Retailers balance strategies in China

2 April 2013

BEIJING: Retailers like Walmart and Carrefour are attempting to balance opening new stores and enhancing the quality of their existing branches in China.

Walmart, the US multinational, has announced plans to spend almost RMB500m on remodelling 50 of its Chinese outlets, building on plans to add an extra 100 new stores locally during the next three years.

As part of a rationalisation of its portfolio of 370 sites, however, the company intends to close two shops, in Wuxi and Shenzhen, indicating that growth is not the only objective.

"China is one of the Walmart's most strategic markets," Greg Foran, the firm's CEO in China, said. "We will continually improve our operational efficiency, reduce costs, and lower prices of our products so that they are more affordable for consumers."

Elsewhere, Carrefour, one of Walmart's biggest rivals, hopes to unveil between 20 and 25 additional branches in China each year going forward, building on its current network of 220 outlets.

A priority for the French operator is extending its reach into lower-tier cities, as demonstrated by its recent opening of a hypermarket in Inner Mongolia.

"Our annual new store target … is a good balance between expansion speed and quality. If the speed is too slow, we will lose the market. If it's too fast, we may sacrifice quality," Thierry Garnier, CEO of Carrefour China, told the China Daily.

"The rapid development of China's economy and purchasing power of the citizens bring a great opportunity to retailing. Whether it's international or local retailers, their business product quality, services and supply chain integration will expand."

Tesco, the British supermarket group, runs 139 branches in the world's most populous nation, a total that increased by 16 or so stores last year. Metro, its German counterpart, also opened 12 new sites in 2012.

Wang Tian, chairman of Better-Life Commercial Chain Share Co, one of the country's leading multi-format retailers, argued tapping smaller markets will be increasingly important.

"Currently, China has entered into a stable development period in the retail sector. In the future all retailers have to look at untouched areas, such as those to the west or in the countryside," he said.

Yonghui is one chain that is gaining strength in urban areas like Beijing, where 28% of households visited its stores in the last 52 weeks, according to research firm Kantar Worldpanel.

"The success of Yonghui is mainly down to our business model, focusing on the fresh products section, which occupies around 40 to 50% of store floor space," said Ye Changqing, of Yonghui. "The fresh goods we are selling are directly delivered from the production bases in order to save costs.

Data sourced from China Daily; additional content by Warc staff