QKL Stores Inc. engages in the operation of retail chain stores in the People’s Republic of China (PRC). The company operates 26 supermarkets, 18 hypermarkets and 4 department stores in northeastern China and Inner Mongolia. The company’s supermarkets and hypermarkets sell a selection of merchandise, including groceries, fresh food and non-food items. The company has five distribution centers servicing its supermarkets. The company is the first supermarket chain in northeastern China and Inner Mongolia that is a licensee of the Independent Grocers Alliance, or IGA, a United States-based global grocery network. As a licensee of IGA, the company is able to engage in group bargaining with suppliers and has access to approximately 2,000 private IGA brands, including majority that are exclusive IGA brands. The company’s stores are spread throughout northeastern China and Inner Mongolia with a concentration in Heilongjiang Province. Its supermarkets are designed to carry a selection of grocery, meat, produce, liquor and tobacco, clothing, household items, small electronics, jewelry and general merchandise. The company’s supermarkets carry merchandise divided into three major categories, such as grocery, fresh food, and non-food items. The company’s grocery items include prepared or packaged foods, including instant foods, canned foods, packaged rice and wheat powder, and crackers and chips; bulk (unpackaged) grains, including rice and ground wheat; bottled water and beverages; cigarettes; and certain non-food items, such as cleaning products, cosmetics, and disposable razors. The company’s fresh-food items include fresh raw meat, which the company cuts and packages; cooked meats; fresh seafood; fresh bakery items, including breads, buns, dumplings, and other self-prepared foods; fresh noodles and pastas; fresh milk, yogurt, and eggs (supplied fresh every day); and packaged dumplings (supplied fresh every day). The company’s non-food items include all non-food items, except cleaning and cosmetic items included in grocery; primarily, clothing and shoes; books and stationery; bedding and home furnishings; small electronics and household use items, such as irons, electric shavers, hair dryers, and massage machines; and office supplies, toys, sporting goods and other items. Private Label Some of the merchandise that the company sells in its supermarkets is made to its specifications by manufacturers, using its QKL brand name. The company refers to such merchandise as ‘private label’ merchandise. With private label merchandise, the company entrusts the manufacturer to make the product and to select the name and design. Department Stores As of December 31, 2014, the company operated four department stores through QKL-China’s subsidiary, Daqing Qinglongxin Commerce & Trade Co., Ltd. (QC&T). The company’s department stores are located in the same buildings as the company’s supermarkets and are licensed to sell all of the non-food products sold by its supermarkets. The company’s department stores sell brand-name and luxury clothing and accessories, cosmetics, small electronics, jewelry, books, home furnishings, and bedding, and contain a movie theater and a traditional beauty salon. Suppliers Suppliers The company’s major suppliers of merchandise in 2014 were Daqing Lvlei Economic and Trade Co., Ltd; Daqing Liangjia Economic and Trade Co., Ltd; Daqing Hongtaiyuan Economic and Trade Ltd; Daqing Tianyi Food, Ltd; Daqing Green Grassland Dairy Sales Co., Ltd.; Harbin Hongyang Economic and Trade, Ltd.; Daqing Kun's Economic and Trade Co. Ltd.; Qingan Bolin Rice Industry Co., Ltd; Harbin Fuyu Trading Co., Ltd.; and Daqing Tonghaiyuan Economic and Trade Co., Ltd. Strategy The company’s strategies for profitable operations include buy-side initiatives to reduce supply costs; focusing on merchandise with higher margins, such as non-food items, foods that the company prepares itself and private label merchandise; and increasing reliance on the benefits of membership in the international trade group IGA. The company’s strategy is to expand its current market share and to benefit from the anticipated growth in China’s retail industry. Intellectual Property The company has registered the name ‘Qingkelong’ as a trademark in the PRC. Competition The company competes with Wal-Mart, Carrefour, Tesco, Dashang Supermarkets, and Mankelong Supermarkets.
qkl stores inc (QKLS:NASDAQ CM)
4 Nanreyuan Street
Phone: 86 45 9460 7987
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