Global supermarkets conquer China
Updated: 2011-12-09 10:03
BEIJING - China's entry to the World Trade Organization (WTO) a decade ago opened the floodgates to foreign investment in a variety of areas, but the retailing sector is surely the most potent symbol of how foreign businesses have come, competed and conquered on the levelling field.
The days have long gone when neighborhood shop keepers would man their counters, ready to dispense to customers whatever their little shops would hold, and when buyers had to go to separate places for groceries, electronics and other products.
The landing of supermarkets, with their open shelves, abundant variety and lower prices, changed everything, transforming the way people shop in China. To see supermarkets' appeal as China marks the 10th anniversary of its accession to the WTO, observers need only look at the growth of French-based chain Carrefour. Just days ago, it celebrated the opening of its 200th store in China.
"Going to supermarkets is becoming our first choice for shopping, especially for food and daily necessities," confirmed one shopper, 40-year-old Beijinger Zhang Ling.
The retailing sector was among the first areas in which China loosened its grip and welcomed foreign businesses upon entry into the WTO, when it allowed the forming of joint ventures in five special economic zones and several other cities, including Beijing, Shanghai, Tianjin, Zhengzhou and Wuhan.
"The policy has greatly facilitated our efforts to add new stores in China," said Sun Jie, general manager of Carrefour in the Tianjin-Shandong districts.
Global retailers including Carrefour and Wal-Mart have successfully forayed into the market with lower prices and better services. They have also tailored their offering to Chinese customers. Wal-Mart has tied with some 20,000 local suppliers and over 95 percent of its products are made in China, for example. Besides, it has taken a slew of measures to reduce costs in logistics to make products less expensive.
Meanwhile, their dedication to customer service and their management mode gives foreign supermarkets another competitive edge to win Chinese consumers.
"Supermarkets provide more choice. Moreover, the services and management there are better than at local stores," said 30-year-old customer Qi Xuan.
Such customer approval has allowed foreign supermarkets a growing presence in China.
On Dec 1, Carrefour opened its 200th store in China, in the city of Changzhou, Jiangsu province. Over the past 10 years, it has expanded product items to over 80,000 from 30,000.
Wal-Mart has also posted strong growth, with 358 of its malls scattered across the country's 21 provinces and regions by Dec 6. Sales volume in China has accounted for nearly 10 percent of its global sales, according to Li Ling, Wal-Mart China Senior Director of Corporate Affairs.
Data from the Ministry of Commerce shows that there were 2,864 foreign retail companies in China by the end of Jan. 2011, involving foreign capital of $6.38 billion.
Li attributed the robust growth partly to China's policy improvements since its inclusion into the WTO. "After the entry, China has fostered a more regulated and mature environment for foreign investments, which gives us better development opportunities," she said.
With China's fast pace of urbanization and rapidly growing numbers of middle-class consumers, analysts forecast the country will have become the largest retail market by 2014.
Moreover, China's determination to spur the domestic market in the 12th Five-Year-Plan period (2011-15) will create more opportunities for the sector, said Li.
On the other hand, foreign retailers' growing presence has to some extent crowded out sales of domestic stores. Analysts said the competition would inspire local stores to improve products and service quality though.
Sun said the market-based rules would make the native businesses mature and develop faster.
"The foreign retailers have brought to China competition as well as new management, operation and service modes, which has provided a lot of learning opportunities for Chinese retailers," said Sun.