Transforming a small store into a household name

Updated: 2013-11-22 13:53

By Qidong Zhang in San Francisco (China Daily USA)

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Transforming a small store into a household name

Zhang Jindong, chairman of Chinese electronics retail chain Suning Holdings Group, poses for a photo with guests after unveiling the company's research and development center in Palo Alto, California on Tuesday. Qidong Zhang / China Daily

At age 27, Zhang Jindong opened a 2,000 square-foot air-conditioning store in Nanjing, Jiangsu province.

Twenty-three years later, in an address this Wednesday at the Stanford Center for International Development (SCID) to Chinese and American students and scholars, Zhang's topic was: "Never Give Up - Continuous Innovation of Enterprises in a Time of Transformation."

It was a topic that matched what Zhang had accomplished in those 23 years: expanding Suning Commerce Group Co from that small store to an enterprise with revenue of $38 billion and 180,000 employees, becoming one of the top-three Chinese private enterprises in less than two decades and making himself a household name in China.

Ranked 39th among the top 500 enterprises in China, Zhang uses Suning as an example of self-revolution, continuous innovation, interaction of the Internet with traditional businesses and collaboration opportunities in both markets and technology for US and China enterprises.

"What we have been doing is like compressing 150 years of retail business in the US into 20- something years in China. It's only natural that we face challenges here and there, and as an enterprise we have to go through transformation," said Zhang.

He recalls the early years of doing virtually everything himself with the first group of employees, from selling products and delivering them to after-service work. Zhang expanded Suning from a single-line business to multiple lines of electronics, as well as creating a self-supporting, after-sales service brand, and eventually expanding into a nationwide chain.

"The first transformation came when we were 10 years into our business (2000). I remember having to make a decision to transit from distribution to retail. I had to warn our unwilling managers that whoever speaks the word 'distribution' would have to be let go," he laughed.

"That year, when we announced that our target would be 1,500 retail chains nationwide, we were laughed at big time by our competitors," he said. "But we made it, by occupying markets in large cities such as Beijing and Shanghai, with head-on competition from our competitors. Business was like a battlefield. If I want to describe Suning's strategy, we practiced technique plus inner strength to get there."

In 2004, Suning was listed on the Shenzhen Stock Exchange (SZ002024) and became a household brand name in China.

The second transformation, according to Zhang, came in 2010 on Suning's 20th anniversary when its e-commerce went online. The company launched a development plan with "technological transformation and smart service", aiming to establish 3,500 stores with offline sales revenue of $57 billion, online sales revenue of more than $49 billion and $10 billion in overseas sales.

Zhang said he is in Silicon Valley now to announce the establishment of the Suning Commerce R&D Center USA in Palo Alto, California, a key initiative in Suning's globalization effort and its first overseas research institute. Other R&D centers are in Beijing, Nanjing and Shanghai.

"We have big plans for the US market and you will see a lot of acquisitions, purchase and development in the near future," he said. "Our R&D center will serve as our antenna to gather information so that we make our leap forward with confidence and strategy."

Describing Suning's new business model as marching into an era of online and offline (O2O) in combination, Zhang said it is a strategic effort by the company to explore market strategies in the US that reflect what he has done in China: establish a full-fledged service from online banking to financial services, commercial real-estate investment, mobile service and the company's traditional electronic stores. The difference this time is his intention of combining cloud technology, big data and the Internet into one.

"Another important thing we need to do right away is hiring talents," he said, "Silicon Valley is known for having talent, we are here to welcome all kinds of talents." Targeting a staff of 50 by 2014, Suning plans to expand the center to 200 employees by 2017.

"Business competition actually starts with competition for talent, which is so vital to the success of any company," said Zhang, who called on students at Stanford to join Suning as a career.

He said that in 2003 Suning did something extraordinary in its search for talent: it hired 1,200 college students within a year, a record in China.

Abel Wang, a 15-year veteran with IBM China who recently became general manager for the Suning Commerce R&D Center, echoed Zhang's O2O business plan.

"Picture this: A Chinese citizen who travels to the US, gets sick and needs to see a doctor. With Su Ning Cloud, he is able to get the best doctor recommended to him in the city he travels in, meets a local friend, uses Suning's online-banking service for daily expenses, and even makes his US investment via Su Ning's financial service. All this can be done via our mobile application by being a member of our network. We expect our full-service data base will make fundamental changes to the retail industry once that step is implemented," said Wang.

The R&D center, according to Wang, will conduct research and analysis via public information obtained from social networks such as Facebook, LinkedIn, blogs, WeChat and Weibo on a person's lifestyle, from which it will be reflected into service via the cloud.

"With analysis we will find out what kind of food a person likes, where he likes to dine out and shop for clothes, what brand of clothes he likes to wear, what movie he likes to watch, where he wishes to travel, etc. Then Su Ning Cloud will recommend a healthy lifestyle via cloud service by providing convenience to consumers from gift cards to discounted tickets and coupon," he said.

The second part is searching for investment opportunities from IP and Internet-related business, real estate and financial services in many US cities.

Wang said eventually Su Ning's business model will be like a membership similar to a citizen card to be used for traveling, shopping, getting insurance and sightseeing globally. And his job is to find out if it will work in the US.

Wang praised Zhang's leadership of Suning. "What impressed me most about him (Zhang) is his ambition. I admire his aggressiveness. He is very serious at what he does, and I have confidence we will do well in the US," he said.

With more than 1,600 chain stores in over 700 cities in the Chinese mainland, Hong Kong and Japan, many people in the US will be watching how Suning will do in the US.

Zhang describes Suning's transformation as a train making turns.

"When a train needs to make a turn, it has to follow the track and do it right. You can't rush a train making a turn like a car," he said. "My goal is to turn Suning into a world-class enterprise," Zhang said. "We have to always hold onto the core nature of the industry in this time of rapid technology change. Once we have a goal, we should go forward without hesitation. We should not be afraid of falling. We should never give up."

(China Daily USA 11/22/2013 page13)