某咨詢報(bào)告中國(guó)路邊的零售業(yè)

TomakemoneyfromtheexpansionoftheChinesemarket,mostoilcompanieswillhavetosellmuchmorethangasoline.JonathanR.WoetzelTheMcKinseyQuarterly,2002Number3CChina抯automotivemarketispredictedtobethethirdlargestintheworldby2023.1Theaccompanyinggrowthindemandforgasolineandrelatedcarfuelproducts梒ombinedwithgovernmentplanstoderegulatethesectorandtheneedtoaddressthechronicinefficiencyofcurrentdistribution梥houldcreateajuicyopportunityformultinationaloilcompaniesaswellasforChina抯twodomesticgiants,PetroChinaandSinopec.GasolinereachesthehugeChinesemarketthroughafragmentedretailanddistributionnetworkofabout90,000stations,almostallstateowned.Manyarerunmoreassinecuresthanasbusinesses,oftenwithastafffourtofivetimeslargerthantheinternationalnormbutwithlessthanaquarteroftheaveragegasolinethroughputofUSstations.TheChinesegovernment,whichiswellawareoftheproblem,hasresolvednottoallowthecountry抯energyinfrastructuretoburdenthewholeeconomy:itisfastderegulatingthesector,whichwillbefullyopeneduptoforeigncompaniesin2004underthecommitmentsattendingthecountry抯membershipintheWorldTradeOrganization(WTO).Foreignoilcompanieshavehithertobeenrestrictedtoone-offlocaldealsinspecialeconomiczonesortiedtoinvestmentsintoll-roadconstruction.Althoughthestageshouldthusbesetforcannycorporationstomoveintothemarket,itremainsunclearhowtheywillmakemoney.Competitionisalreadydrivingdownretailmarginsongasoline,whilepricesforthebeststationsiteshavesoaredasChina抯largedomesticoilcompanieshaverushedtobuythem.OilcompaniesintheWestfacingsimilarmarginpressuresknowthatmostgasolinestationsareviableonlyiftheyoffergeneral-retailfacilitiesatleastaslargeasaconveniencestore,inadditiontogasoline.ThisistrueinChinaaswell.Thehighest-volumesitesmightbemadeprofitableontheirfuelrevenuesalone,buttherestneedsubstantialnonfuelrevenuestomakeaprofit.Thestrategicimplicationsareclear.InChinaaselsewhere,thefirstdecisionforanoilcompanyiswhethertoownandoperatesitesormerelytosupplythemwithgasoline.Ifthecompanyoptsforownership,ithasachoice:toadoptaretailstrategyandpursuenonfuelrevenuesfromaportfolioofretailsitesortotargetonlythehighest-volumesites,usingthemtobuildahigh-qualitygasolinebrandthatcanalsobeofferedthroughindependentretailers.Atpresent,theChineseoilmajorsarepursuingneitherstrategy;theyhavesimplyrushedtograbanyavailablesite,wheretheysellasmuchpetroleum-basedproductaspossiblewhileignoringtheretailpotential.Themultinationalshavebeenmorejudiciousinselectingsitesfortheirinitialjointventures,buttheytoohaveneglectedthestrategicchoice.Unlessallofthesecompanies,domesticandinternationalalike,changetack,theirinvestmentsinexpensiveChineserealestatemayunravel.ThemarketandsiteeconomicsChina抯dominantoilcompaniesareSinopec,inthesouthandeast,andPetroChina,whichhasthemorecomprehensiverefineryanddistributionnetworkofthetwo,inthenorthandwest(Exhibit1).Thetwocompaniesaimtocapture,betweenthem,70percentofChina抯gasolinesalesvolumeby2005.SincetheirIPOs,in2000,theyhaveinvestedheavilyinpetroleum-relatedinfrastructureandinbrandbuilding.Havingalreadyraisedtheirshareofsalestomorethan40percentandsecuredmostoftheprimesitesinthebiggestcities,theyareontracktomeetthistarget.Until2004,multinationalcompanieswillbeallowedtoownoutrightonlythe300orsositestheynowpossessthroughlocaldealsstruckbeforegovernmentderegulationofforeigninvestmentinthesector,inthemid-1990s,buttheycanbuilduptheirholdingsthroughjointventureswithChinesecompanies.BP,ExxonMobil,andRoyalDutch/ShellareestablishingjointventureswithPetroChinaandSinopecbycontributingcapitalforthepurchaseofsitesandbysupplyinghigher-marginpremiumfuels;BPandPetroChina,forexample,aimtoboosttheirholdingsto950stationsbyacquiring670stationsfromlocalcompaniesinFujianandGuangdong.Suchjointventuresbindthepartnersonlyinspecificprovincesandhavesofarbeenformedinjust4outof27ofthem.Fortheremainder,theoptionsofbothpartiesarestillopen.The60percentofsalesnotcontrolledbythetwoChineseleadersiscurrentlyheldbyvariousquasi-governmentalentities,includinglocalandprovincialauthoritiesandstate-ownedenterprises.Citygovernments,forexample,havestartedtheirownretailinggroups,oftenbuiltaroundlocalhighway-constructionprojects.Someprivateoperatorsarealsoemerging:forexample,ChinaResourcesEnterprise,aholdingcompanybasedinHongKong,has23stationsandisthinkingaboutopeningmore.Butingeneral,smallercompanies,dauntedbythebiddingpowerofPetroChinaandSinopec,areholdingback.BothofthemajorshopethattheirspendingwillcreateaprofitablestructureforChina抯gasoline-retailingindustryafterthemarketopensupin2004.Internationalexperienceshowsthatgasolineretailingtendstoberelativelyprofitablewhereverthetopthreeparticipantscontrol80percentofthemarket,growthisstrong,andthesupplyofgasolineisshort.Chinashouldmeettheseconditions.PetroChinaandSinopecareconsolidatingthemarketbybuyingouttheirindependentrivalsand,giventheirheadstartoverthemultinationals,shouldsucceedingainingaleadingpositioninthemarket.Growthindemandisforecasttoremainhigh,especiallyforhigh-qualitygasoline.Andalthoughsupplyiscurrentlyinbalancewithdemandatthenationallevel,itrunsshortinthecoastalregions,wherebothdemandandgrowtharegreatest.Retailmarginsaretighteningfast,however.AsinalmosteveryderegulatedChineseindustry,domesticpricecompetitionwillprobablybesevereasthemarketopensup.PetroChinaandSinopecfoughtseveraldamagingpricewarsfrom1997untiltheywererestrainedin1999bystate-imposedpricecontrolsthatarenowbeingremovedintandemwithChina抯entryintotheWTO.Theresumedpricecompetitionwillintensifywhennewforeignanddomesticcompaniesarepermittedtopurchasesitesin2004.Moreover,allcompaniesinthemarketwillgaingreateraccesstogasolineasimporttariffsforrefinedproductsfallto5percent,from9.Wherecomparablereformshavetakenplace梚nAustralia,France,Israel,Japan,andNewZealand梤etailmarginshavedroppedbyuptohalf.Inanticipationofthisfiercelycompetitivefutureenvironment,PetroChina,Sinopec,andnewentrantswillingtotakethemonareratchetingupspendingonlocations,brands,andmarketing.Goodlocations梩he20percentofurbangasolinestationsthatgenerate60percentoftherevenues梐rescarce,andzoningregulationsandthehighcostoflandlimitnewentrants.Theseprimesites,whichmovemorethan1,500tonsinvolumeandgenerateover900,000renminbi($108,700)infuel-relatedgrossmarginsayear,currentlysellforupto20,000,000renminbi,threetosixtimesthepriceofastationwithequivalentturnoverintheUnitedStatesorEurope.Theinflatedcostsatthehighendofthemarketarealsodraggingupthepriceofsmallerstations,to5,000,000to10,000,000renminbi.Thecostofpromotionalcampaigns,includingtelevisionadvertising,isaboutassteepasitisindevelopedmarkets.MakingsitespaySellinggasolineanddieselfuelthroughretailoutletsisacostly(andthereforerisky)business.UnlessPetroChina,Sinopec,andtheforeignjointventurepartnersofbothcompaniesreconsidertheirindiscriminatebuyingofsites,theycouldfindthattheirstationportfoliosholdmorebalancesheetliabilitiesthanassets.演It端i范s施vi罰ta答l即to矛m柔ak非e棕th掉e滴si煉te勢(shì)s仰pa季y,蒜b柳ut連h爪ow北?蒙Th揮er碗e率is國(guó)l軌it礦tl擔(dān)e賤sc娛op舒e架to鄙c房ut公o責(zé)pe席ra塊ti漁ng牛c刻os墾ts燥,竿wh攀ic炊h稻ar容e箏al揮re惑ad留y較lo稅w虎by徑g慌lo扣ba氣l反st舌an蹤da漠rd聯(lián)s;亦l(xiāng)遮ab敲or灶,猴fo污r妙ex園am鄙pl疲e,躲i拒s童re眼la蓄ti享ve闖ly順c言he念ap帶i三f卸in鋪ef輛fi愚ci泉en蜜t.點(diǎn)C傾ap預(yù)it沒(méi)al騎c儲(chǔ)os好ts鼓a景re光l延ar仔g(shù)e港ly辰f留ix央ed值o火nc針e枕a幻st膽at宰io曾n呀ha家s較be往en廚b獵ou姐gh藏t.況W成ho響le敘sa船le劍m余ar電gi反ns蠅,粱on粥w抬hi聞ch父t從he往C言hi洽ne過(guò)se藍(lán)m蔥aj旦or櫻s圾ha閘ve暑u歷su滔al曠ly葬r雪el糟ie卸d秘to跟s閑ub夕si鳴di肉ze并t奶he式ir塵r柿et惑ai杜l片ou基tl竿et徒s,泰w線il襯l冒pr解ob己ab堪l(fā)y亭d央wi悄nd巷le尋t仿o打th巖e留co繪st統(tǒng)o廊f(wàn)室tr土an窩sp膛or誘t直an弱d甩st第or資ag峽e茫as蟻W令TO泊c裙om幻mi臭tm欠en亦ts秤a腔nd義o羽th母er餡r墊ef輩or辰ms沖t姑ak第e種ef殺fe辱ct比.泊Th種e仁tr養(yǎng)ut術(shù)h愛(ài)is翅t(yī)洪ha汽t聯(lián)th妄e疲ec題on陸om恢ic以s畝of心m濱os西t中si聽(tīng)te柱s哥wo蒜n抰淹w銜or忍k雜un搜le嚴(yán)ss宵t痕he羅re同a暈re掉s披ig更ni蝕fi影ca氏nt茶n熱on坦fu際el洽s稻al咳es曉,鉤fo銜r(shí)善th勢(shì)ey店i姻mp用ro銜ve攝s妖it師e祖ma莫rg望in腎s皇by嫩l拜if身ti夫ng寬r塔ev蔥en館ue標(biāo)s參wi鑄th姥ou縱t唱ra勿is賴in摸g寇co狹st真s份in難a填c泥om息pa賣ra叢bl尸e圍wa波y蟻(E秀xh再ib胸it廣2橋).猴P析et虎ro蠢le附um翼c于om困pa膛ni悠es打t趟hu拖s股ha踩ve巴t瓣hr咳ee再p暴os平si付bi典li么ti款es央:銜th枯ey繡c插an猶f依oc浪us和o帳n鵝th程e敘re巧ta窮il貍o僚pp俗o(hù)r激tu味ni幕ty鳥(niǎo)o潛f碗th傳ei不r炊si小te調(diào)s,題c帥on團(tuán)ce伙nt律ra委te悶o逢n色a牽hi輔gh建-q銷ua詢li國(guó)ty猾f壩ue天l鼠se列rv徒ic友e會(huì)th須ro色ug岔h藥th小e丘hi塌gh兩es醒t-喊vo歪lu雄me鉛s漿it廳es逆,醉or參i亂gn踩or祥e鐘re洪ta機(jī)il姨a蹄lt踢og凡et位he的r賭an再d漸be控w棒ho字le互sa拘l(wèi)e甜rs傻o有f百co興mm飄od竭it嘴y茂fu葵el芽s.愛(ài)Th我e乏re舒ta押il倆s箱tr遼at稍eg氣y槳El暗se薯wh貌er厘e(cuò)外in獎(jiǎng)t泳he休w數(shù)or歉ld弦,籍mu吧lt獄in譯at摩io非na刊l軋oi貸l醉co噸mp插an植ie稈s月ha駁ve掏c褲om辜pe喉ns山at鐵ed火f管or找t擺ig懷ht酒m式ar株gi稀ns筋o堅(jiān)n棍ga趙so抖li預(yù)ne霸b邀y多in擠ve謊st負(fù)in掘g喉in米a椅dd寇it懼io衰na蹲l額re崇ve莊nu戒e城st顯re興am診s.騾T美hi勉s普ki懇nd資o氏f瞎st珠ra托te跑gi撕c理be筐ha適vi辨or攻t月ak首es圣p狹la跌ce筒i份n增th亂e荒co概nt孫ex到t耗of井a(chǎn)健g繼lo雄ba被l陜r(jià)e燕ta護(hù)il壩s遭ec梢to真r蠶mo誓vi桐ng聽(tīng)f隸ro換m侄ow壘ne與rs復(fù)hi剩p默of痕p論ro精du蜓ct痰c塘at顏eg濤or吃ie職s嶄to炸o膊wn求er扔sh賢ip斯o方f天re算ta貼il濁小"o外cc慚as嗎io納ns曾"梩隔he順w帳ay毫-t剛o-鐵wo藝rk庸o蔥r淘we系ek否en謠d充st邊op捆f凡or茄g盲as館ol淚in墳e計(jì)an兵d芬in稼ci株de隱nt管al籠s,祝r眾ou用ti程ne焰S低at傭ur得da楚y撥sh摩op昨pi損ng尊,紙th吹e催le節(jié)ss宏f腐re策qu社en擔(dān)t炎ho競(jìng)us球eh婚ol餃d南st義oc歉k-翼up撫.賢G熱as哥ol鉤in館e吧st泄at逃io腔ns胸a敏re奪d欠es源ig筋ne裁d掉to贈(zèng)a疤tt悼ra死ct甘c鞏us彈to桐me突rs史w課ho趨w神an適t從mo閃re叛t哄ha粉n只ju遮st想f唇ue化l術(shù)fo鍵r誕th卡ei穗r州ca維rs妹,忘an虧d劍in激E瓜ur盜op裝e殼an劇d肅th轎e遍Un按it壺ed啄S氏ta掌te圾s更t窄h(huán)e吳se憶f掀or罵ma侵ts裙n暖ow糧g壟en駕er萬(wàn)at死e舞as圣m奮uc針h宣re割ve劫nu緒e夸fr躲om邪e借xt奔ra斥s愁as慧f董ro堪m須ga翻so擁li掘ne突.鈔In喉d嗽ev袋el磨op褲ed具e汗co堅(jiān)no例mi及es周,緒th廢is芒m決od碰el駱h挽as候b聯(lián)ee擴(kuò)n誼ad闖op膠te本d貞sl愛(ài)ow愛(ài)ly修b案ec壟au疫se肚i勇t萬(wàn)ta撫ke瓣s冰ti萍me餡t鬼o香co嗚nv隊(duì)er誼t選or祥d蛙is餅ma劍nt冬le合t疾he精l爪eg鋒ac有y甜as喬se濟(jì)ts叫o掘f癢a徒lo本ng辦-e崗st打ab管li檢sh侄ed宴g混as體ol圈in殺e-蝦on現(xiàn)ly奔s劫tr絹at銀eg責(zé)y.杠C沃hi宜ne蓮se閥p射la膏ye障rs乖h惰av型e糟an址o宵pp猜or僑tu尸ni做ty奮t急o糞go族s肢tr格ai扮gh柱t袍fr粗om長(zhǎng)t田he攀b餐as軋ic濱g享as賢ol掙in平e劈mo泥de城l類to民i公nt苦eg趴ra肌te滑d孝re味ta限il投in澇g.雁Y扮et途s唐o想fa涂r,種P瓦et版ro駐Ch雖in簽a,超S殘in肺op段ec撤,猛an赴d漂ev耀en張t月he嶺m廳ul揮ti睡na飄ti襲on皮al眨s絕ha置ve獸b宮ee溝n腰re改lu沖ct獎(jiǎng)an縫t淚to添p逝ur映su龍e董no輪nf圾ue派l直re童ta糟il務(wù)s飼tr茂at劍eg哀ie譜s升on爺t卷he城ir對(duì)c乞ur暴re靠nt神s筋it脈es車,辛fo綁r組th手ey魚(yú)h皺av姨e錯(cuò)be潮en鐘p幣er旺su畢ad克ed咽t亮ha割t,沒(méi)i暢n遇Ch弊in桂a,鹿t播he趟u喊bi貨qu權(quán)it昆y僅of徹l狐oc界al娘m絞om紗-a盆nd漏-p捷op掘s際to型re姜s斯me母an斬s否th適at死c縱on才ve稅ni巡en蹈ce懸s謙to碌re漫s邀at左g拍as蒜ol揀in秋e你st件at堂io征ns得a倒re童r褲ed饑un統(tǒng)da棵nt途a妹nd喚t簡(jiǎn)ha蜘t雹ma救rg瞧in陷s渾on逆n陡on產(chǎn)fu火el弟i鼻te杯ms植a植re吧t四oo示t飄hi往n.下T猶he訓(xùn)m宅ar掃ke戴ti舉ng畫e隨ff會(huì)or婚ts過(guò)o噴f卵th頸es擺e捉co慧mp斧an擠ie涼s偽ha器ve骨t截hu添s等be受en城c拍on橡fi膚ne勇d放to件g掀as盒ol肝in裹e,戶a壁nd企t笨he遷ir舉s陽(yáng)it剝es吸o似ff志er捉n升o革mo勉re董t自ha踢n焰a欄li戶mi片te閣d勉se眨le抵ct即io坡n殃of居l穩(wěn)ow舊-c嚇os繳t焰ad影di誕ti撥on裹al揀g侍oo跑ds搏a障nd蔬s掌er迎vi教ce稠s礙su桂ch氧a喉s寶ci暮ga傻re演tt逗es僅,四sn藍(lán)ac栽ks覽,士an厲d負(fù)au釣to玩l頁(yè)ub京ri畜ca深nt班s.Nonetheless,theintegratedretailmodelforgasolinestationscansucceedinChina全.牙As睡w造or種ki對(duì)ng猴h扭ou喇rs泡a勁nd原p慣ro魚(yú)sp昨er全it畢y它in昨cr跟ea墓se優(yōu),合th易e儉Ch種in捧es貞e貝ar獻(xiàn)e崇mo古re雹a提nd握m們or晝e霸wi砍ll血in濤g榜to蓬p衡ay象f敘or管c槳on很ve也ni嚼en薯ce旅a咬nd拔b蜜ra考nd隸s.犧C蹤ar序d趴ri畢ve漲rs脹,內(nèi)wh犯o繼ar扎e辯ge關(guān)ne死ra占ll動(dòng)y詠am冰on饑g快th朝e永m(xù)o帶st黎a傾ff壯lu庭en處t穴pe糊op挖le跑i可n康th列e宣co判un夕tr叢y,黎a谷re胞b筆eg質(zhì)in頓ni執(zhí)ng設(shè)t將o節(jié)de慚ma草nd款o粗ff設(shè)er乓in梁gs促n泰ot鑰a求va倚il流ab語(yǔ)le銀a認(rèn)t候mo汁m-質(zhì)an浩d-同po零p稅st譜or窩es咬,漆su蒜ch蕉a送s討fo泥re灰ig密n煙br域an盾ds話a多nd奴t暫ec掘hn朱ol脾og水y-喉ba慘se擠d哄se披rv考ic蘆es啊.酒An脾d刻th厭e含ec延on牧om肝ic恒s江sh悠ou紋ld龜w詢or沾k,翼s江in貪ce剪e直ve澡n妙sm燕al含l騾no壇nf虧ue魂l形it廟em灰s呆of衫te捷n架ha任ve涼p碗ro傻fi傷t膽ma令rg印in悔s錄of超m男or賠e哭th浴an霧5砌0釣pe兼rc汪en進(jìn)t.擦O片wn三in傳g拍a跨ne凱tw戀or屢k畢of目s庭it扭es個(gè)f瓶ur計(jì)th絮er訓(xùn)i糖mp坐ro急ve影s納ma縮rg牧in擁s脖fo埋r匹in澡di貧vi修du她al落l傘oc汽at蜘io盜ns含b鉤y岸de缺li秘ve館ri銅ng笑s共ca取le花b漠en墊ef驚it蟲(chóng)s骨fo穗r遷ov披er蜘he解ad辱c凱os領(lǐng)ts助s樹(shù)uc睛h紫as頁(yè)m叔ar喪ke睡ti題ng良a墓nd耳a謀dm泉in民is脊tr碌at伯io境n儀as靈w刪el赴l(fā)私as快p杯ur臣ch勉as優(yōu)in蛾g友sc朽al秘e臺(tái)fo民r彩bo乖th荷f跳ue升l建an叛d危no鼠nf乞ue春l番it絲em扇s.Thekeyistostartwithanattractiveretailsite梡erhapsincorporatedintoanentertainmentorcommercialdevelopmentthatcouldalsodrawpedestrians梐sopposedtoapuregasolinestop.Chineseconsumersarealreadyfamiliarwithretailingconceptssuchashypermarketchains,specialtystores,andgreatlyimprovedsupermarketsanddepartmentstores,whichhaveallemergedoverthepast10to15years.Mostoftheseformatshavebeensuccessful,thoughconveniencestoreshavefallenpreytooversupplyandmarginpressures.2Giventhisrathermixedexperience,profitabilitywilldependonthreefactors.Thefirstisearlyentryintothemarket.Onlycompaniesthathavebeenquicktointroduceinnovativeformatsandtogainnationalscalehavemadetheirretailventurespay.Carrefourledthepackwithhypermarkets,therebysecuringaleadingmarketshareandleavinglocalandforeigncompetitorswithlessattractivelocations.Yettheneedtobuildscalequicklyshouldn抰persuadecompaniestooverpay;insteadtheyshouldlookforopportunitiesinmidsizecities,whichrepresentupto40percentofnationaldemandforgasolineandwhereretaildemandisnowgrowingfastest.Herethereisstillachancetoenterthemarketearlyandtoestablishastrongbrandpresencewithoutoverpayingforsites.Developingtherightretailpropositionisthesecondfactor.China抯newlyaffluentconsumersaredrivingchangethroughoutthecountry抯retailsectorbyseekingconvenienceandbrandedquality.Foraretailgambittowork,gasolinestationsmustappealtoprosperousconsumers,suchaspeoplewhodrivetheirownprivatecars(accountingforupwardof40percentofnew-carpurchasesin2000),aswellastheyoungmotorcycleriders,whostilldominatestationforecourtsandaremorelikelytotryoutnewandforeignbrands.Toappealtothesecategoriesofconsumers,gasolineretailerswillneedtooffernotonlyhigh-qualitygoods梥uchaspreparedandpackagedfoods,includingasubstantialnumberofforeignbrands梑utalsoservicessuchasDVDrentals,photographicprocessing,apick-uplocationforInternetorders,laundry,mail,andpharmacycounters.Theprecisemixandthedesignofthesitewilldependonthemarketsegmenttheretaileraimstoserve:affluentbutmoretraditionalcardriversoryoungermotorbikeriders.Butretailersmustalsobearinmindtheneedsoftaxidrivers,whostillaccountformostgasolineconsumptioninChinaandlookmainlyforhigh-qualitygasolineandgoodservice.Thethirdingredientisthedevelopmentofretailskillsbeyondtheusuallevelofbasicexpertise.Managinganetworkofretailsitesinvolvesthecontinualdevelopmentofaportfolioofoptionsfromwhicheachsitecandraw梐nundertakingthatrequiresskillsinconceptdesign,partnering,andventurecapital.Thestate-ownedChineseoilcompanieswillneedtodeveloptheseskillsbothorganicallyandthroughjointventures.ThegasolinespecialiststrategyGiventhehighcostofowningalargenetworkofretailsites,andtheaccompanyingpitfalls,oilcompaniesmightdecideinsteadtobecomegasolinespecialists.Pursuingthisstrategywouldinvolvebuyingonlythosehigh-volumesitesthathavesufficientsalesofgasolineandauto-relatedservicestomakeaprofit.Elsewhere,thecompany抯brandedgasolineproductswouldbesoldthroughanetworkofretailpartners.Therationaleofthegasolinespecialistrouteisthatautofuelisatechnicallydifferentiatedproductandthatbranded,qualityproductscancommandapremium.China,withitsshortagesindomesticsupplyanditsincreasinglydiscerningconsumers,isthuspromisinggroundforthegasolinespecialist.Inthecaseofautolubricants,forexample,thequalitysegmentofthemarketaccountsforonly7percentofthevolumebutformorethan30percentofthevalue;marginsareuptothreetimesthoseforthecommoditylubessoldbylocalsuppliers.ThepushtoqualityisalreadybeingpromotedbygovernmentcrackdownsonfakeandcounterfeitproductsandbyWTO-inspiredmovestoencouragetheuseofhigh-qualitygasolinewithcleaneremissions.SinceChina抯refineriesoperatefarbelowinternationalbenchmarksanddomesticallygeneratedhigh-qualitygasolineisscarce,3multinationalcompanieshaveaclearopportunity.About20percentofallgasolinesoldinGuangdong,forinstance,isimported,andindustryforecastssuggestthatthisamountwillriseslowlyoverthemediumterm.FormultinationalsnotboundbyjointventureswiththeleadingChinesecontenders,thegasolinespecializationstrategymakesparticularsense,forforeigncompanieshaveaccesstogoodgasolineandareputationforproductqualityandbrandstrength.Atypicalforeign-ownedgasolinestationinChinasellsasmuchastwotimesmorepremiumgasolinethandolocallyownedstations,anditspricescanbe5to10percenthigherthantheirsevenonbasicproducts(Exhibit3).Multinationalsthathaven抰spentheavilytoacquirelargenumbersoflow-volumestationscancherry-pickthebestofthenewsitesandthenfocusonsupplyinghigh-qualitygasolinetoanyindependentretailersthatemerge.Thegasolinespecializationstrategyreliesonthreekeyelements.First,suchaspecialistshouldbuyonlyhigh-trafficsitesandperhapsdivestsiteswithsmallervolumes.Sitesthatsellmorethan1,250tonsayeararenotjusttheonlyonesthatmakeaprofitwithoutsignificantnonfuelsalesbutalsocancreatelocalbrandpreferences.Second,thespecialistwillneedstrongretailpartners梖oreignandlocal梩ogetthenecessaryscaleforitsproducts.CarrefourandWal-Mart,whicharebuildingnetworksofretailsitesinChina,areobviouspartners,butJet,QuikTrip,Tesco,andevenMcDonald抯mightalsobesuitable.Moreover,sincethestructureofChina抯retailsectorisstronglyregionalincharacter,multinationalswillneedtobuildrelationshipswithanumberoflocalretailpartners.Finally,agasolinespecialistshoulddifferentiateitselfonproductsandservices,notprice.Inadditiontohigh-qualitygasoline,itmustofferquickandfriendlyassistance,convenientlayouts,linkstocompany-orcard-paymentschemes,andservicessuchasrepairsandcarwashes.Toreinforcethemessagethatqualityisparamount,pricesshouldn抰bevisiblefromthestreet.CanChina抯oilcompaniesrealisticallypursuethegasolinespecializationstrategy?Therearecertainlyproblems.Althoughthesecompaniesmaydecidetoscaledowntheirinvestmentinretailsites,thequalityoftheirgasolineandserviceisstillrelativelypoor,andtheirbrands,thoughwell-known,areperceivedasbeingoflowerqualitythanthoseofthemultinationals.4StickingtowholesaleLocalandAsia-Pacificproducersandmerchantrefiners,suchastheChineseNationalOffshoreOilCorporation,thatcan抰investinasubstantialretailpositioncouldsteerclearofretailingaltogetherandfocusonsupplyingindependentretailers.Oncetheindustryhasconsolidated,theremainingoneswillbelookingforasecuresourceoflocalgasolineundertheirownorfranchisedbrands.ForChinesecompaniesthathavealreadyinvestedheavilyintheirownsites,thispathmightnotbeanacceptablechoice.Butformanyregionalrefiners梐tleastifthecostsofdistributionaren抰prohibitive梚tcouldproveasafewaytooperateascompetitionintensifies.Chineseandmultinationaloilcompanies,buildingontheirestablishedsupplypositionsandbrands,areinvestingheavilytosellgasolineinthefast-growingChinesemarket.Butwithfallingmargins,aggressivecompetition,andevermoredemandingconsumers,selling