Forbes came across the wire with a very interested article entitled Adidas Gets Red Flag, Not Gold Star, From Chinese Consumers on the recent mess Adidas found itself in over their use of the national flag.

Apparently starting with a new line of gear to show its support for China (an Olympic play), some reporters looked at the new gear in a different light… breaking the law.

According to the article:

Adidas’s Shanghai office on Sunday issued a global recall of a line of sports bags and polo shirts printed with a clever design melding Adidas’s corporate logo with China’s national flag.

Rather than get clever with national icons, treasures, and likenesses, I suggest brands just stick to good old fashioned banner ads.  They are a lot cheaper to remove once their negative impact is recognized.

After all.. Impossible may be nothing… but Nationalism is a Big Deal.

Now that was cleaver!

There are more than a few firms in China that have tried and failed to build a successful sales structure, but AMWAY is not one of them.

Even with their model being lumped in with pyramid scams for a long time, and thus being restricted in China up until a few years ago, AMWAY has successfully built a grassroots network of agents.

This is really brought out in the Journeyman clip below.

It should be said, that their primary competitors, Mary Kay and NuSkin, have also developed large platforms in China as well… and it should also be pointed out that all three have won AMCHAM CSR Awards for their innovative programs.

Last year while enduring a jack hammer educed headache I wrote a post entitled Nanjing Road… Will the Construction Ever End? where I wondered if the construction on Nanjing Road would ever come to an end. After all, it is the showcase street for Shanghai.

Well, 12 months after that post, while working on a retail project I was given an excuse to put together an update.. and while one would think we would be coming to an end, the construction on Nanjing Road clearly has a way to go.

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In yet another retail fatality, I am sorry to announce that the WB store is officially gone. Cut down to half the size a year or so ago, this store has been rumored to be on the brink for a while now… and it was just that time.

Unfortunately, the WB store is not the only store to find Kryptonite on Nanjing Road

Just stumbled onto an article in the USA Today Home Depot at home in China for holidays (via Blogging Stocks) .

To say the least, Home Depot had a difficult time getting into the market. they had several failed merger attempts, several management turnovers, and in the end paid a tidy sum to take up Homeway. Or as it is stated in the article:

After a decade of courting various Chinese companies, Home Depot (HD) finally bought its way in with the December 2006 purchase of Home Way, a Tianjin-based retailer which modeled itself on the Atlanta-based company. “They called themselves Home Way as they wanted Home Depot to do a deal with them, even 11 years ago,” when the company was founded, Verschuren said.

It was an epic journey that was discussed around the retail world for a while, but they made it and with the pressure of getting into the market behind them it was time to get down to business

she admits it was pretty rough before the company invested millions to remodel the original 12 stores it bought from Home Way, train the 3,000 employees and start operating under its own brand in August.

Home Way needed to strengthen its offerings in a number of ways, including its assortment of products, the kitchen, bathroom and flooring sections. And the store exteriors had to be redone. The remodeling was completed without shutting the stores.

Where I had to laugh a little bit was when the reporter covered the fact that Home Depot is selling Christmas trees and ornaments in the stores… and the response they received

“Lighting Christmas trees is a great tradition in North America. We’re delighted to continue this tradition in China,” Verschuren told a crowd of American businessmen in the parking lot, and a larger crowd of bemused onlookers.

“I have no idea what that tree is doing here. What’s Christmas?” asked migrant laborer Yang Kunji.

While Home Depot is a firm that I grew up with, I sometimes have to wonder who is polling their client base. B&Q, their largest competitor globally has executed in China in a very large way. they have been agressive, they have built through organic and acquisition, and they don’t have Christmas trees.

PErhaps Home Depot in their formative years are best to look to their partners for guidance. Model themselves after the best & grow strong.

Nanjing West Road retail property is buy far some of the hottest around, and for years the CITIC Starbucks was an icon as it had probably the best spot in town for people watching.

But a couple months ago that all changed as Starbucks closed their doors on that property and moved downstairs.  for the average consumer, this may seen odd… but for those that know real estate, that is a sign that someone was either not willing to pay street level rent or someone else was willing to pay more than market.

Well, it didn’t take long for the answer to come out, and it turned out that Mont Blanc (who previously leased the space next to Starbucks inside the mall was taking over that spot, and the one about it on the second floor, to creae Mont Blanc’s worldwide flagship store.

Where this gets mind boggling is that it turns out they are paying 11USD/ meter/day.  that is 11 USD … PER METER… PER DAY.

Now, at 800 – 1000 meters of space, that adds up to a whopping amount of rent every month that I would guess is over 250,000USD a month… and you know what that means…. all those hawkers on the street with their Mont Blanc pens are gonna have to go.  Cause Mont Blanc is gonna need to sell a lot of pens and cuff links to make their overhead.

Let’s just hope they fair better than others who sought riches on Nanjing West’s Golden quarter km.

One of my very first projects in China involved a study of 400 farmers in the Jiangsu province bringing agriculture to market. My team at the time went through town after town and interviewed farmers, wet market buyers, truckers, and food processors to understand the process as it stood .. .and we used that to develop our platform.

It was one of the most interesting projects that I worked on, and one that I wish had received the funding (we were 3 years too early).

So, while doing some research on trucking in China, I ran into a report online entitled The supply chain and management of fresh produce in China (PDF Report Here) by Huang Zu-hui, Song Yu and Liu Dong-ying of Zhejiang University that examined the process by which produce makes its way from the farm to the market (retail, wholesale, and export).. and it reminded me of many of the things we found in our earlier study.

While obviously a rough draft, and written by students who were ag. majors rather than logistics majors, they have done a pretty good job of mapping out the current situation in China, what it should look like, hurdles in way, and some of the catalysts that will drive change.

For anyone looking to understand the pain that big box retailers (Carrefour, WalMart, Tesco, Lianhua, etc) go through in China, I highly recommend taking the 10 minutes to run through it. It is an interesting read, and as a rough cut produced by students, it is without a sales pitch or spin.

Importers Defend Trade With China ,US needs ‘new vision’ for trade,
and Bills Targeting China’s Trade Practices Draw Concern From Business Leaders
During the last few months of product recalls, the difference between what the papers and politicians have been saying has been quite different from what we have been saying on the ground. It has been easy for finger pointing and broad brush statements to be taken as fact, and as this has continued the fears of trade wars and backlash have grown. Well… it appears that some U.S. buyers and lawmakers have realized just how tied they are to China, and that if they do not do something to protect the relationship that they may be the ones to feel the pain.

All Copies Of Beijing Times Have Been Sold
One of .the most interesting stories about the lengths competitors will go to in order to prevent a successful campaign of another competitor, electronics retailer GOME (who just signed deal with Dell) has apparently purchased every copy of the Beijing Times to prevent the 12 pages inserts of their competitor from hitting the streets. While selling out the complete stock of papers is usually considered a huge success, GOME has duped the system and could end up a real mess once the Sunning lawyers come out with their estimates on damages.

Outsourcing and Trade Imbalances (PDF Here):
In response to increased political and public concerns about China in the U.S. from a macroeconomic (manufacturing and trade) standpoint, Henryk Kierzkowski and Lurong Chen of Graduate Institute of International Studies, Geneva have written an excellent paper on how trade benefits all. Even if both partners are running deficits. An interesting article well worth the read as many of the intangible benefits of trade are highlighted. I have always said that the U.S. has been able to defy economic gravity with the assistance of China,and were it not for China, more than the quote 2 million jobs would have been lost. I have never been able to articulate or prove that… but this article begins the conversation.

In China, Being an Olympic Pig Sounds Better Than Being a Human and China Bloggers Stew About Olympic Pigs
China’s recent inflation numbers shocked many analysts, and for those of us in China the shock comes every time one goes to the store. Prices are up.. especially on pork. Add to this, stories of product safety becoming more and more prevalent, and it is easy to see why local residents are up in arms when they hear about the Olympic stock of pigs who are on organic diets and going for daily jogs around the yard. For many Chinese who believe that foreigners are given preferential treatment, they now have issue to hold onto, and as residents are told to clean up their acts for the Olympics, the are some who are beginning to wonder what it is all about when they have to eat pigs eating who knows what while those invited to the greatest show on earth have a red carpet rolled out across the Great Wall. Just fuel for the nationalistic fire..

Nearly 8 years since Starbucks moved into the Forbidden City, and 8 months since TV anchor Rui Chenggang renewed the call for their immediated closure, Starbucks has announced they will close.

some news outlets are reporting that they were kicked out, but I am more likely to believe that they were (as Eden Woon states) given an offer they could refuse:

Businessweek: Starbucks, for its part, downplays the importance of the store’s closure and says the company was given the option of continuing its coffee business in the same location, albeit not under the Starbucks name. “We would have had to use the Forbidden City as our brand. The other choice was to shake hands and part ways,” explains Eden Woon, Starbucks’ vice-president for Greater China. “We decided we can’t operate a store that on the marquee says Forbidden City Coffee.”

For those in retail, the fact that Starbucks was able to hold this piece of property for so long is something to be respected in economic terms as most major brands have difficulty cultivating brand loyalty in China, and store turnover rates run high.

Macro wise, this closure has little symbolism for or impact on investment in China. Starbucks stores around China are opening at a faster rate than they were before, and by all indications Starbucks is doing quite well here.

It was just time for this store to close.

the last 24 hours have been active for the journal today, and they have done a good job of reporting on the above three issues:

1) The environment:
In their article Walk of Shame Jane Spencer reports that dozens of MNCs in China have been highlighted as polluters in a recent report entitled Greece Choice. A compilation of records from around the country, this report has been back by 20 environmental NGOs and outs Pepsi, Suzuki, Nestle, and Danone.

ctually a few months old (see our post here ), this report highlights what is to come for companies operating in China who thought that they could circumnavigate the environmental safeguards of their home countries by opening up shop in China.

Bill Valentino’s (probably the most well respected foreigner in the NGO game in China) comment at the end sums it up very nicely “Companies should be getting to this issue before the activists do”.

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