Foreign grocers continue to retreat from China and Asia as they face increasing competition from e-commerce companies, struggle to adapt to local tastes and find it difficult to differentiate themselves without local partners, according to analysts and industry experts. Since the beginning of 2018, French grocer Carrefour, German supermarket operator Metro and Spanish rival Dia have either sold outright or ceded control of their China operations to their joint venture partners. In 2018, British retailer Marks & Spencer also sold its retail business in Hong Kong and Macau to its franchise partner Al-Futtaim of the UAE after exiting China two years earlier. On Monday, British grocery retailer Tesco became the latest to pull back from Asia after it agreed to sell its Thailand and Malaysia businesses to CP Group in a deal that valued the business at US$10.6 billion. That came after Tesco sold its remaining stake in its Chinese joint venture to its state-run partner China Resources Holdings for £275 million (US$355 million) last month and withdrew from South Korea in 2015. “Local retailers have been rapidly growing over the past five to 10 years, rolling out more stores and multi-format networks that are highly tailored to the locations they serve,” Nick Miles, head of Asia-Pacific at IGD, an industry research group, said. “These retailers tend to have a stronger understanding of shopper preferences across markets and regions. The major markets in the region all have a different leading retailer, therefore geographical focus tends to give an advantage over companies who spread their operations too thinly.” The Tesco sale comes as Asia is expected to account for nearly half of all grocery retail sales between now and 2024, when global sales are expected to exceed US$8.3 trillion, according to IGD. China is expected to be the world’s largest grocery retail market with nearly US$1.9 trillion in sales in 2024. Tesco, which owns more than 2,000 stores in Thailand and Malaysia, acquired much of its business when it bought Lotus stores from CP Group during the Asian financial crisis in 1997-98. Thai billionaire Dhanin Chearavanont, who controls CP Group, has long wanted to reacquire the stores. CP Group is the sole operator of 7-Eleven in Thailand and would control nearly 60 per cent of the country’s grocery market after the deal, according to market researcher Euromonitor International. Following an accounting scandal in 2014, Tesco chief executive Dave Lewis moved to improve profitability, cut debt and simplify the business by reducing its global footprint. Lewis, who plans to retire later this year, declared the turnaround completed when he announced his departure in October. Tesco plans to use the proceeds to further cut its debt, eliminate its pension obligation deficit and return £5 billion (US$6.4 billion) to shareholders. CP Group secures funding for US$10.6 billion purchase of Tesco stores The Tesco transaction is the biggest deal in Asia this year and the largest merger in Thailand’s history, according to data provider Dealogic. It also comes in what has been the slowest start to the year for Asia excluding Japan since 2014, with 1,007 deals worth US$84.3 billion through Monday, Dealogic said. That compared with 1,294 deals worth US$124.2 billion in the same period last year. Jacques Penhirin, head of consulting firm Oliver Wyman’s Greater China retail and consumer goods practice, said grocers have been hit hard in China by the “tsunami of e-commerce” as players, such as Alibaba Group Holding, JD.com and Tencent Holdings, have taken away as much as 40 per cent of their business in the past three or four years and traditional grocery store operators have been slow to adapt their formats. Alibaba is the parent company of the South China Morning Post . China’s online sales of goods rose 19.5 per cent last year to 8.5 trillion yuan (US$1.2 trillion), according to the National Bureau of Statistics. E-commerce sales in China have grown by double-digit rates each year since 2017 as consumer spending habits have dramatically shifted. “In Southeast Asia, e-commerce is growing, but is not that powerful yet,” Penhirin said. “The markets are maturing, slowing down and the [foreign] operators need cash somewhere else. If you’re Tesco, if you’re Carrefour, it’s not strategic for you to be in Indonesia or to be in Thailand and Malaysia if you can get cash out of it to secure your core business in Europe.” The operators that have been more successful, such as Costco or Walmart, have succeeded by differentiating themselves or developing strong local partners, Penhirin said. Walmart said last year it plans to open 500 new stores in China over the next five to seven years and invest US$1.2 billion to upgrade its distribution centres in China. The American retail giant sold its e-commerce platform in China, known as Yihaodian, to JD.com in 2016. It now sells groceries and other products through JD.com as part of a strategic partnership and offers same-day delivery on some products, as well as about 100 of its stores being used as JD warehouses. “If you look at the overall relationship considering all the things that are happening in China, we're in pretty good shape,” Doug McMillon, Walmart president and CEO, said on a February 18 conference call with analysts. “I'm optimistic and recognise the tremendous opportunity that market has and we're constantly trying to think through our position in that market and how we might improve it.”