Tesco and Walmart say goodbye to easy expansion in China

PUBLISHED : Saturday, 20 October, 2012, 12:00am
UPDATED : Saturday, 20 October, 2012, 3:14am

Tesco is trying to lure Chinese shoppers with promotions on soy sauce, cooking oil and apples this week. But Emily Zhang still won't do much shopping there.

The 30-year-old Shanghai resident buys most of her produce at an informal market close to home where daily supplies are fresh, the location convenient and friendly vendors throw in the occasional cooking tip.

Shoppers such as Zhang are pushing Tesco to shut Chinese outlets and open new ones more slowly two years after announcing plans to double stores and build more 37,000-square-metre malls.

Hindered by the country's slowest economic growth since the 2009 financial crisis and competition from local markets and regional chains, the British retailer's China same-store sales fell 1 per cent in the second quarter.

Tesco's China pullback reflects the hurdles global big box retail chains face in Asia, where the realities of complex local markets and slowing economies are dampening dreams of easy expansion.

The world's largest retailer, Walmart Stores, is also adding outlets more gradually than it had planned in China's 3.5 trillion yuan (HK$4.3 trillion) grocery industry.

Same-store sales at Carrefour, the world's second-largest retailer, fell 6.1 per cent in China in the third quarter, excluding currency swings, and declined 3.1 per cent in Asia, it said this month.

"It's more of a marathon than a sprint," Philip Clarke, Tesco's chief executive, said referring to China on a recent conference call. "Many retailers putting down more space in the market; few seeing that translate into profitable growth."

This month the company posted its first profit drop in almost two decades for the first half of its fiscal year.