China Aiming for Own 'Carrefour'

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Last updated at: (Beijing Time) Tuesday, October 22, 2002

China Aiming for Own 'Carrefour'

China's booming retail industry, which is currently facing a great challenge from overseas retail businesses, is exerting to bring up and develop its own retail giants.

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China's booming retail industry, which is currently facing a great challenge from overseas retail businesses, is exerting to bring up and develop its own retail giants.

With China's entry into the World Trade Organization (WTO) late last year, an increasing number of large international retail enterprises have flocked to China to expand their businesses.

Statistics show that large retail businesses from overseas had set up more than 300 large retail outlets inside China by the end of 2001.

Carrefour, which has already 28 branches in 16 cities across China, plans to add 10 more shops in the country. Walmart, another prestigious retail giant from the United States, will open eight more outlets in the country this year, and Metro has the license to open eight shops in Shanghai.

Experts expect foreign businesses to increase their domestic retail sales of consumer goods from the present 3 percent to 10 percent by 2005. A report from the well-known McKinsey & Company predicts that over half China's retail markets will eventually be controlled by three to five multinational retail giants.

"Never before has a nation's retail industry been controlled byany overseas businesses," said Guo Geping, chairwoman of the China Chainstore and Franchise Association.

Statistics show that there are more than 1,000 retail businesses around China each with an annual sales above 100 million RMB yuan (about 12 million US dollars). However, the top 50 firms control only 5 percent of the whole market. The Lianhua Supermarket Holdings Co., Ltd., China's largest chainstore enterprise, has a yearly sales of only 14 billion RMB yuan (some 1.75 billion US dollars), a far cry from the 200-plus billion US dollars of the world's top retailer -- Walmart.

However, foreign retail firms are not expected to dominate China's retail market. "Foreign enterprises focus on large and medium-sized cities and do not comply with the needs of people in small cities and the countryside," said Prof. Huang Guoxiong, a noted specialist of business management at the People's University of China in Beijing.

China-wide business will continue to be the major part of the retail market.

Chinese retail businesses have already their own chain stores in a wide range of regions and are striving to develop their own "Carrefours". The China Resources Group, the largest Chinese enterprise in Hong Kong, has launched a five-year plan to invest 500 million RMB yuan (62.5 million US dollars) to increase its sales to 50 billion RMB yuan (6.25 billion US dollars) within a period of five years. The retail group is expected to have 600 branches by 2006, almost doubling the present number.

Lianhua Supermarket will have 8,000 branches by 2008, with the sales rising to 80 billion RMB yuan (10 billion US dollars).

Lianhua Supermarket Holdings Co. Ltd. will surely develop from a regional company to a strong nationwide company in the near future, said Zhou Youlong, general manager of the Lianhua Company in North China region.

A "Chinese 'Carrefour' will emerge in the next three to five years," said Michael Toh from Roland Berger Strategy Consultants (Shanghai).

It takes time for China to nurture and develop its own "Carrefour-style" replica. A country usually has no more than four giant supermarket chains and, in case of China, it would have no more than six, said Jean-Pierre Bienfait from the China Trade Association Makro Commercial Co., Ltd..

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