China Catalyst: Powering Global Growth by Reaching the Fastest Growing Consumer Market in the World

CHAPTER 7

Distribution Issues and Trends

In the fall of 2010, the British grocery giant Tesco started thinking about how to gain market share for its chain of Home Plus supermarkets in South Korea. The company explored how it might be able to gain access to new consumers and increase its market share without the necessity of large capital outlays to build new stores. It was a daunting challenge and required new thinking. The new ideas generated by the company produced an innovative way to reach consumers that is rapidly making its way around the world.

Instead of building new stores, Tesco set up what has become known as a virtual store in the country's subway stations. Riding the subway can sometimes be monotonous, especially for those who take the same route back and forth every morning and evening to and from their jobs. Commuting along the same daily path can lead to the endless task of figuring out how to keep the mind engaged. Reading a newspaper, working on a crossword puzzle, or reading a book are some of the most commonly chosen activities.

The pervasive rise of the smartphone has made time consumption a lot easier on these kinds of commutes, and it is the smart phone that Tesco began centering on in its new strategy on to reach new customers in new ways. Mobile phones are ubiquitous in South Korea. The country has one of the highest mobile penetration rates in the world and a user base that consumes data services ferociously.

Tesco used these insights and found a place ...