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ParknShop has furthered its plan to become the leading food retailer in southern China with the opening on Saturday of its largest store since launching a new development strategy.

Iwan Evans, the chief executive of AS Watson, Hutchison Whampoa's retail food division, said its mainland supermarket business had moved into the black since shifting into megastore development in China in 1999.

He said the company's operations include three megastores with floor areas of more than 100,000 sq ft and three other superstores in excess of 60,000 sq ft in Guangzhou, Shenzhen and Dongguan.

'China is by far more competitive than Hong Kong. We have the world's leaders in retailing in China, and we are competing with the world's best,' said Mr Evans, after the opening of the store in Haizhu district of Guangzhou.

'We have no room for error, and we are highly geared.'

ParknShop claimed it had a profit margin of 1.5 per cent in Hong Kong, which was still higher than in China.

Mr Evans said its large stores generally took a few months to break-even, and the latest 203,000 sq ft store in Guangzhou, in which more than of 80 million yuan (about HK$74.97 million) was invested, was no exception.

ParknShop owned a slight majority in the new store with a local manufacturing unit in Guangzhou. All its megastore operations were joint ventures with local partners.

In China, ParknShop is fighting leading global chain stores such as the Unites States' Wal-Mart and France's Carrefour, and also competing with local supermarkets such as China Resources Vanguard and Taiwanese Trustmart.

Mr Evans said ParknShop aimed to be the lowest priced supermarket with hopes of having the cheapest stores in China, with margins maintained at low levels. He said megastore stores had proved to be the right model against competitors, because for mainland shoppers, going to outlets are a form of entertainment and leisure.

The Watson supermarket chain did not achieve the right formula until 1999, when it decided to close several fresh food supermarkets in Guangdong and Shanghai in favour of opening conglomerate stores, which sold fresh food as well as electrical and personal health cares items.

These megastores reached 23,000 to 25,000 transactions a day with an average basket worth HK$78, both higher than in Hong Kong.

Non-food items contributed half of the megastore turnover.

In retrospect, Mr Evans, who oversaw the chain stores' Shanghai operation in the mid 1990s, confessed early entrants are not necessarily winners in China.

However, as consumer behaviour evolves, the company is considering opening discount specialty stores in China, with locations that include Shanghai and locations further north in China.

He said ParknShop had no limit to opening more stores in China.

The Watson unit planned to open its third megastore by the end of this year in Whampoa, Guangzhou, where the company was originally established back in 1828.

Mr Evans said ParknShop aimed to increase its staff from 6,000 to 11,000, which would meet the human resources capacity to open eight more stores by year-end.

'In China, Guangzhou is an extremely important city to us. It is our goal to become the No 1 food retailer in southern China,' said Ian Wade, group managing director of AS Watson.



Megastore strategy sees ParknShop register southern mainland growth