An article on People's Daily comments that spurs and standardization are needed to promote the steady development of voluntary chain. Specifically, it holds that small and medium enterprises (SME) in circulation business should have the access to clearer idea about the voluntary chain as a business model which is still in the budding stage in China. Complicated legal relationships involved in the collaboration, it says, should be defied by laws and it is also necessary to speed up the establishment of the credit system for enterprises.

On September 27, Nibo Sanjiang Shopping Club based in Ningbo in coastal Zhejiang Province signed an agreement with IGA, world's largest supermarket network, to become IGA's first Chinese member. Before that, China's first retailer's union, Shanghai Jialian, based on free will was born as the result of the unity of four retailers.

These initiatives seem to indicate that voluntary chain, as one of the three models for chain stores which also include direct selling and franchising, is getting closer to consumers.

The organization normally is made up of a leading company and some small and medium retailers. Benefits from their cooperation on procurement, distribution and operation bring them advantages on purchasing, information sharing and brand building. Unlike direct selling or franchising, members in a voluntary chain still holds the property rights of theirs assets and have their own independent financial system.

For example, Jiajiayue in Shandong, a member of Shanghai Jialian, offer apples at favorable prices to Bubugao in Hunan, one of its allies in the same organization, in return for local fruits at a discount. This brings down costs and benefits consumers.

More than 99 percent of Chinese enterprises are in small and medium size. When SMEs joint hands in an organization, the market competition is believed to be fairer and in better order. Besides that, small and medium retailers have massive appetite for labors.

Small and medium retailing companies collaborate in this way to make the effect of scale they need to compete with large players. Voluntary chain has a history of more than 70 years in Europe and US. IGA in US generated 21 billion USD of sales last year. SPAR, the biggest giant of this kind in Europe, has 15,000 members in 34 countries and recorded 26.8 billion euros of sales annually.

Chinese small and medium sized retailers extend their big nets around the country and have developed mature operation model and regular customers. But they fell mounting pressure from foreign and domestic retailing giants.

China will fully open its retailing sector to foreign capital as of December this year. As a matter of fact, foreign competitors have made presence and strengthened their foothold in this promising market.

Carrefour has 44 stores while Wal-mart has 39 in China. The less developed western region will soon become a new playfield for retailers. Guiyang, the capital city of Guizhou Province in the south-west of the country, opened a Wal-mart store this year.

But foreign retailers have to secure their brands as hard as, or even harder than they do in other countries beyond China. Chinese consumers are growing rationality in their consumption. Low prices are not the only reason for their choices. Quality is the key. The lesson that Carrefour has learned from its involvement into selling of fake Maotai alcohol last year may cost its pace of expansion in China.

By People's Daily Online