Wal-Mart, Carrefour seek China expansion
(Xinhua)
Updated: 2004-12-13 15:46

Wal-mart Stores Inc. and other overseas retailers that gain full access to China today won't overrun domestic rivals in a consumer market forecast to grow to more than US$600 billion this year, analysts said.

"The threat posted by foreign retailers won't be as prominent as some have anticipated,'' said Xu Xiaofang, an analyst with Guotai Junan Securities. Overseas companies' share of the market may grow to 10 percent in three years from 7 percent now, he said.

Overseas retailers are allowed to wholly own stores for the first time, as China honors commitments made when it joined the World Trade Organization three years ago. Bentonville, Arkansas- based Wal-Mart, the world's largest retailer, last month said it plans to expand its 40-store China network by more than a third in 2005.

The four largest Chinese retailers have more than 20 times as many stores as the combined total of Wal-Mart and Carrefour SA, the largest overseas retailer in China by sales. Wumart, the biggest supermarket chain in Beijing, added 22 outlets in the third quarter and plans more acquisitions, Chairman Zhang Wenzhong said Oct. 26.

"Local companies won't suffer from sudden death as competition increases, said Mabel Wong, an analyst at CLSA Ltd. in Hong Kong. Foreign and local companies have different competitive advantages and can carve out their own niches.''

Wal-Mart, which has 5,500 stores in 10 countries, on Nov. 2 announced plans to open as many as 15 stores in China next year, adding to 40 it operates now in Beijing, Shenzhen and other cities. Paris-based Carrefour, Europe's largest retailer, last month said it planned to boost its supermarkets and larger supercenters in China to 59 this year from 53 at the time.

Carrefour had a 20 percent sales increase in China in the first half, China's commerce ministry said Aug. 6 in its latest report on overseas retailers. In the same period, Wal-Mart's revenue in the nation jumped 32 percent.

James Lo, regional manager at Carrefour, and Wal-Mart spokeswoman Sharon Zhang weren't available for comment.

As a market, China offers the world's largest population and an economy that grew 9.1 percent in 2003, with economists predicting similar expansion this year. Incomes in urban areas, home to about a third of the population, rose 40 percent from 1999 to 2003 and topped US$1,000 a month for the first time last year.

Retail sales in the world's seventh-largest economy surged 14.2 percent in October to a record 498 billion yuan (US$60 billion). The Commerce Ministry has forecast sales will rise this year to more than 5 trillion yuan. Chinese consumers were the most confident in a survey of 38 industrialized economies published Nov. 24 by AC Nielsen.

Foreign retailers in the past were required to have Chinese partners and could own no more than 65 percent of those ventures. Their operations also were limited to provincial capitals and big cities such as Beijing and Shanghai.

Kingfisher Plc's B&Q chain, the U.K.'s largest home- improvement retailer, said that it plans to almost double outlets in China to 39 next year now that restrictions are lifted. The company is spending $13.2 million buying five stores in China that will be transformed into B&Q outlets.

"The opportunities are there next year because of the availability to go wholly owned,'' Ian Strickland, managing director of B&Q China, said at a forum in Shanghai on December 1. "We will not turn it down.''

Wal-Mart and other multinationals will continue to rely on local partners, CLSA's Wong said. The diversity of the nation's economy means the same formula for expansion used in big cities may not work everywhere, she said.

About 2 percent of China's households owns a car, compared with an average two vehicles per U.S. household. Many people still rides for shopping, placing more emphasis on convenient store locations, said Wong.

"Local partners can help find good locations and with other formalities,'' Wong said. "China is a collection of markets, not just a single market. So I don't think foreigners will just go it alone.''

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