Tesco, the largest retailer in the UK by market share and also by sales, is aggressively tailoring its development strategies in China by adding freehold multiplexes with shopping centers, hypermarkets, entertainment venues, apartments and home offices.
With an investment of more than 500 million yuan, Tesco's first 76,000 sq m freehold multiplex in Qingdao, Shandong province, opened its shopping mall, hypermarket and restaurants to shoppers during the weekend.
The company said it is a landmark for Tesco's development in China, and added that it is the first foreign retailer to do freehold mall development on this scale.
Tesco entered the Chinese market in 2004, and the late-comer is facing fierce competition for market share from Carrefour and Wal-Mart.
"The freehold multiplexes will provide us more freedom in selecting better locations and also making better plans for supportive facilities -- for example, parking lots -- compared to the old model of renting properties," said Paul Mercer, CEO of Tesco Property China.
The freehold model also enables the retailer to equip the projects with more environmental friendly technologies and facilities, Mercer said.
Tesco's Qingdao hypermarket is expected to cut energy consumption by 25 percent compared to common markets of the same scale. It will save 1.18 million kilowatt-hours of electricity and reduce CO2 emissions by 1,176.5 tons a year, he said.
"Additionally, some of the freehold multiplexes will include apartments and home offices, so it will help us gather a stable group of shoppers," he added.
More than 20 such giant shopping complexes will be opening across the country, said Ken Towie, president and CEO of Tesco China.
Towie said Tesco is willing to import a leading management and operation model in the retail industry to China to better serve Chinese customers.
Another two multiplexes will be built soon in Qinhuangdao, Hebei province, and Fushun, Liaoning province, he said.
Mercer told China Daily that a new shopping multiplex is expected to be built at Yaojiayuan in Beijing's Chaoyang district.
Tesco is operating 71 hypermarkets and seven pilot Tesco Express stores in the country. By February, Tesco will have 82 hypermarkets in China, although sales there are still less than 2 percent of the group's total.
Wal-Mart's share of Chinese hypermarket sales in 2009 was 45 billion yuan and Carrefour's was 33 billion yuan, while Tesco accounted for just 11 billion yuan, according to data from Euromonitor.
US retail giant Wal-Mart, which entered the China market in 1996, owns more than 160 outlets in 89 Chinese cities. The chain opened about 30 new outlets in 2009.
Carrefour previously said it will add 20 to 25 new outlets each year. The French hypermarket chain that first came to China in 1995 now has about 145 outlets in the country.