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Beijing's Retailers Ponder Merging
Retailers in Beijing are contemplating the formation of several flagship supermarket groups to enhance the capital's competitiveness in the industry.
Liang Wei, director of the Beijing Commerce Committee, said some relatively large supermarkets in Beijing will likely join hands to form a number of "aircraft carriers" to dominate the industry. The first of these superstores is expected to surface in the next four months.
"We are now stepping up the preparations. Through the promotions of the municipal government and co-operation of the retail companies, I believe the large-scale supermarket will emerge soon, " Liang said.
The supermarket group may own assets exceeding 3 billion yuan (US$362 million), he added.
The city's chain stores are prospering quickly but are constrained by smallness of scale, he said, adding that chain business is the model on which Beijing plans to develop its commerce.
More large supermarket groups will be opened following the first one and will hopefully grow stronger through competition, Liang said.
"I suggest Beijing's commercial enterprises take part in forming chains, which can give full play to their advantages as being large, " he explained.
Wang Yao, director of the information section of the China Commerce Association, said Beijing's move to build large supermarket groups is timely and can help the city's food sellers catch up with giants in the industry like Shanghai's Lianhua and Hualian, and international behemoths like Wal-Mart and Carrefour.
In the association's list of the country's top 100 retailers for 2000, 18 Beijing enterprises ranked but not a single one made it into the top 10.
Shanghai Lianhua Supermarket Group recorded sales income of 11.44 billion yuan (US$1.38 billion ) last year. In contrast, the most profitable of Beijing's supermarkets reported sales of just over 1 billion yuan (US$120 million). Lianhua owns 950 outlets around the country.
However, Beijing has a good commercial base and a sizable number of relatively large and well performing retailers, which provide good conditions for restructuring and co-operation, Wang said.
"The local enterprises should rethink the strategy of working independently and develop themselves together. Otherwise, they won't be able to compete with giants from other cities and countries, " he said.
With the proposed lift of restrictions on foreign investment in the retail sector after China enters into World Trade Organization (WTO), it is imperative for domestic enterprises to join hands to fight against their aggressive overseas counterparts, Wang said.
He noted that China will allow foreign investors to have controlling stakes in joint venture retailers one year after WTO entry. All limitations will be lifted after two years.
Domestic giants like Shanghai Hualian and foreign counterparts Wal-Mart and Carrefour are all eager to expand their share of the market in the capital.
Co-operating with Beijing Chaoshifa Company and Xidan Department Store, Hualian, the largest retailer in China, kicked off business in Beijing in March.
It aimed to open 100 outlets in Beijing this year and 1, 000 in three years.
Wal-Mart Stores Inc, the world's largest retailer, has already applied to the Beijing Commercial Committee and other relevant government bodies for approval to open outlets in Beijing.
A spokesman for Wal-Mart's China Operations said the company had its sights set on Beijing because the city has a huge consumption capacity.
The Wal-Mart spokesman added that Wal-Mart had finished their feasibility study for business inauguration in Beijing.
Earlier reports said Carrefour, Wal-Mart's global rival, which has already launched in Beijing, also planned to develop new stores in the city.
Sources: China Daily
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