Tesco, the UK’s leading supermarket chain, plans to open its first branded store in China. The store, in Beijing is currently branded as Hymall — Tesco’s JV partner — but from January it will bear the Tesco logo and start to stock some Tesco-branded goods.
The retail giant, which paid $260m for a 50% stake in Hymall in 2004, has asked the Chinese government to authorise the use of the Tesco logo across its network of 42 jointly-owned stores.
The retailer will also keep Hymall’s Chinese name, Le Gou — which means happy shopping — on its shop fronts. “It differentiates us from the local businesses — it will be beneficial to improving the brand name,” said Ying-Chiao Wei, chairman and CEO of of the Chinese group.
Both Wal-Mart and Carrefour operate under their own brand names in China, and retail consultants say Chinese consumers like to shop in western branded stories.
Tesco, which has been in China for just over two years, has some way to go to catch its rivals. French giant Carrefour built up a network of 83 stores across 22 cities after more than a decade on the ground. It is the undisputed “thought leader” particularly in areas such as merchandising.
Wal-Mart has, unusually, had to play runner-up in China. But that will change when the US giant completes the acquisition. of Trust-Mart, China’s second-largest hypermarket chain, for $1bn — more on the deal in this EngagingChina post. If it goes through, the acquisition will make Wal-Mart the biggest western retailer in China.
According to Knowledge@Wharton, Wal-Mart is learning to be more Chinese and the acquisition of Trust-Mart marks a turning point in the US giant’s China strategy. Yurong Ai, a partner in AccuWin, a Guangzhou-based marketing consulting firm, told the consultancy:
Wal-Mart has finally used the acquisition weapon, which indicates it will be entering into a period of fast expansion. The layout of Trust-Mart’s superstores will be very helpful for Wal-Mart. For example, in South China, Wal-Mart has never been a presence in Guangzhou.”
Wal-Mart’s China strategy can be divided into three phases, according to Wharton.
The first stretches from 1996 to the present day and represents the US giant finding its feed in the new market. The second phase begins today, with the acquisition of Trust-Mart which, once successfully integrated, will enable the company to expand more aggressively. The third phase, still some years away, will be when Wal-Mart is as much a part of Chinese shoppers’ daily lives as it is in the US.
For, make no mistake, Wal-Mart plans to dominate China’s retail scene.
John Zhang, marketing professor at Wharton,argues that Wal-Mart has shown that “size” can trump “location” as the key to success in today’s retailing. Wal-Mart’s huge power comes from both the one-stop shopping model — with its wide selection of merchandise — and its relentless efforts to remain faithful to its sales slogan, “Always low prices. Always.”
However, Wal-Mart’s growth is slowing down in US market, hence it is having to go overseas for new high-growth markets like China to compensative for its sluggish poor performance back home.
Nevertheless, there are doubts that the Wal-Mart business model can be made to work so well in China. Zhang believes Wal-Mart does have some advantages in China relative to other foreign operators, not least its leverage with suppliers that no other retailers have in China.
It has a good reputation for following regulations in China and a good working relationship with the Chinese government, and it has the know-how to build the most efficient distribution networks.
But one of the big challenges that Wal-Mart now faces is trying to make its highly technical management system work with Chinese suppliers and logistics.
Elsewhere on the retailing front:
Germany’s cash-and-carry giant Metro plans to double the number of stores in China by the end of the decade. It has just opened its 33rd store, in Beijing. The company wants to keep expansion in line with that of the overall Chinese economy and so keep control on store and quality standards. More in this Financial Times article.