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Wal-Mart faces uphill battle in Shanghai
By Jiang Jingjing (China Business Weekly)
Updated: 2004-06-28 14:38

Wal-Mart, the world's leading retailer, is having a difficult time entering Shanghai, China's commercial capital.

Speculation has been rampant recently that the company plans to open three outlets in the city this year, but that the opening has been delayed until the second half of next year.

Wal-Mart, however, denied it had ever announced the exact opening time for the new stores.

"We cannot guarantee or promise the exact time of opening new stores in Shanghai, but everything is going smoothly under the plan," said Zeng Qiang, a staff member with Wal-Mart's public relations department.

Experts say it is not the right time for Wal-Mart to enter Shanghai now.

Real-estate prices have skyrocketed by 28.3 per cent year-on-year in the first quarter of this year, the highest growth rate throughout China, said Ding Jian, vice-president of Shanghai Land Resources Studies Association.

"Due to the characteristics of low-profit margin in the retail sector, huge risk lies ahead for Wal-Mart," Ding said.

In addition, Wal-Mart chose the downtown, rather than a bit more remote sites, to open its outlets in Shanghai, which is against the city's construction plan of commercial sectors.

Wang Yao, director of the information department of China General Chamber of Commerce said, although it is hard currently for Wal-Mart to enter Shanghai, it is "absolutely correct" for the company to march forward to the city.

"Despite the fierce competition in Shanghai, the consumption power there is still the strongest in China. There is room for Wal-Mart to develop," Wang said.

No matter when Wal-Mart enters Shanghai -- this year or next year -- industry insiders believe the US retail giant has lost the battle in the city, where its French rival, Carrefour has been reinforcing its presence in the market for nine years.

Ding suggested Wal-Mart did not get along well with the local government, but the company declined to comment on that.

"Wal-Mart's decision makers did not fully understand the Chinese retailing market," Ding said.

Wal-Mart refused to admit its defeat, saying only that any moves are made following the company's strategy.

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