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  • Competition causes Yeli China to lose footing

    Competition causes Yeli China to lose footing

    While revenue rose 47.6 per cent for the quarter ended June 30 for China Sports International, its footwear subsidiary Yeli China is facing difficulties.

    The Singapore-listed company has changed its financial year end from December 31 to June 30, meaning its current period covers 18 months.

    For the latest quarter, revenue amounted to about RMB22.71 million (US$3.4 million). For the 18 months ended the same date, revenue grew by 4.8 per cent to about RMB358.8 million. The slender increase was mainly attributable to persistent and increasing competition in the sportswear industry.

    “Our distributors continued to be wary of the intensified competition and became even more prudent in placing their orders for footwear and apparel products,” says the company.

    However, an increase in OEM orders in first half enhanced revenue performance.

    Footwear sales for the 18 months grew only 2.6 per cent to about RMB345.4 million. The company says the poor economic outlook and lack of product improvement resulted in fewer orders from Yeli footwear distributors.

    Because of the persistent weakening retail sportswear market and intensified price competition, more than half the distributor sales outlets have been closed.

    During the 18 months, Yeli footwear sales were about RMB114.5 million, representing 33.1 per cent of the company’s footwear range, down from 53 per cent.

    For the sixth quarter, Yeli footwear revenue fell 25 per cent to about RMB15.8 million.

    Apparel sales were RMB13.4 million for the 18 months, up from RMB5.83 million, and for the sixth quarter were RMB1.9 million, down from RMB2.9 million.

    Overall gross profit was up 21.5 per cent to about RMB13.9 million for the 18 months, mainly because of the high sales volume from the OEM footwear segment.

    Overall gross profit margin edged up 3 per cent for the 18 months.

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  • New McDonald’s set to expand faster in China

    New McDonald’s set to expand faster in China

    Some 2,000 quick service outlets to open by 2022 in small cities

    McDonald’s Corp, the global fast-food chain that has forged a new partnership in China last month, will expand faster by opening 2,000 new restaurants in the next five years.

    They will be set up mostly in third-and fourth-tier cities with a focus on take-aways and digitalized services.

    The company said it will increase its expansion pace from about 250 new outlets this year to 500 per year from 2022 onward.

    It did not disclose other details like the scale of new investments that would ensue.

    The new partnership, jointly established by CITIC Ltd, CITIC Capital, Carlyle Capital and McDonald’s, paid $2.08 billion for the US-based fast food chain’s business in the Chinese mainland and Hong Kong.

    The deal received regulatory approval and was completed on July 31.

    The new company will become McDonald’s largest franchisee outside of the United States.

    CITIC Ltd and CITIC Capital together hold a majority 52 percent stake in the new company, while Carlyle Capital will hold 28 percent, and McDonald’s 20 percent.

    Currently, McDonald’s operates and manages 2,500 restaurants in the Chinese mainland, including 600 franchises, and 240 restaurants in Hong Kong.

    The new company will manage all the 2,000 new restaurants directly.

    Despite McDonald’s global dominance, KFC, owned by Yum China, has bigger presence in the Chinese quick service restaurant. Yum China runs more than 5,000 KFC restaurants in over 1,100 cities and counties.

    KFC’s wide presence in China appears to have bolstered the confidence of McDonald’s investors in the new expansion plan, industry insiders said.

    The new partnership of McDonald’s aims to achieve double-digit sales growth annually in the next five years.

    The goal includes delivery coverage of 3,375 restaurants or over 75 percent of the total.

    “China will soon become our largest market outside of the United States,” said Steve Easterbrook, McDonald’s president and CEO.

    “The mainland and Hong Kong are leading the global system in capturing new consumer trends such as delivery and digitalization and it is driving strong performance and growth momentum.”

    Zhang Yichen, the new chairman of McDonald’s China, said restaurant ownership at the local level will foster entrepreneurial spirit within the company.

    For example, considering the strong demand for takeout food and the population density in China, Zhang emailed Easterbrook regarding the need to develop a customized software system for the Chinese market.

    The latter dispatched McDonald’s global IT team to support the China business. Now, the take away operation in China tops the global chain’s comparable systems across markets.

    Zhang said CITIC has more than 1,400 bank branches in China. Besides, CITIC and Carlyle’s extensive resources and market expertise in real estate, supply chains, retail, consumer goods and technology, coupled with the global quality standards and branding of McDonald’s, will prove to be a winning formula.

    Jason Yu, general manager of Kantar Worldpanel China, a firm that researches shopper behavior, said, “CITIC operates many branches in third-and fourth-tier cities, and they understand the local market, hence will be able to help McDonald’s to choose appropriate sites for new restaurants and also provide useful real estate information.”

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  • Low Production Hurting South Korea Economy

    Low Production Hurting South Korea Economy

    The recovery pace of the South Korean economy has remained feeble for months as an upturn in exports and private consumption was offset by weak industrial output, a government report said Tuesday.

    “The South Korean economy saw its exports and investment continue to rise and private consumption make a slight rebound, but its recovery pace remained lackluster due to a slowdown in the production of mining and manufacturing,” the finance ministry said in its monthly economy assessment report called the “Green Book”, Yonhap reported. The report is based on the latest economic indicators of such key factors as output, exports, consumption and corporate investment, which could provide clues as to how the economy has been fairing in recent months.

    Exports extended its winning streak to nine months, which started in November last year, thanks to stellar overseas sales of chips and petrochemical products. Facility investment rose 5.3% in June from a month earlier on increased demand for semiconductor equipment and machinery, spearheading the recent economic recovery along with exports. Retail sales moved up 1.1% on-month in June on rising demand for clothes and cosmetics, turning around from a 1.1% drop from the previous month.

    However, such gains were offset by the 0.2% on-month fall in industrial output and a 2.4% drop in construction-related investment. The finance ministry said that external downside pressures, including geopolitical risks centered on North Korea and trade issues, will weigh on the South Korean economy in the coming months.

  • Ericsson launches its 5G platform

    Ericsson launches its 5G platform

    Ericsson has announced it has become first to market with its new 5G platform, comprising combined 5G core, radio and transport portfolios, as well as digital support systems, transformation services and security.

    The 5G portfolio supports federated network slicing for 5G roaming, network slice management, 5G policy and user data, distributed cloud architecture and 5G transformation services.

    “With this launch, we introduce our 5G platform to support the beginning of a huge change in network capabilities, allowing our customers to offer more advanced use cases and new business models to their customers. It is an important milestone enabling operators to continue their evolution journey to 5G,”

    SK Telecom and Ericsson separately revealed that they completed the first end-to-end demonstration of a 5G trial system at Ericsson’s lab in Kista, Sweden late last year.

    The live demonstration was based on joint development with SK Telecom. It used Ericsson’s Cloud Core, virtual RAN and over-the-air new radio/LTE interworking technologies.

    Nokia separately announced it has successfully conducted the first connection based on the pre-standard 5GTF interface.

    The trial at Oulo in Finland used commercially available 5G-ready Nokia AirScale radio access and AirFrame data center platforms. It used an Intel 5G mobile trial platform designed to support both sub 6-GHz and mmWave 5G bands.

    “This first 5G connection is a true landmark for the telecommunications industry, and yet another mark of Nokia’s capabilities in 5G,” Nokia head of 5G Harold Graham said.

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  • Single Men Power Shift in Retail Market

    Single Men Power Shift in Retail Market

    The landscape of Korea’s retail industry has shifted over the last few years due to the growing number of singles, online purchases and frugal purchasing patterns.

    Traditional retail giants like department and superstores have seen revenues drop, while convenience stores and online shopping malls are booming.

    Shinhan Card analyzed spending patterns by 700,000 heavy spenders who account for 10 percent of total credit card users in 2010 and in March to May of this year.

    It found that the proportion of credit-card spending at department stores, supermarkets and TV home shopping channels fell from 46.1 percent to 31.1 percent over the last five years, while that of convenience stores and online shopping malls rose from 30.1 percent to 43.5 percent.

    Single Men

    Convenience stores stood out among 14 retail sectors considered in the survey. Based on credit card spending, convenience stores’ share of the retail industry rose from 1.6 percent in 2010 to 5.7 percent this year, a 3.5-fold increase.

    In contrast, department stores’ share dropped by 25.7 percent, and superstores’ 34.2 percent. The share of TV home shopping channels plunged 37 percent.

    One 36-year-old single office worker frequently shops for groceries at the local convenience store. He buys mainly milk and drinks and ready-to-eat meals for two to three at a time, with an eye on special offers. “Products are more expensive in convenience stores, but I don’t really buy much,” he said.

    He rarely buys fresh produce since he does not cook at home. Only once every two to three months does he go to the supermarket. When it comes to clothes be buys online.

    Single men in their 30s are mostly responsible for boosting convenience store sales. One out of every three customers or 32.5 percent are men between the ages of 28 and 37. But a growing number of men in their 40s are also switching to convenience stores.

    The consumption patterns of singles here are similar to those in Japan, which saw a rise in one-person households and an aging society 10 to 20 years earlier than Korea.

    Online Shopping Malls

    Online shopping malls have also gained a solid share of the domestic retail market, accounting for 37.8 percent of credit card spending, which is higher than the market shares of supermarkets (18.6 percent) and superstores (18.4 percent) combined.

    In terms of per-capita monthly credit card spending, Koreans spent W365,000 at online shopping malls, compared to W159,000 at superstores and W122,000 at department stores (US$1=W1,164).

    Mobile shopping accounted for 48.5 percent of online shopping mall revenues.

    Prudent Spending

    As unemployment remains high among young people, consumers in their 20s are keeping their wallets shut. Credit card spending in March to May by men in their 20s rose only W50,000 compared to five years ago, and credit card spending by women in the age group only W90,000.

    In contrast, credit card spending among consumers in their 30s to 60s rose by around W100,000 to W220,000.

    Kim Dae-jong at Sejong University said, “Women in their 20s usually spend money on cosmetics, clothes and accessories but are cutting down on unnecessary purchases due to the tough job market. But as more and more people put off marriage until later in life, spending by working women in their 30s has increased.”

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