the machine and showed her that it had simply been unplugged.   She just shrugged.

With this complete disinterest in serving the few remaining customers that B&Q still has, I question how much longer they will last in China.

Their smarter global competitors, Home Depot and OBI, saw the writing on the wall years ago and exited before they grew past the point of no return.  But B&Q may now be in that unfortunate position of being too big to leave - or at least too big to leave without their Kingfisher parent company shareholders asking the Board some very embarrassing questions.   Let's wait and see.   On the basis of what I can see, it may not be a very long wait.

Chinese Expressions: Signposts for doing business in China

This is an article I wrote for the British Chamber of Commerce in Shanghai

Baijiu Bubble Burst. China’s luxury goods next?

When China’s new premier, Xi Jinping, walked smiling on to the stage with the rest of China’s new central leadership team back in November, few people would have anticipated the immediate consequences to the Baijiu industry.

Baijiu, China’s home-grown spirit that, incredibly, accounts for over 35% of global spirit sales (whisky is just ~10%), will see an unprecedented collapse in its volumes and profits.   The staple drink of China’s banquet-loving Government officers and State Owned Enterprise management teams has been hit by a ban on excessive expenditure by public officials which has included purges on everything from entourages, fresh flowers, entertainment performances, gifts, and lavish meals.

It is these last two (gifts and meals) that will deal Baijiu’s pricing and volume a double blow – just before the Chinese New Year gifting period when Baijiu is traditionally one of the most favoured presents, with gifting the major seasonal driver of off-trade (retail) spirit sales. 

 On-trade (bar, restaurant, nightclub) sales of Baijiu had already been hit by the reduction in corporate entertaining in the run up to the Communist Party Congress/Leadership Change, but rather than recover – as industry observers had anticipated – the contraction appears to have accelerated since Mr. Xi came to power as he seeks to make graft/corruption reduction a high profile early win to boost the flagging popularity of the Chinese government amongst the increasing vocal people of the People’s Republic.

We at Concise China are seeing the effects first hand by visiting retailers. Pricing of Moutai and Wuliangye (another famous Baijiu brand) at major retailers in Shanghai is down by USD$100/bottle (not a typo)!  With the pricing in a downward spiral and no end in sight, it may not be over for the beleaguered stocks which have seen >USD$30Billion in value wiped out since the leadership change.  And all of this is BEFORE the inevitable poor sales results of the critical CNY period are published next month!

However, I don’t believe that Baijiu will be the only casualty of this (permanent?) China sea change.  The astonishing growth of luxury goods in China (now the world’s number 2 market after Japan) is also driven by gifting. 

Highly visible gifts can be spotted, as was shown by the blogger who recently published photos on line of a senior local government official wearing a variety of Swiss watches at various public meetings! (Despite the watches’ value amounting to many times his annual income.)  The official is no longer in his job.

 

So, who else should be bracing themselves for the fall out?  I believe the following are the most exposed, in no particular order:

·      Luxury bags

·      Swiss watches

·      5-Star Hotels

·      Luxury restaurants

·      Premium spirits, especially Cognac

·      KTV (Chinese karaoke where most corporate entertainment and ‘deals’ are done)

·      Golf Clubs (some of whom have been charging over $200,000 for memberships, often paid for with company money or ‘gifted’)

·      Luxury houses (many of which have been illegally registered by government officers to names of other people to avoid discovery)

Whatever happens, China’s gift-giving, graft-based commercial and political environment has changed for good.  How deeply these reforms become ingrained in the slow changing Chinese cultural psyche remains to be seen.  But now would be a prudent moment for luxury goods companies and related industries to recalibrate their China expectations.