"Conquering the Asian market" is frequently a topic of discussion among strategy and research divisions of today's internationally minded companies. But how does one achieve this? Marisa Klumpp addresses this point in her dissertation, which examines how Western companies can penetrate into the Chinese market with the help of geomarketing solutions.

Continual advancements in retail have strengthened the resolve of companies to develop and pursue a strategy for expanding into international markets. In addition to Europe, Asia's markets have formed a point of particular focus. With 1.3 billion inhabitants, China is the most populated country in the world. Combine this with the country's rising purchasing power, and it's clear that China is one of the most important markets of the future. It is predicted that China's retail turnover will surpass that of Germany's by 2015, and, if these estimates hold, China is set to become the world's third largest consumer market by 2025.

However, as a result of the tremendous cultural differences between China and the home countries of European companies, many Western businesses have had great difficulty gaining traction in the Chinese market. These challenges are due not just to differing consumer behaviors, preferences, patterns and varying business practices, but also to the difficulties of selecting suitable venues. In order to properly evaluate prospective business locations - particularly in the case of determining market potential, detailed socio-economic and demographic data are needed. However, in contrast to Germany and other industrialized nations, this kind of information is typically not yet available for Asia's growing markets, a consequence of the relative infancy of market research in these areas. Also, the information that is available often lacks the required detail and accuracy. Finally, the language barrier poses a challenge in the analysis of existing data sources.

For the Peking location analysis, the first step involved calculating this region's potential purchasing power. Next, using GfK GeoMarketing's RegioGraph, population figures for small-scale areas with between 10,000-100,000 inhabitants were produced. Data was generated for one square kilometer units. A raster grid was then created with the help of satellite imagery that revealed population density for the square kilometer in question by showing the precise height and density of the region's architectural structures. The initial population figures for these square kilometer units were then cross-referenced with the topographical analysis in order to adjust them for accuracy. The resulting information served as the basis for calculating catchment areas, and thus the market potential of the location.

For suburbs and outlying areas, factors such as accessibility, level of competition, layout and the existing business infrastructure were taken into account and weighted according to their perceived importance. The resulting analysis revealed the locations most suitable (and unsuitable) for international companies wishing to establish themselves in this market.

In China, fashion items made by European and American manufacturers are offered primarily according to the shop-in-the-shop concept - i.e., in department stores, boutiques and speciality stores located within shopping centers. These shopping centers are, however, a comparatively new form of retail trade in China. They profit mostly from the fact that they offer an acclimatized setting - with eating and entertainment options - in a country with a very high level of air pollution. However, there is tremendous competition among shopping centers. Many have been built in recent years, with many others now under construction or in some phase of planning. Despite this, Chinese customers continue to show a lukewarm attitude to these centers. Traditional shops represent, for many, continuity and an awareness of past customs - two values highly prized by many Chinese.

It stands to reason that the newer locations - such as the emergent Central Business Districts - will enjoy significant growth in the coming years. As the shopping centers increase in number and establish a firmer foothold in the market, consumer skepticism will lessen; the available purchasing power will also likely rise. As a result, the target groups for products of international companies - with their corresponding high prices - will become ever larger.

In summary, the locations of Peking's vendors of international clothing brands are very diverse, distributed widely throughout the city. The individual locations - particularly shopping centers and traditional shops - are structured according to very different sales concepts that enjoy varying levels of customer acceptance. Also, despite rapidly growing purchasing power, only a small percentage of the populatoin can afford to regularly purchase foreign brands. For this reason, it is particularly important to know where potential customers are located when considering suitable business sites. Geomarketing is a very helpful and well-established tool for making this assessment. Location selection and sales territory planning can be optimized through the implementation of socio-demographic data into geomarketing software applications.

Author:
Marisa Klumpp
GfK GeoMarketing
Market Data & Research

Contact details:
Tel. +49 (0)911 3952680
E-mail: m.klumpp(at)gfk-geomarketing.com

If you have questions about international location research and planning, please contact Manuel Jahn at +49 (0)40 22711223 or m.jahn(at)gfk-geomarketing.com.