Shanghai is the biggest city in China. It has a population of 12.7 million, which is number 10 on the list of the world’s largest population cities. Shanghai also is the number one economic center, fastest developing international city and the hottest market for pizza in China. Aside from the large international chain companies, such as Pizza Hut and Papa John’s Pizza, Shanghai also has a large number of independent stores and many Chinese-owned local pizzerias.

Shanghai’s Hengshan Road has a very famous pizzeria called Melrose Pizza, which is this company’s first store. Today Melrose Pizza has 12 stores located in different areas in Shanghai and one in Shuhzhou. Jack Liu, Shanghainese, is the president of Shanghai Melrose Pizza. “Back seven years ago, my American friend and I had opened our first Melrose Pizza restaurant at Hengshan Road in Shanghai,” Jack said. “At that time pizza was a very new and popular Western food for Shanghainese. There were few pizzerias here and not much competition. The rent and labor was quite low at that time, so we made money the first month after we opened. Two years later we had to move because the government needed to rebuild the street where we were located, so we moved across the street. After the road was rebuilt, the price of land in Shanghai was  ‘an inch of land for an inch of gold’. We had to reduce the size of the dining area and tried to push the carryout and delivery business. Our business was running pretty good, the carryout and delivery business reached 30 to 40 percent from 7 to 8 percent in the beginning. We decided this was the running mode for Melrose Pizza; small dining area, target delivery and carryout business. The lower cost of rent helped reduce the risk of business.”

“In today’s Shanghai you can see the pizza stores everywhere. It is unbelievable how fast the pizza business has grown here. Pizza Hut isn’t the only place you can go for good pizza anymore. People make more money than before, so they can afford to try different pizzerias now. Shanghai has the largest population in the whole nation. You can keep your specials and keep your customer groups and don’t have to be afraid of losing to the competition,” Jack said. “We use the best ingredients to keep the best quality of our pizza. Our cheese is  very good cheese imported from New Zealand and Australia and the meat is the best you can find in market, which is from the Hormel Shanghai Company. The flour is from Shandong province and spices are from the McCormick Shanghai company. We pay a high price for the high quality ingredients, but we also keep the traditional taste of American pizza. Half of my customers are foreigners who work or study in Shanghai so they come to Melrose for ‘real’ home-tasting pizza.”

As of 2005, Jack already had six stores. Delivery is more than 60 percent of business, carry out is 10 to 15 percent and dine-in is about 20 to 25 percent.  Melrose Pizza is the only store open 24 hours for delivery in Shanghai. Shanghai is a very big international city, so different people come from different places and have a different life here.  Shanghai, like New York City, is the city that never sleeps.

“The business is pretty good after midnight; customers always order pizza for delivery, but it was really took me a long time to finally find some professional hot bags for delivering pizzas. Sometimes it is difficult to find good restaurant equipment with high quality and fair prices here.” Jack said.  “Another very important element that makes our delivery business so successful are our delivery workers. Most of them are from the poor country side places so they work very hard here. We use bikes and scooters to deliver pizzas. It doesn’t matter how bad the whether is or how late or how far the delivery distance, they always try their best to deliver pizza to customers as soon as they can. As you know, tipping isn’t the traditional way to appreciate customer service in China, but with the great customer service our delivery workers offer, they can make half their salary by tips.”

Great marketing makes great business. Jack has 50,000 flyers sent out every month, and the content of the flyers are different every time. He cooperates with event planners, has monthly event lists on the fliers and puts them on top of every pizza box that has been ordered.

“In 2005, the X-Games came to Shanghai, so we traded for 500 tickets for the game and got free advertising. We told people that if they buy $100 Yuan ($12.5 USD) in Melrose’s Pizza, we would give them two free X-Game tickets. The 500 tickets were gone very fast.” Jack said. “We also cater to some events of the AmChem (American Chamber of commerce in Shanghai),  and many exhibitions in Shanghai. We are also the sponsor for the Shanghai Heineken Open and cater there, too. Sometimes we may not get all of our money back from selling pizza at catering, but I think of it as part of the cost of marketing. The results we get from these events are the new customers and better business.”

Franchises are new and popular systems for China. “In 2005, Shanghai government invited me to their Shanghai Franchise Show. I went there because I wanted to learn new things, but what really surprised me was how popular we were at the show,” Jack said. “There were so many people interested in us and six months later we had six new franchise stores opening. I think we are going to have more stores opening around Shanghai in 2006. I also plan to open in the Beijing market as well.”

China is a market with endless business opportunities, but you need to choose the correct orientation before you go in the market. “I think carryout and delivery services will be the major businesses for future pizza markets in China. Extend to customers great service, instill it into the people’s minds and it will make pizza become their daily meal.” Jack said. “The market here has a lot of space for growth. A great market needs good competition. The economics of China has grown very fast, the standards and style living of the Chinese youth is changing with this economic evolution. Cultivating their new dining style and distributing the pizza culture will be the key to the success of the Chinese pizza market.”

To learn more about Melrose Pizza in Shanghai, please visit www.melrosepizza.com. If you would like to know more about Chinese market, please contact Weihua Watson at weihua@pmq.com, visit PMQ’s Chinese website at www.pmq.cn.