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Posts: 139

Governor

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Q: How is it that shops spring up (and close) so fast in China?

Seriously...in Beijing a new coffee chain has just 'landed' a few months ago and have shops ALL over the city now. Even smaller shops just seem to spring up and close down from month to month. Is it because it's easier to have/bypass permits? The turnover rate just seems crazy unbelievable.

8 years 34 weeks ago in  Business & Jobs - China

 
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Posts: 129

Governor

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Simple. in American lingo it is called "Dollars and Sense"
It applies to everything including the permits.

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8 years 34 weeks ago
 
Posts: 3046

Emperor

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For locals, requirements are easier, and many will ignore some of them until caught.  All dream of striking it rich, and do not even bother with a business plan, not even scouting for a good location, with no idea of what is involved.  They feel that if they open up, the next day they will be already rich.  And in many business way (at least in Western minds) they are so naive.  

You can ask any of them thinking of opening a business, what their breaking point (break even point in sales) and they just will stare at you.  You try hard to explain to them that they will need enough capital to cover start up costs plus at least six months of operation afterwards until business grow "roots", and they look at you like if you were crazy.  I asked a friend planing to open a store selling lamps what carrying cost of inventory could he afford, and his reply was he would store lamps to be sold in a space above store ceiling, so no extra cost.

So, I am not surprised at all to see failures of businesses in China.  And if I would be forced to say the reason in a few words, I would say lack of proper planning.  

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8 years 34 weeks ago
 
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Minor Official

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HappyExpat's answer has driven a very good point. Most of the new business owners here in China do not have an entrepreneurial mindset and the necessary preparation to help them succeed. These are my personal observations as to why many startups fail in China:

 

1. Proper venture screening - many hold the belief that following the bandwagon will lead them to riches. On the contrary, one might find that they are already too late in the market due to the saturation of market players.

 

Folks should think outside of the box - think of a "game changing" opportunity that make sweeping changes to how a community pushes on with life... way better if you can think on a global scale Smile

 

2. The Dream Team to Succeed - Another pitfall for many would-be entrepreneurs is the lack of teammates. A one-man army cannot succeed. Even a jack-of-all-trades is not sufficient. Contributing to this problem is...

 

3. Lack of adequate resources to duke it out - 6 months of operations is not enough, am afraid.... studies show that businesses' general survival stage window is 4 YEARS, so would-be entrepreneurs should make this as a consideration.  If you don't have adequate resources, it's impossible for you to assemble A-listers.  All forms of financing the venture has to be considered (pocket, bank, equity, investment angel... etc.)

 

Here in Beijing, I have rarely heard of an entrepreneur borrowing from legit financial institutions - most try to strike it out using their own pockets. I feel that the "face" culture of China is always getting in the way.

 

4. Of course, the business plan - a framework that you can follow to make things happen.  Although they tend to become obsolete once printed on paper, it is a useful "map" for things to follow as it provides you with the ability to check the deviations on the course of the business and making the necessary adjustments.

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6 years 2 weeks ago
 
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I di not read the above stuff ...BUT

 

I suggest that these places are not ever expected to actually make money... SOE for convenience .... I find it amazing the number of shops that open and close in my  neighborhood..... the local hair guy does OK...  the local vegetable and meat stand does ok.... the local fruit market does OK..... the booze and tobacco place OK....

but there is always a new guy...  the hardware guy, the fruit guy, the clothes guy, the bakery guy ........ very difficult for somebody to get in on the business here. I think most of the established business here in this mostly new (5 year) is government .. little pieces of big government  ........... amazing how they just shut down a store and rebuild it as something else .... the alcohol tobbaco place just becomes the toy store place.

some gibberish here... but oh well.. BIG GOVERNMENT

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6 years 2 weeks ago
 
Posts: 7204

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It's an old question but a good one.

 

We have shops opening and closing all the time in my neighbourhood.

 

We had a corner shop open in our apartment block and it lasted for about 8 months.  The problem was it did not restock what people were buying. The ciggarette brand I smoke for example, they sold out within a month of opening and never bought more.

 

The guy in the little cubby shop across the road does however keep stocked up with what his customers buy, so he has a steady stream of customers.

 

I am surprized many of the shops last as long as they do.

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6 years 2 weeks ago
 
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Because many of the entrepreneurs here are incompetent and stupid and a lot of the expats they hire are communist party caricatures of the laowai rather than able people.

 

Not all of course... But a vastly disproportionate amount compared with America, Australia (excepting the Murdoch and Packer sons), Switzerland, Finland, Denmark, Norway Germany, France, Poland, Slovenia, Estonia, Croatia, Kenya, Turkmenistan, Uzbekistan, Pakistan, Sri Lanka, Jamaica, Cuba, Brazil, Argentina, Uruguay, Paraguay, Chile, Peru, Tanzania, Canada, Morocco, Monaco, Japan, The Philippines, Korea (North and South), Tonga, Nauru, Nigeria, Niger, Ghana, The Central African Republic, South Africa, Zimbabwe, Mozambique - hell how about everywhere else except Russia, Mongolia and Vietnam?

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6 years 2 weeks ago
 
Posts: 4684

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Sometimes they probably just run afoul of some local official. fail to pay their dues to the right person, or are unwelcome competition for someone with a few connections.

 

Sometimes they probably get screwed over by their landlord, jacking up the rent on them as soon as it looks like they may start to succeed, stuff like that.

 

A friend told me about a young woman he knew who wanted to open a hair salon, or beauty salon or something along those lines. ( I don't remember what it was now)

She put all the money she could raise through her family, loans etc into renting a place and renovating it only to get evicted about a month later. It turned out the place was scheduled to  be demolished to make room for something else and the piece of s**t landlord happily took her money without telling her this. Of course she didn't get any of her money back.

 

Often though I think it's just stupidity. There was a fruit shop opened up near me about a year ago in a big area on the ground floor of a building with very expensive rent, right next to a popular supermarket with a great fruit/veg section and about a half block away from 2 well established fruit shops that would probably be paying a third of the rent the new shop was.

I remember watching them renovate it and wondering what was going in there, hoping it would be a good restaurant then being surprised to see it was a fruit shop and wondering how the hell they expected to make any money. It lasted about 6 weeks I think.

 

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6 years 2 weeks ago
 
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sometimes local families will do worse than just carbon-copy a business across the street to yours and price you out of the market: they'll hire goons to destroy you. not beat you up, mind you; there's a dedicated chengguan for that. the thugs will simply surround your business as cheaper competitors. possibly making a loss, but they are being paid elsewhere for their activity. once your business quits, so do they. that might explain why you see so many similar companies come and go.

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6 years 2 weeks ago
 
Posts: 7204

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As Eorthisio said above, open one shop and do well and more are sure to follow.

I have a friend who opened a franchise shop locally.  I asked him why he opened his franchise where he did, because its only 100 yards from a rival franchise shop.

 

He told me it was the policy of his franchise company to open a store as close as possible to their competitor.  And as I go about town, I see that there are always a pair of these competing shops close to each other.

 

I can understand why put all the shops of one type next to each other... well sort of.  Want a snooker table, go to snooker table street.  Want a camera, go to camera street.  In the case of specialized stuff the concept works.

 

But when it come to instant noodles or cans of coke, the concept falls down. Because custom is split between the competitors and someone will fail.

 

Recently, someone opened a bar local to me.  Why did they open a bar here?  Because there was already one other bar here, so the assumption was made that this was a good place to open a bar.

 

Big mistake.  Because there are actually only 3 customers. So one of the bars failed and closed.  But guess what?  Someone has bought the closed bar and opened it again.   Will it fail?  Don't know. But get more bars and you have a bar street. Then people might come.

 

How often do we see bar streets, with perhaps one busy bar and a half dozen empty bars that change their name every 6 months?

 

There is definitely a tendency to follow the leader here, with assumptions made rather than cold hard market research.

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6 years 2 weeks ago
 
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