Always refreshing to have a truism that’s repeated parrotlike as a godgiven truth exploded and who better than the folk at Access Asia in Shanghai to do it. This week they address the issue of the stampede at a Carrefour in which three people were killed. Coming as it did right before some pretty unpleasant inflation figures (mostly food related rises, the highest being 50 per cent year on year for pork), many of my colleagues linked the two and blamed the stampede on desperation induced by inflation. Not so says Paul French of Access and proceeds to demonstrate why very convincingly:
The sad events in Chongqing come after a similar discount promotion on cooking oil at a Shanghai Tescos, where fortunately nobody died, but 19 people were hospitalised. These events have been linked by some in the press, notably the FT, to the current bout of inflation in China, suggesting that the crazy response to these price promotions is a sign of hoarding in expectation of higher prices. We beg to differ. Not that there isn’t food inflation (though there’s also still deflation in prices of many non-food items, such as cars and appliances), but that these incidents are not linked, and we are yet to hear consumers voice open concerns about inflation. It’s simply not on the tip of everyone’s tongue (excepting bank analysts), whether it should be or not. Deep discounting, price promotions and loss leading have all been part of the Chinese retail scene for years now. Indeed, events such as those seen in Chongqing and Shanghai recently are not rare or unique. Anyone who tracks Chinese retail knows that these sort of scrambles for special offers occur on a weekly basis. Fortunately, a tragedy on the scale of Chongqing hasn’t happened before. Sometimes these stampedes are responses to loss leading and discounting (a DIY chain did a buy-one-get-one-free on tins of paint recently, and a full scale brawl erupted in the aisles involving about 300 people), sometimes nothing more than a new store opening, such as has been seen at several new branches of Wal-Mart in the last couple of years, with scrums outside the doors before opening and sometimes just frenzy, such as the mobs kicking in the doors at the opening of several casinos in Macao recently. The government has been aware of it, and has called on retailers to tighten up security at such events (which do generate enormous publicity and to be frank – a stampede is not necessarily bad news for the retailer, at least everyone knows you’ve got low prices). The government stepped in a couple of years ago to stop loss leading when stores started selling below wholesale prices, leading to stampedes and angry customers when supplies ran out or stores introduced limits (i.e. bottles of Coke at below wholesale price – but limited to a couple of bottles only per customer)…. The truth is that the Chinese consumer (despite the hype brigade who think they’re all buying LV handbags!) likes a bargain, and is still willing to queue up early, for a long time and go to extraordinary lengths to stretch their personal and still limited disposable income. We would suggest that the stampedes a couple of years ago at Carrefour stores in Shanghai, when pensioners were offered free breakfasts as a promotion, weren’t anything to do with inflation but with OAPs liking the idea of a free meal – that situation sounds comical, but was actually quite scary, despite the angry crowd being largely composed of teetering septuagenarians. Also, on the same day as the Chongqing tragedy, a stampede and fight broke out outside a Wuhan museum that decided to promote itself by offering free entry for just one day – unlikely people were stocking up on museum visits to protect themselves against entry fee hikes! Or what about the stampedes that occurred during the opening of the Shenzhen metro – stock piling tube train rides were they? The Sands casino – stockpiling gambling chips? Similar scenes have been seen at department stores, cosmetics stores, shoe stores and many more over the last few years Inflation-related? No. Good deal related? Yes. Chinese consumers, particularly in tier 2 and 3 cities (such as Chongqing and Wuhan), are still at a relatively early stage of consumer behavior. Many have limited budgets, and wish to stretch them as far as possible. Many are retired people (look at the ages involved in the recent Chongqing and Shanghai stampedes) who have relatively small pensions and time to queue to save, and not much else to do, to be honest. The government is now moving to ban deep discounting and time-limit promotions, as well as loss leading, to calm these events down. Retailers had better take note, and beef up their security too. But let’s not add to the inflation scare stories by linking stampedes and inflation together. It doesn’t add up.