Ito-Yokado hands Beijing retail operations to Chinese firm; foreign retailers accelerate localization to adapt to market evolution

Japanese general merchandiser Ito-Yokado sold 90 percent of its stake in Hua Tang Yokado Commercial, the operator of the Beijing store, to the Beijing Xinchen Group, in addition to signing a licensing deal for the use of the Ito-Yokado brand, Nikkei Asia reported on Monday. The move is seen as the latest step by international retail capital to deepen localization in China, as the firm seeks to better adapt to the country’s increasingly diverse consumer demand, Chinese experts said.

“Japanese general merchandiser Ito-Yokado has exited store operations in Beijing, selling its wholly owned unit to a local retailer due to a sales slump,” Nikkei Asia reported. “The move is part of a reorganization of unprofitable businesses under US private equity firm Bain Capital, which became Ito-Yokado's parent in September.”

Industry experts said the deal structure – retaining brand presence while transferring operational control to a local partner – highlights a pragmatic approach increasingly adopted by foreign retailers seeking to adapt to China’s fast-evolving consumer market rather than exit it altogether.

The arrangement reflects a typical localization model, in which the Chinese partner holds a majority stake while the foreign brand retains a minority share and licenses its trademark. Majority ownership usually ranges from 60 to 90 percent, depending on operational performance, Zhang Yi, CEO of the iiMedia Research Institute, told the Global Times on Monday.

“Foreign brands like this remain reluctant to exit China, also viewing local partners as guides in developing business models that could later be replicated globally,” Li Changan, a professor at the Academy of China Open Economy Studies under the University of International Business and Economics, told the Global Times.

“Hua Tang Yokado's sales sank 24 percent to 1.7 billion yen ($11 million) for fiscal 2024,” Nikkei reported. “Though a direct comparison is impossible because the accounting standards are different, sales have dropped to less than one-tenth of the 24 billion yen logged in fiscal 2015.”

While industry insiders said the development is also partly driven by a broader slowdown in global retail consumption, they noted that without adapting to increasingly diversified consumer demand, any accumulation of brand recognition would ultimately prove futile.

Ito-Yokado once operated nine stores in Beijing in 2013, but has since scaled back to just one, reflecting broader adjustments to its China business. Nikkei noted that as online sales and home delivery of food and daily necessities have become more widespread, the company’s traditional large-format general merchandise stores “no longer fully meet customer needs.”

Brands – foreign and domestic alike – that fail to move beyond legacy product advantages or business models and adapt to shifting consumer demand are likely to face mounting pressure, Li Changan,

Recent months have seen a growing number of foreign retail chains in China recalibrating their strategies to accelerate localization.

Chinese asset management company CPE recently announced a strategic partnership with the Burger King brand to establish BKC, marking the next phase of the brand's growth in the Chinese market, according to a statement on Monday by Burger King.

Starbucks, a US-based coffee chain, last year set up a JV with Chinese company Boyu, with the Chinese side to hold a stake of up to 60 percent in its China operations.

Notably, Starbucks told the Global Times on Thursday that its China business has maintained strong momentum, with fiscal 2026 first-quarter revenue reaching $823.4 million, up 11 percent year-on-year.

China’s consumer market remains vibrant, but is undergoing differentiation and upgrading, with outdated business models being phased out, Zhang said. He noted consumer choices are not driven by whether a brand is foreign or domestic, but by how well products and services meet their needs.

“In retail, this contrast is evident within the same US company: while Walmart’s traditional hypermarket format has come under pressure in recent years, its warehouse membership chain Sam’s Club has expanded rapidly by aligning with the consumption upgrade,” according to Zhang, based on iiMedia Research Institute’s research.

China remains one of the world’s largest retail markets, with total retail sales of consumer goods reaching 50.12 trillion yuan in 2025, up 3.7 percent from a year earlier, official data showed.

While the research capabilities and operational experience that foreign brands once relied on when entering China initially provided a competitive edge, the rapid advancement of the market and rising consumer sophistication have rendered those old benchmarks insufficient to meet today’s consumption threshold, according to Zhang.

As equity and supply chain localization deepens, Starbucks and Burger King are expected to further localize their brand positioning, business models and product offerings, according to statements the companies once sent to the Global Times.