Technologies come and go, and urban professionals have no choice but to change with the times and adapt.

This can be particularly challenging for older members of the workforce, who may have been trained decades ago on technologies that have since become obsolete. People like Liu Xinmeng, however, are caught in the middle.

The 45-year old works in administration for a State-owned enterprise, and while she hardly qualifies as 'old', the workplace was not dominated by computers when she started her career, either. Pens and notebooks have given way to computers, printers and fax machines over the past 20 years. Purchasing methods have also changed, and her colleagues in the office equipment department now buy from stationery superstores or over the Internet instead of contacting small retailers or salesmen.

The continually evolving product mix and distribution model in China has created huge market opportunities for domestic and foreign stationery retailers, says Ding Wenbo, a spokesperson for the China Stationery and Sports Article Industrial Association.

Sources from the association reveal that China has become the world's largest stationery market, with turnover exceeding 100 billion yuan (US$12.3 billion) in 2004. That figure is expected to reach US$25 billion by 2008, partly due to the introduction of more office automation (OA) and digital equipment, says France-based information technology and telecommunications industries advisory body IDC.

Foreign firms are enthusiastic about the potential. The top three office equipment retailers in the United States -- Staples, Office Depot and Office1Superstore -- have all established a presence in China. All of them are Fortune 500 companies with over US$10 billion in annual sales volume and more than 1,000 outlets worldwide. They have all set up joint ventures in the country, as well.

Some overseas investors such as Hong Kong-based Officebox are looking to acquire underperforming mainland office supply retailers, in the hopes that they can provide capital and expertise and take advantage of local retailers' sales networks.

Ding says that the arrival of overseas competition presents a challenge to domestic retailers, which tend to be smaller and operate according to traditional sales models. These companies need to consolidate in order to remain competitive, and they need to adopt modern operation models such as one-stop service and online B2B (business to business).

There are other equally important factors to consider, however.

"(Domestic retailers need to) adapt to the local market and meet the specific demands of Chinese consumers," says Li Fei, a professor in the School of Economics & Management at Tsinghua University.

Office1Supermarket specializes in franchise development, and was the first professional office equipment retailer to extend its chain operations into China after the country became a part of the World Trade Organization (WTO) four years ago. It set up a joint venture in Shanghai in September 2001 and plans to open 500 outlets in China by 2008.

Office1Superstore is an international franchise specialist, says Liu Xuedong, general manager of Office1Supermarket China. Liu believes that the franchise model can help the joint venture gain a stronger footing in China, given the smooth flow of capital and its standardized services developed in the United States. It can also provide start-up opportunities for local people.

Insiders say Office1Superstore's distinctive character is its one-stop service. The retailer offers a wide range of products and services, and tries to provide everything shoppers might need under one roof. The US retailer has established over 350 chain shops in 31 countries since it debuted in 1989.

Staples is looking in a different direction, however. The largest US office supply retailer hopes to cash in on Internet-related opportunities.

"It's more efficient and cost-effective than on-the-spot sales," says Chen Yifeng, the chief executive officer of Staples's joint venture in China.

Chen's OA365, the largest office equipment business website in China, signed an agreement with Staples in Shanghai in October 2004. It opened a Beijing branch last month. The plan is to grasp half of the Beijing market over the next several years and bring total revenues up to US$1 billion by 2010.

Chen believes the ambitious plan is realistic.

"We have built a mature B2B platform across the country and Staples is an experienced retailer," he says, adding that foreign management and marketing skills are one of the keys to surviving the competition.

Li says that another reason to focus on China is the access it provides to other markets throughout the Asia-Pacific region. The country is Staples' first foray on the continent.

Although Office1Superstore and Staples are developing distinctively different strategies in China, industry analysts say that there are signs both are trying to diversify by dabbling with elements of the other's operational models. This attempt at diversification reflects the fact that they are aware that their strategies might not work in the unpredictable Chinese market.

"Nevertheless, their targets are the same - getting into the market as quickly as possible," says Ding.

Government purchases account for approximately 30 per cent of the market, and are dominated by domestic suppliers. Large companies, especially multinational firms, are the key targets for foreign-funded retailers. Many of these companies have fixed providers based on their international sourcing systems, however, so it will not be easy to persuade them to change. Some small companies also prefer domestic salesmen, who usually sweet cut them sweet deals.

Domestic consumers might also see the B2B model as unreliable, due to China's undeveloped online sourcing sector. Purchasing transparency is necessary, both Ding and Li say. The government is strengthening laws and regulations to prevent corruption, and online commerce is developing very quickly in China, so analysts predict that foreign retailers should do well.

"But I think it will take a while for foreign companies to gradually build their businesses," says Ding.
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