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Posts: 133

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.

11 years 43 weeks ago in  Business & Jobs - China

 
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Posts: 124

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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11 years 43 weeks ago
 
Posts: 3025

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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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11 years 43 weeks ago
 
Posts: 1

General

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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.

thefidu881:

Congratulations...you just answered a question being asked in 2012...why did you need to make an account for that...?

9 years 11 weeks ago
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mike695ca:

This post is 2 and a half years old!!! How did you even find it??  Did you want to say that so badly that you actively went searching old posts until you found one that was suitable???  

 

 

9 years 11 weeks ago
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mike695ca:

I wonder if we are already experiencing a downside to the loss of the anon function.  

 

Prepare for countless questions from people with exactly one post. 

9 years 11 weeks ago
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ScotsAlan:

To be fair, when I joined up here I done the same thing. It's easy to do if your skipping through related questions.

9 years 11 weeks ago
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9 years 11 weeks ago
 
Posts: 2578

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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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9 years 11 weeks ago
 
Posts: 7178

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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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9 years 11 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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9 years 11 weeks ago
 
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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.

 

Eorthisio:

LOL at the fruit shop, when I lived in Chengdu there was a nice bakery at the entry of my residence with a hard rooted core of customers who came on a daily basis or every two days to buy their bread of candies for the kiddies, yet some smart ass tried to open another, less fancy bakery right across the street, it had less good, more expensive products than the first, it lasted for 2 months or so. Then around half a year later another "businessman" wannabe opened another bakery at the exact same location, it lasted for less than a month this time. Now I can tell what we lacked there in my district, a good import shop, none to be found around, yet my neighbors always asked me to bring them back foreign food or snack next time I go home (and that they will buy it back from me), how they like Toblerone, Cream Soda or anything else that's not easy (nearly impossible) to find in Chengdu. Open an import shop there, make a fortune. No business skills at all in this country, money can't fix stupidity.

9 years 11 weeks ago
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laowaigentleman:

The latest thing to look for is wedding photo providers. Lots of Chinese couples fly off to Bali to get conspicuous consumption wedding shots. Inevitably this market will be completely over-saturated and probably is already. My Chinese friend has just jumped in with two other business partners having raised together about 200,000 rmb to open a shop in town.

 

My knowledge of finance (or financial alchemy) in China is limited, but I'm sure these guys take out one loan and then go to another provider in another city. Perhaps the household registry system lures lenders into a false sense of security (more likely lenders are just as stupid as the entrepreneurs), but there's obviously no way for a lender to be able to check the credit history of any of his clients.

 

How many times do you think ventures here recollateralize without any repercussions? They sure as hell don't make the turnover necessary to justify the money they invest in their ventures.

 

As for my friends, well I told them I will translate their webpage once it's ready. It's been two months so far and I think all their meetings together have yielded are that each of them want to own a Ford Mustang rather than a Mercedes or an Audi because it will make them feel like a real man. crying

9 years 11 weeks ago
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9 years 11 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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9 years 11 weeks ago
 
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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.

coineineagh:

ha! shopping malls are the same story. it seems there's not enough room for varied stores, with all the copycat clothes shops hogging the space. clothes, women's clothes, baby clothes, shoes, handbags, clothes, clothes, wedding clothes, clothes again. i once had a thorough search in the shopping mall downstairs from my workplace: "i'm looking for correction fluid." 5 floors of "mei you". a shopping mall, you say? oh yes, one with chinese characteristics.

9 years 11 weeks ago
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ScotsAlan:

I hate malls Coin.  First thing I do is look for the fire exits. Feck me, they are designed so you cant find your way out at all.  I think the idea is to keep you there till you have no money left.

 

Hate them, hate them, hate them. Give me sky above my head, and slippy marble pavement under my feet.

9 years 11 weeks ago
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