Chapter 544 – Multilateral cooperation (Part 6 of 6)
When everybody thought that the contracts will be signed soon, Superman Li’s assistant, Mr. Su suddenly asked.
“Mr. Feng, you all want to set up so many big supermarkets at once. Can I ask about the market position of your supermarkets?”
“Market positioning? We want to create a core concept of one-stop shopping! We are not managing a normal supermarket. We are building hypermarkets! We will satisfy the consumers in terms of prices, varieties, qualities, convivence, customer service and lots more. We want to meet our customer’s needs. Tai Hua Supermarkets will be the best hypermarket in any cities and will be the City’s landmark!”
Feng Yu was copying the Carrefour model from his previous life. Carrefour was the first to open hypermarkets, and also Europe’s and the world’s number 2 supermarket chain. After Carrefour entered the Chinese market, it climbed to the top position of the Chinese Supermarket industry. Their model was very successful!
Mr. Su frowned. City’s landmark? Their target was too high. It was not an easy task for a supermarket to become a city’s landmark.
Nevertheless, Mr. Su felt that Feng Yu wanted was quite good. It would not be easy to reach this goal. It will take lots of energy to take care of the prices, varieties, qualities, convivence, and customer service. Was the target set too high?
“You want good quality products at low prices, and you still want to have a wide variety of goods? Then where are you getting the profits from?” Mr. Su asked directly.
The prices for good quality products were not low. To have a wide variety of goods, that means some of the least popular goods will be left on the shelves and might even expire. There will be high wastage, and their cost will increase. Where will they get the profits from?
Feng Yu smiled at Mr. Su and looked at the rest. Seems like everybody there was interested to know the answer. These people had discussed this before he arrived.
“What? Don’t all of you know the answer to this simple question? If we are going to rent the location of our supermarkets, how much will it cost? We had set a budget of 100 million RMB for a supermarket because it includes the land parcel! Our supermarket will be the core, and we will open a hypermarket. The remaining empty spaces can be rented out. With our hypermarket pulling in customers, do you think the rents will be low?”
“Also, we are opening more than 20 supermarkets at once. We are a huge sales platform for manufacturers. Why can’t collect slotting fees?”
“Wait.” Mr. Su interrupted Feng Yu. “I understand what about the rents, but what is slotting fees?”
“Simply put it, it is the entrance fees to our stores! The products sold in our supermarkets will be classified based on the product’s brand influences. The bigger the brand’s influence is, the lower the fees are. The lower the brand’s influence is, the higher the fees are. This is because they are making use of our supermarkets to display their products!”
Mr. Su, including the rest, jaws dropped. Feng Yu was too bold to suggest this! Collecting entrance fees? Only those prominent shopping malls can do that. Their supermarket was still new, and there was no awareness. Furthermore, they were just a supermarket. Why would the suppliers be willing to pay to display their goods with them?
“All of you don’t believe me? What if our hypermarkets are featured in China’s national media? If our hypermarkets are visited by China’s top leaders? Do you think the suppliers will object to us collecting fees from them?” Feng Yu smiled and asked.
It suddenly dawned on Fu Guangzheng and Li Zekai. Both of them remembered that Feng Yu had said he could let their supermarkets to be featured on CCTV. CCTV was the national TV station of China and had a significant impact on the Chinese. If this works out, then the slotting fees will not be a small amount. The rentals will also be raised.
“If that’s the case, then the slotting fees should generate a high revenue to us. Is there anything else?” Mr. Su continued to ask.
Of course. For example, we can use a force promotions model. Our supermarkets will have promotional products every day to increase customer flow. The suppliers will take turns to offer their products, and they have to pay for the marketing fees. During the promotions, we will place the discounted products at a prominent space. This is also good for the company to increase its brand awareness.”
“Force promotions? That means the suppliers will have to suffer losses to help our supermarkets increase our customer flows and profits? Are you sure they will agree to this?” Mr. Su frowned and asked.
“They will surely agree. I can guarantee this. Don’t forget that we will be China’s top supermarket chain. We will have the highest customer flow and sales volume. Also, the suppliers will be taking turns to offer discounts on their products. I am not asking them to do promotions every day. When it was another supplier’s turn, you will also benefit from it. This is like a collective effort to advertise. Whoever that do not agree will not be allowed to sell their products in our supermarkets!” Feng Yu said with an arrogant tone.
“Anything else?” Mr. Su felt this might be possible, but it will still depend on the actual situation.
“Of course. It is also like collective advertising. For instance, during festivals and weekends, we will be giving out leaflets. Whoever wants their products to be featured on the leaflets will have to pay the advertising fees and also the people distributing the leaflets. We can also collect a display fee. We will allocate a space along the aisle or an empty space for the suppliers to display their goods. These places will attract the most attention and will increase their sales. The suppliers cannot use these places for free. If they want those places, they have to pay for it!”
In Feng Yu’s previous life, there were some “God-level” packers at supermarkets whose daily salaries were more than thousands and even more than tens of thousand RMB. It was because the way they packed the products will attract the customers’ attention and increase brand awareness.
“Lastly, our fresh produce sections must ensure our products are the freshest. We can get these products directly from the farmers, and we can even build a supply base. There will be no middlemen, and if our stocks are running low, we can stock up anytime. We want our customers to get used to coming to our supermarkets to buy their groceries every day. After they had bought their vegetables, meat, etc. they can buy other items like salt, cooking oil, etc. When they are buying those items, they will see the milk, ham, instant noodles, etc. nearby. So, even if the customer had come to buy 2 cucumbers, they will end up purchasing lots of other items.”
“I have access to many suppliers for a wide variety of goods in China. I do not need to say how much cheaper I can get those goods and all of you will be supplying the imported products and this will attract more customers. Mr. Su, do you have any more questions?”
“I have no more questions. Mr. Feng is indeed like what my boss said. Although this might seem to be an idea out of nowhere, you have already planned everything out.”
Mr. Su finished talking and turned to Li Zeju. Li Zeju nodded. This was an indication that the Li Family will be part of this venture!
Translator’s notes: I had learned a lot about supermarkets from this chapter. I did not know that other than selling products, supermarkets still have other sources of revenue.
Carrefour
https://en.wikipedia.org/wiki/Carrefour
Slotting fees