In my line of business I'm learning something new everyday - thanks to our group's clients. They always come up with interesting problems to wrangle with. Recently I was examining a large amount of China city data for an international customer who required insights on how to build up their network. I was looking at different ways of modeling potential target customers for retail development. What does that mean? Well, say you are a fast food chain, or QSR as they prefer to be called, and you are thinking of expanding into China at 100 stores/year. What are you going to do? Start playing Monopoly with real money? More likely you will try to map what has worked for you in other territories into the one you are entering. You will make assumptions about customers, preferences, spending, take into account what you can learn locally, and create a profile for what the average customer is and how much they might be willing to spend.
Internally it actually works more like this: your operations will probably begin a discussion with international, then bounce over to the data people, then bounce over to finance, then up to management, then back to international. You get the picture. Lots of bounce. By the time the ball has stopped bouncing, the landscape you are looking at has completely changed. But has the target customer changed? Most likely not. They just have more choices, and you as the QSR have to deal with more competition.
In Econ 101 we were taught that competition is a good thing for all the standard reasons - lower prices, better product, more selection, etc. But actually, I'm learning that competition is good because you can actually count it. If you can count it, then you can map it. If you can map it, then you can make predictions. If you can make predictions, then you can model it, and if you can model it, you can build a financial analysis.
So, I was thinking about all this while looking at target customers in terms of how banks, car dealerships, QSRs, appliance stores, sports outlets, etc, were spreading out in different cities to try to reel them in, like fish in a net. Retail naturally follows the movements of the target customer, and in China, as cities expand so quickly, people are really moving around. By following the growing shape of the competitive landscape, you can gain some insight into the way city areas are developing, and most importantly - where the fish are.
After spending all day looking at all these little consumer fishies swimming around my excel sheet, I started playing with different data layers, or sticking with the fishing analogy - trying out different line and lures. I also had access to different types of boats with interesting names. One was Brand Recognition. Another was Social Development. A third was Lifestyle Indicators.
So for my particular experiment, here's how the fishing stacks up around different smaller cities in China. Sorry, I can't tell you what kind of fish or the exact lure I was using. That would be cheating! But we are available for chartered tours.
Small boat, faster lure, light line:
1. Fuzhou
2. Kunming
3. Zhengzhou
4. Wuxi
5. Ningbo
6. Fushan
7. Changsha
8. Qingdao
9. Suzhou
Big boat, slower lure, heavy line:
1. Xiamen
2. Changchun
3. Changsha
4. Ningbo
5. Zhengzhou
6. Qingdao
7. Fushan
8. Xian
9. Wuxi
Medium sized boat, flashy lure, mid-weight line:
1. Qingdao
2. Shijiazhuang
3. Changsha
4. Wuxi
5. Yangzhou
6. Xiamen
7. Dalian
8. Ningbo
9. Changchun
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