Photo by Aaron Shen
## Shanghai – A Restaurant Graveyard

Shanghai is a vibrant city, fast moving and development is out of control. If it wasn’t for the buildings being torn down and built up on a daily basis, it would also be known as a restaurant graveyard.

Restaurants in Shanghai range from the local cart vendor, peddling US$.020 sticks of “meat”, to 200g Rib eye fillets at Char Rooftop Bar (Hotel Indigo, Shanghai Bund) for a piddly 2400RMB. The restaurants at the extremities at each end of these ranges seem to be the ones that stay around the longest.

Why? One caters to the daily needs of hundreds (thousands, millions, billions?) of people, and one does business the way other restaurants in Shanghai do not. Obviously, investment in a street cart is not likely one of most foreign investors’ goals, and there is no sales margin that could be shown to prove otherwise. So what does one need to succeed at the other end of the scale?

In all forms, when competition is fierce, differentiation and brand recognition are paramount factors. The ideas to succeed in China are numerous, but some of the basics are often overlooked, and are what the survivors do well. A few factors that segregate the good from the general…

Rare Products – Where on Earth did you find this?!

Wagyu steaks, Coffin Bay Oysters, Norwegian Salmon, Belgian Beers, Sotuh American Red Wine – These are things not regularly available to consumers in Shanghai, and definitely not for a decent price.   With 800 000 foreign expatriates, and a growing Chinese middle and upper class, delicacies are a way to have oneself on the map. But while not easily available, competition is still fierce, so:

Location and Presence – Oh my god, the view is amazing!

Location is of paramount choice in Shanghai – if you are not in the French Concession, Jing’An or The Bund, chances are people aren’t going to spend the extra half an hour getting to a restaurant that perhaps, some others in the area can provide. The bund is an obvious choice, with views from Char Bar, The Hyatt’s Vue Bar and the multitiude of Restaurants and bars in Bund Number 18 beyond compare (Pollution permitting), this is an integral part of the atmosphere in eating out in Shanghai. While the prices in these places are downright abhorrent for Asian meals (An outing is generally $150-300 USD/Person), the right atmosphere can quiet the worst criticism of the empty wallet. Unfortunately for startup restaurateurs, capital requirements for floor space in these areas are astronomical – and not going down anytime soon.

The Backroom – Love thyself

In the position this author is in, it is almost a daily basis to meet chefs, managers and sales teams, and consistently these are hired from overseas. Given the limited range of food that most Chinese households are able to consume, and the fact that most of the animals served are often strange looking (though delicious, even if you don’t know what it is), cooking styles are not suited to that of the western, or alternate Asian tastes, hence needing an expertise that can only be gleaned by a childhood and adolescence consuming herd of cattle. This, and the fact that these people work hard to get overseas often results in a product with just that little bit of extra pride, be it the meal, the management or the marketing.

Service – “Do you have any recommendations?” – “No.”

Anyone in China for even a few short minutes will realize that the service attitude is not entirely “developed” yet in China. Within a few minutes, complete silence, inattention to queues, ignorance of customer questions, a look of hatred permanently attached to the eyebrows and large loogies being hocked in all corners becomes part of everyday life. This is where restaurants that really stay in Shanghai really differentiate themselves – immediate greetings, good phone service, inquiries into how you are being served and, at the very least, a friendly smile are rare, and in restaurants and hotels such as those in the bund and French concession, are a welcome relief from the chaos.

The poorest service in many Western countries could still be considered welcome here in China, and an attitude that is prevalent among the Chinese is “Do a job well, get 30. Do a job poorly, get 30”. Service is not something you can import, and while local workers will do the hardest to put in the hours and impress in those probation months, you can be sure that once the heavily protective labour laws kick in (Thanks Mao), you can be in for some headaches. A slightly higher pay, months of training and observance – This is where a manager’s attention to detail is paramount.

Nowhere in this list will you see “can be done for $X or less”, and that is unfortunately where Shanghai becomes a graveyard for restaurants, and many other business.   Undercapitalisation is a major issue facing firms in China – incorrectly assuming China is a cheap startup operation, proper allocation of resources is what separates the good, from the living.

So what does it all come down to, to succeed in Shanghai? Attention to detail, attention to service, case selection and differentiation – and above all, persistence..