By: Lee Rubin, Stephanie Creamer, and Marla Jaffe Integrating CVS into China

Introduction Marketing is “a social and management process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.” An essential aspect of marketing is thus consumer behavior: the understanding of what consumers need and what exactly influences their buying behavior. The Chinese consumer market is evolving very fast and it happens often that new products have been accepted before their forerunners have succeeded in penetrating the market. By inspecting elements such as consumer preferences, shopping habits, and cultural issues a company can determine the level of success they might have in entering a foreign country.

Competitors China Jo-Jo Drugstores Prescriptions, OTC drugs, nutritional supplements, traditional Chinese medicine, personal care products… China Nepstar China Drugstore Ltd. Largest retail drugstore 2,582 stores across 74 cities 13 regional distribution centers

Target Size and Location Shanghai largest number of convenience stores in China with 4100 shops Most populous city in China (14.57 million permanent residents) Largest commercial and financial center Central Shanghai divided into 2 areas: Pudong-economic and business zone Puxi-other side of Huangpo River

Target Size and Location Cont. Foot traffic primary factor in choosing CVS location Diversified location profiles such as subway stations, petrol stations, office buildings, schools, entertainment venues Active social activities can lead to increase in consumer demand

Industry Issues Rising income, urbanism and change in consumer attitude, conveniences stores on rise in large cities of China Chinese convenience store industry not yet sophisticated Profit in Shanghai started only in 2006 Small franchise chain sizes, low levels of franchise connection, and lack of unified procurement leads to high store costs High operating costs = High product prices Many ignored office areas, schools and parks, they are not utilizing location freedom Shanghai, China

Format CVS operations have to be franchised Can utilize reputation to issue equities and bonds to attract capital Employee ownership, mergers, acquisitions or licensing agreements also can be used to bring in capital

Innovation Establish own uniqueness, provide comprehensive and diversified service For financed areas have fax machines, printers, public phones, and lotteries Possibly sell bus,ferry or flight tickets CVS should run 24/7 to maximize convenience

Shopping Behavior Consumers are willing to pay premium of 2.5% for branded products Chinese consumers more wary in 2008 to buy unfamiliar products, so more difficult to launch new products Chinese prefer domestic brand names However, new generations in China adopting Western styles in clothing styles and forms of entertainment Teenagers in particular wear styles and designers from the West

Shopping Behavior Cont. Advertising on TV very important medium, followed by newspaper ads and sponsorships 78% decide in store what they are going to buy 37% easily susceptible to promotions, only 22% stick to original idea before entering store

Expansion throughout China Challenges Consistent population growth Consumer behavior varies in many dimensions throughout regions Overcoming Challenges Differentiated strategy Research and product trials Focus on one regional market like China’s major cities

Works Cited aviour.pdf aviour.pdf us/about/our_publications.aspx#aug us/about/our_publications.aspx#aug2010