BEIJING - Top
foreign retailers such as Wal-Mart and Carrefour
plan to accelerate store openings in China this
year to further strengthen their presence in the
rapidly growing market.
"Wal-Mart intends
to open 18 to 20 new stores throughout the country
in 2006," Gao Jing, public relations manager of
Wal-Mart China, told China Business Weekly.
Gao said the retailer opened 13 new
outlets in China in 2005, for growth of at least
35%. Interestingly, when Wal-Mart's president and
chief executive officer Lee Scott visited China in
late October,
he
said the company's goal was to open only 13 stores
in 2006, increasing the total to 62.
The
US-based retailer currently has 56 stores in 28
cities throughout China. These include 51 Wal-Mart
Supercenters, three Sam's Club wholesale club
stores and two community stores.
"Foreign
retailers are trying to grab a bigger part of the
huge domestic retail market by opening [more]
stores," says Sun Luan, from China Securities.
With the national economy growing at more than 9%
a year, China's retail market is expected to
expand by 8-10% a year, to US$2.4 trillion by
2020. With this in mind, Carrefour and Lotus have
also announced expansion plans.
French
retailer Carrefour will open around 20 new
hypermarkets this year, said Wang Xiaozhong,
public relations manager at Carrefour China.
Carrefour currently leads foreign retailers in the
Chinese market, with a total of 70 stores and
sales of more than 20 billion yuan (US$2.5
billion) in 2005.
Thailand-based Lotus
Supercenter has also sped up its development over
the past several years in an effort to catch up or
even surpass its rivals. In a Ministry of Commerce
list last year of China's top 100 chain store
operators in 2004, Carrefour ranked fifth,
Wal-Mart 20th and Lotus 21st.
"We plan to
have 100 stores by the end of this year," said
Xiang Jun, who is in charge of Lotus' media
communications. There were 69 Lotus Supercenters
in 14 provinces and municipalities by the end of
January, she said, noting that the period between
2004 and 2006 was characterized by rapid
expansion.
Sun Luan of China Securities
said the retail market in big cities like Shanghai had become
crowded through years of development. Foreign
retailers had strengthened their presence in these
big cities, but were also likely to pay attention
to small and mid-sized cities, where there was
more space for development, Sun said.
"Lotus has started to expand in mid-sized
cities like Huai'an and Kunshan in [east China's]
Jiangsu province, and
Jiangmen in [south China's] Guangdong province,"
Xiang said.
The company would deepen its
networks around its five logistics centers, two of
which were in Shanghai and the others in Beijing, Wuhan and
Guangdong, she said.
Wal-Mart also has
ambitions to expand into second-tier markets. Over
the past few months, it has opened stores in
smaller cities such as Yuxi in southwest China's
Yunnan province, Weifang
in East China's Shandong province, Wuhu
in East China's Anhui province, and
Yueyang in central China's Hunan province. It is
also looking into opening stores in even smaller
cities, such as Shaoxing in East China's Zhejiang province.
"We see surging demand for consumption in
small and mid-sized cities, which offers us a good
opportunity to expand our investment in China,"
said Dong Yuguo, a spokesman for Wal-Mart China,
at the opening of Wal-Mart's third Beijing store
in December.
The rapid expansion of
foreign retailers poses big challenges to domestic
companies, which are trying to expand to compete.
Beijing's leading retailer, WuMart, increased its
number of stores in the capital to 100 through the
recent acquisition of rival MerryMart. WuMart
bought a 75% stake in Beijing's fourth largest
retail store for 373.5 million yuan earlier this
year. The deal has given WuMart about 10% of the
supermarket business in the capital.
Other
domestic retailers are also planning for rapid
expansion to survive and develop. "It is important
to strike a balance between store openings and
profit-making," said Sun Luan.
Wal-Mart
opened its first store in Shanghai last July.
Within two kilometers of this store, however,
there is a Lotus Supercenter, a Hualian GMS, an
NGS Supermarket and a number of convenience
stores.
"This kind of face-to-face
competition will hurt performance. That's why it's
important to stay profitable over the long term,"
Sun said. "Some local retailers have been
declining."
