Wal-Mart poised to make belated entry into Shanghai

PUBLISHED : Monday, 18 July, 2005, 12:00am
UPDATED : Monday, 18 July, 2005, 12:00am

Wal-Mart, the world's biggest retailer, is about to open its first store in Shanghai, the city with the densest retail coverage in the mainland and 10 years after its global rival Carrefour. But has it arrived too late?

A Wal-Mart spokesman said that it would open the store, its 48th in China, on July 28 in a residential district of Pudong, with a floor area of 18,000 square metres and employing 500 people.

However, the chief of the information department of the China Chain Store and Franchise Association, who gave his name only as Yang, said: 'The Shanghai market for cheap products is saturated. The sales of the city's hypermarkets are falling this year for the first time. But there is room for growth at the top end of the market.'

At the end of last year, Shanghai had 97 hypermarkets and will add 28 more this year, taking the number to 125 - more than double the 60 envisaged in the retail plan of the city government. They include big domestic players and major foreign brands such as Auchan, Metro, the CP Group of Thailand and Carrefour.

Carrefour - which opened its first store in Shanghai in 1995 and now has eight in the city - has 61 hypermarkets, eight supermarkets and 201 discount stores in the mainland, according to the company's website.

In a report issued in early July, US consulting firm A.T. Kearney said that China's appeal to foreign retailers had declined because the number of retail companies there had grown significantly and competition in the sector had intensified.

In addition, the government has announced that it would help 15-20 domestic large retailers compete against the foreign giants.

The mainland's biggest retail chain, the Bailian Group, is based in Shanghai, with sales of 67.6 billion yuan last year.

Wal-Mart is 10 years behind Carrefour into China's commercial capital because of its business model. People in the industry call it a centralised army and label Carrefour a guerilla organisation.

Wal-Mart began its expansion from Shenzhen and preferred to deal with only three local partners.

By contrast, Carrefour established a national network quickly by setting up 31 mainland joint ventures with 32 different partners, and owns a majority stake in most of them. Wal-Mart also lagged because it has played too strictly by the rules, while its French rival pushed the envelope by signing deals with local partners without the approval of Beijing.

According to Ministry of Commerce figures, China is a tiny part of Wal-Mart's global empire. Its sales last year from 43 mainland stores accounted for less than 2 per cent of international sales and a fraction of its revenue of US$288 billion.