How to Identify and Address The Most Profitable Demand? Ashley Wu Associate Director Nielsen Strong Network is #1 Driver to Success Every company recognizes the importance of network, but often speed-to-market and lack of rigor leads to a not-scientific-enough approach to city and location selection, resulting in poor results. CEO, Leading Retailer Copyright © 2010 The Nielsen Company. Confidential and proprietary. Rapidly Increasing (and Aging) Car Parc in China • Car parc* is expected to grow to 150 million by 2015…60% vehicles over 4 years old • Aftermarket is growing significantly faster than OEM car market • Rapid expansion of aftermarket network is a must for exponential growth *Parc - The total number of cars on road Copyright © 2010 The Nielsen Company. Confidential and proprietary. Tire Company Case Study • Background: Focused on aftermarket needs of premium car brands • Growth Opportunity: Expand to top 50 cities in next 3 years • Three Key Questions: 1 Which top 50 cities by rank order? 2 What is the capacity of each city? 3 What locations within in each city? Copyright © 2010 The Nielsen Company. Confidential and proprietary. Network Expansion Strategy Which market? City Potential Index How many per city and what size? City Capacity Assessment Where? Location Selection and Evaluation Copyright © 2010 The Nielsen Company. Confidential and proprietary. Nielsen’s Location Analytics Deployed Client Data (store characteristics, activity, sales) Cartography (Location of Interest) Consumer Profiles Demographics Competitive Landscape Income Proxy Car Parc* *Parc - The total number of cars on road Concentration of Auto Workshops Copyright © 2010 The Nielsen Company. Confidential and proprietary. Highest Car Ownership Regions Beijing 29.55 Personal Car Ownership (Cars per 100 Household) Beijing Highest with 30 Cars per 100 Household Shandong ng jia 16.00 e Zh .72 23 Shanghai 14.04 Guangdong 23.31 Yunnan 14.88 Copyright © 2010 The Nielsen Company. Confidential and proprietary. Next Highest Car Ownership Regions Personal Car Ownership (Car Households (HH) per 100 HH) Beijing 29.55 Hebei 10.13 Tianjin 11.86 Mon I nne r 9. 51 Xing Jiang 7.61 golia d Shan 0 0 . 6 1 Shanxi 10.03 ong Shanghai 14.04 Guangdong 23.31 Sichuan 6.83 Liaoning 7.23 g an eji h Z .72 23 Jiangsu 11.92 Yunnan 14.88 Guangxi 10.68 Hainan 10.72 Fujian 9.57 Copyright © 2010 The Nielsen Company. Confidential and proprietary. Personal Car Ownership - All Regions Beijing 29.55 Car Households (HH) per 100 HH Gansu 2.53 Hebei 10.13 Ningxia 5.30 Tianjin 11.86 Shan'xi 5.72 Ji Lin 5.95 olia Mong Inner 9. 51 Xing Jiang 7.61 dong Shan 16.00 Shanxi 10.03 Tsinghai 3.95 Tibet 13.28 ng Gua 1 23.3 Sichuan 6.83 Hei Longjiang 3.23 g an eji Zh .72 23 Shanghai 14.04 g don Jiangsu 11.92 Yunnan 14.88 Jiang Xi 4.31 Guangxi 10.68 Chongqing 4.90 Guizhou 4.85 Henan 5.03 An Hui 2.76 Fujian 9.57 Hainan 10.72 Hunan 5.51 Liaoning 7.23 Hubei 4.41 Copyright © 2010 The Nielsen Company. Confidential and proprietary. Dealership Network for Premium Car Brands Dealerships spread across 200 cities Top Tier Car Brands Audi (244 dealership) Jiamusi Qiqihar Daqing Harbin Jilin Urumqi BMW (291 dealerships) Yanji Shenyang Tonghua Fushun Anshan Jinzhou Chengde QinhuangdaoYingkou Chifeng Hohhot Mercedes Benz (140 dealerships) Mudanjiang Songyuan Changcun Karamay Panjin Beijing Fengrun Dalian Baoding Tangshan Tianjin Datong Yulin Cangzhou Dongying Weihai Taiyuan YangShijiazhuang Yinchuan Dezhou Qingdao Lvliang quanHandan Jinan Zibo Weifang Yan’an Jining Linfen Changzhi Rizhao Anyang Xining JinchengXinxiangZaozhuangLinyi Lianyungang Yuncheng Lanzhou Xuzhou Luoyang Zhengzhou Huai’an Yancheng Yangzhou Taizhou Pingding Xi’an Nantong Bengbu shan Shanghai NanyangNanjing Changshu Hefei Liyang TaicangJiaxing Nanchong Mianyang Xiangyang Ma’ Anshan Yixing SuzhouCixi Yichang Deyang WuhuHuzhou Ningbo Chengdu Wuhan Hangzhou Zhuji Yiwu Linhai Leshan Shangrao Taizhou Yueqing Quzhou Changsha Chongqing Wenzhou Nanchang Nanping Rui’an Xiangtan Zunyi Ningde Zhuzhou Hengyang Fuzhou GanzhouSanming Putian Chenzhou Qujing Longyan Xiamen Guiyang Guilin Quanzhou Zhangzhou Kunming GuangzhouJieyang Meizhou Liuzhou Yuxi Huizhou Shantou Zhaoqing Foshan Shenzen Nanning Zhongshan Zhuhai Zhanjiang Baotou Ordos Haikou Copyright © 2010 The Nielsen Company. Confidential and proprietary. City Potential and Prioritization Index Rank City Potential Index Rank City Potential Index 1 Shanghai 130 11 Chongqing 30 2 Beijing 93 12 XiAn 26 3 Guangzhou 63 13 Dalian 26 4 Shenzhen 47 14 Dongguan 25 5 Chengdu 43 15 Changsha 24 6 Wuhan 41 16 Zhengzhou 24 7 Shenyang 40 17 Qingdao 22 8 Tianjin 36 18 Jinan 20 9 Hangzhou 33 19 Changchun 19 10 Nanjing 32 20 Taiyuan 18 Rank City Potential Index 31 Urumqi 13 32 Nanning 13 33 Hefei 12 34 Ningbo 12 35 Zibo 10 36 Guiyang 9 37 Xuzhou 9 38 Nanchang 9 39 Shantou 8 40 Huhhot 8 Rank City Potential Index 21 Suzhou 17 22 Harbin 17 23 Wenzhou 17 24 Wuxi 16 25 Kunming 15 26 Xiamen 15 27 Fuzhou 15 28 Changzhou 15 29 Shijiazhuang 14 30 Foshan 14 Rank City Potential Index 41 Lanzhou 8 42 Tangshan 8 43 Zhuhai 8 44 Yangzhou 7 45 Yantai 7 46 Zhongshan 7 47 Jilin 7 48 Huizhou 7 49 Taizhou 7 50 Luoyang 7 Copyright © 2010 The Nielsen Company. Confidential and proprietary. Top 50 City for Tire Company’s Expansion Huhhot Tangshan Taiyuan Lanzhou Luoyang Yantai Zibo Xuzhou ChangzhouYangzhou Hefei Taizhou Guiyang Fuzhou Foshan Shantou Zhongshan Dongguan Zhuhai Huizhou Copyright © 2010 The Nielsen Company. Confidential and proprietary. Network Expansion Strategy Which market? City Potential Index How many per city and what size? City Capacity Assessment Where? Location Selection and Evaluation Copyright © 2010 The Nielsen Company. Confidential and proprietary. City Capacity Assessment Factors: • Purchasing power • # of premium car parc • Catchment area • Assessment of revenue expectation • # of areas with automotive, transport concentration using location of interest (LOI) data • Conducted for cities where Tire Company is already present (i.e., Beijing, Shanghai and Guangzhou) Copyright © 2010 The Nielsen Company. Confidential and proprietary. Nielsen’s Location Analytics Deployed Client Data (store characteristics, activity, sales) Cartography (Location of Interest) Consumer Profiles Demographics Competitive Landscape Income Proxy Car Parc* *Parc - The total number of cars on road Concentration of Auto Workshops Copyright © 2010 The Nielsen Company. Confidential and proprietary. Suggested Workshops Per City for Tire Company 1 Shanghai 5* 11 Chongqing 6 21 Suzhou Workshops per city 4 2 Beijing 3* 12 XiAn 6 22 Harbin 4 3 Guangzhou 4* 13 Dalian 6 23 Wenzhou 4 4 Shenzhen 10 14 Dongguan 6 24 Wuxi 4 5 Chengdu 9 15 Changsha 5 25 Kunming 3 6 Wuhan 9 16 Zhengzhou 5 26 Xiamen 3 7 Shenyang 9 17 Qingdao 5 27 Fuzhou 3 8 Tianjin 8 18 Jinan 4 28 Changzhou 3 9 Hangzhou 7 19 Changchun 4 29 Shijiazhuang 3 10 Nanjing 7 20 Taiyuan 4 30 Foshan 3 Rank City *SH, BJ and GZ advised to open additional workshops Workshops per city Rank City Workshops per city Rank City Rank City 31 32 33 34 35 36 37 38 39 40 Urumqi Nanning Hefei Ningbo Zibo Guiyang Xuzhou Nanchang Shantou Huhhot Workshops per city 3 3 3 3 2 2 2 2 2 2 Rank City 41 42 43 44 45 46 47 48 49 50 Lanzhou Tangshan Zhuhai Yangzhou Yantai Zhongshan Jilin Huizhou Taizhou Luoyang Workshops per city 2 2 2 2 2 2 2 2 1 1 Copyright © 2010 The Nielsen Company. Confidential and proprietary. Network Expansion Strategy Which market? City Potential Index How many per city and what size? City Capacity Assessment Where? Location Selection and Evaluation Copyright © 2010 The Nielsen Company. Confidential and proprietary. Site Assessment Approach 1 • Sites selected / ranking applied 2 • Ranking based on: – Location of interest – Nearness to auto/transport hub and premium shopping/leisure areas – Purchasing power of the neighborhood 3 • Success score assigned to each store location 4 • Results used to: – Quantify the site assessment criteria – Standardize and speed up the site selection decision-making cycles Copyright © 2010 The Nielsen Company. Confidential and proprietary. Site Assessment Green dots —80% chance of success Red dots—60% chance of success Blue dots—40% chance of success Purple dots—20% chance of success Copyright © 2010 The Nielsen Company. Confidential and proprietary. Tire Company’s Network Expansion Strategy Open 250 stores in first 3 years Penetration first, intensity second: Start with one store in the city, then add more stores in the same city 3 year network expansion plan: • 1st Year add 100 stores; Top 30 cities • 2nd Year add 50 stores; Top 50 cities • 3rd Year add 100 stores; Top 50 cities Copyright © 2010 The Nielsen Company. Confidential and proprietary.