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Motivated by tourism, one of the pillar industries, Macao’s economy has been rising rapidly in recent years. Thanks to the ever-increasing inflow of tourists and the improving spending power of local residents, the retail market continues to expand. A good shopping experience, which offers high quality products, exceptional service and favourable environment is becoming more appealing to the consumers. Chain stores, which have the advantages of standardisation, organisation and modernisation, is therefore becoming trend for the development of Macao’s retail industry in this rapidly changing local market.
CHAIN STORES: THE RISING TREND IN THE INTERNATIONAL RETAIL MARKET
As a modern method of operation, chain stores have now developed into a mainstream method of business in today’s economy. The gradual expansion and variation of the local retail sector also contributes to a more diversified market, which is now shifting from the traditional supermarket, convenience store, food and beverage outlets into more specialist stores selling things like electrical appliances, clothing, pharmacies, jewellery, and entertainment outlets. There are three major types of chain stores: the regular chain, franchising and the voluntary chain. Under the regular chain operation, all the stores are controlled and owned by a single head office; in a franchising agreement, the franchisee acquires the rights to use the franchisor’s trademarks, logos, operating manuals and standards, marketing procedures and the authorisation to sell or distribute the trademarked products by paying a fee to the franchisor. A voluntary chain is constituted by a group of individual enterprises who work together under a contractual agreement in order to engage in group buying, common merchandising and marketing. Chain stores have a unique competitive edge both in its operational methods and structure, which is fundamental to exploring markets, increasing demand and remodelling traditional business methods.
CURRENT DEVELOPMENT OF RETAIL CHAIN STORES IN MACAO
Rapid economic development in recent years is creating a more diversified consumer base and an ever expanding number of products in the retail market, which at the same time has attracted many international chain stores to the city. For instance, the opening of a series of large integrated resorts has spurred development of the local high-end retail market, and has attracted plenty of internationally renowned high-class retail brands to set up branches in the local shopping centres. In addition, the burgeoning gaming and tourism industry has also generated a demand for the 24-hour convenience store; two international 24-hour convenience store chains spotted Macao’s potential business opportunities and entered the fray in 2005. Within two years, the two companies have successfully penetrated the local market with 40 stores scattered throughout the city. At the same time, more and more local retail companies are adapting to the chain store operation strategy by constructing their own retail chain brands in order to increase their market share. Most of these local enterprises are running regular chain stores, with which one head company owns all the stores in a chain. The majority of these stores are running traditional businesses such as supermarkets, convenience stores and restaurants. In addition, specialised retail chain stores such as boutiques, bookstores, pharmacies and stationery shops have developed rapidly in recent years.
DEVELOPMENT STRATEGY FOR MACAO’S RETAIL CHAIN INDUSTRY
As more and more international chain stores and franchising brands are setting up in Macao, the effect of the retail chain market is continuously expanding. Macao enterprises need to keep abreast of the fast changing market and adjust their own operation strategies accordingly.
Alliance for success: The entrance of foreign chain enterprises into Macao has no doubt created the ripple effect for the traditional retail industry. Nevertheless, forming alliances with foreign enterprises offers a new path to success for local enterprises. The local bakery Mario’s is a typical example: viewing the potential opportunities brought about by the newly set up international convenience stores, Mario’s has successfully extended and expanded its market through co-operating with 7-11. In fact, the critical factor for international enterprises to success is ‘localisation’ and co-operation with local enterprises can accelerate their localisation process. Conversely, ‘internationalisation’ is an inevitable strategy that has to be adopted for local enterprises to grow. Therefore, co-operation between overseas and local enterprises not only enhances the competitiveness of local enterprises but also creates a win-win situation.
Bringing in overseas franchising brands: Constrained by the relatively lack of capital and skills, local Small and Medium sized enterprises (SMEs) have always found it relatively difficult to run a regular chain store type of business. SMEs can therefore, consider becoming a franchisee of existing franchise brands from Mainland and overseas. With the help of the goodwill of the brand, an extensive array of services (including staff training, know-how transfer, marketing, advertising and brand maintenance) and other advantages such as sharing resources, franchising can help SMEs to transform in accordance with the changing demand of consumers with relatively low costs and risk in a short period.
Nurture local chain store brands: While introducing more overseas franchising brands into the market, local enterprises should also strive to enhance their own competitiveness through closer co-operation with international enterprises. As most of the local chain enterprises in Macao are operating under the regular chain method, few of these have developed their own franchising system, which undoubtedly had limited their success in overseas market. The increasing presence of international franchising brands in Macao, have brought with them the relevant knowledge and techniques, which can be a guide and show local enterprises the value of this method of doing business.
IPIM ASSISTS SMES TO ENHANCE COMPETITIVENESS
The rapid spread of globalisation has stimulated Macao’s integration process into the international economy. In this dynamic marketplace, ‘strategy’ is of particular importance to businesses. Therefore, local enterprises should try to construct their own brands or form alliances with international enterprises in order to be better equipped to embrace competition; local SMEs who continue to operate in old style single shop method should also adjust their strategy and grasp every opportunity to improve their competitiveness and business environment. The “SME Service Centre” established under IPIM’s Macao Business Support Centre (MBSC) assists local SMEs to improve their own operating performances, expand their horizon as well as their overseas network by providing an extensive array of services such as the “One-stop Economic and Trade Consultation Service”, application of financial incentives for participation in exhibition activities, regular themed workshops, business and information exchange activities to the local SMEs. Local SMEs should also try to make good use of the government’s various SME support policies such as the existing “SME Aid Scheme” and the “Funding Scheme for micro, small and medium sized and longestablished, specialty food stores” which will be introduced into the market this year, so as to improve the business environment, create a distinctive brand, and finally to excel in the competition.
Source:
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- “Retail and Food Chain Industry is gaining momentum”; Statistics Bureau of Shanxi; Guo Chun; 07 June 2007
- “Alliance: a new development path for Small and Medium sized enterprises”; Macao Daily News, 21 March 2005
- “The potential of Macao’s franchising market”; Jornal do Cidadão, 2 July 2005
- “Franchising and Chain Store Operation”; Mr. Zhang Qiong, Vice director of Legislative Affairs Office of State Council; 20 June 2007
- “Franchising: a way to starting a business with low cost”; 2 Jan 2006,
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Important Notice：All information is for reference only. While every effort is made to ensure the accuracy of information, IPIM will not be held responsible or be liable for failing to guarantee the accuracy of any information provided, nor for any damage caused by inaccurate information or omissions.
