The world’s biggest retailer, Wal-Mart Stores Inc., said it planned at least 10 new stores in China next year, joining other foreign retail giants in taking advantage of new rules letting them move into smaller cities.
China’s $240 billion retail market, dominated by local firms such as Beijing Wangfujing Group and Wumart Stores, is turning into a major battlefield as foreign firms ratchet up their investment.
Arkansas-based Wal-Mart will have 43 Chinese outlets by the end of this year, just a fraction of its more than 5,000 outlets worldwide, and it runs a distant second to France’s Carrefour SA in terms of foreign retailers in China.
Next month, Beijing will drop geographic and joint venture requirements for foreign retailers, as well as minimum turnover and asset criteria, giving them greater access to China’s retail arena.
Metro AG, the world’s fourth-most valuable retailer, said on Monday it would break even in China for the first time next year as it, too, opens 10 more stores.
The German giant, which set up shop in China in 1996, the same year as Wal-Mart, expects to have 23 outlets across China by the end of the year.
Britain’s Tesco Plc. joined the China fray in July after agreeing to buy half a local hypermart chain, while France’s Casino has said it was eyeing the vast market.
Carrefour, which already operates 53 of its flagship hypermarts in China, said last week it was launching its Champion discount chain, hoping to run 10-15 outlets by 2005.
China’s retail sales topped 2 trillion yuan ($242 billion) last year, though that is still well short of about $1.2 trillion in Japan, Asia’s top retail market.
“We really are very happy with the progress we have made in China over the last year,” Wal-Mart China President Cassian Cheung said on Tuesday.
The firm, which opened its 40th store in China on Monday, plans to add about new 10 stores by the end of next year, about the same number as this year. “We don’t think we will be less than that,” Cheung said, adding it may be more.
Wal-Mart is looking at opportunities outside China’s larger cities, but was unlikely to change its structure of partnering Chinese firms, executives said.
“Wal-Mart evolved by starting in smaller cities and moving into the larger cities. China’s been a little bit of the reverse of that,” Joe Hatfield, President and CEO of Wal-Mart Asia, told a news conference in Beijing.
“We visited many provincial cities over the last three to four months in preparation for approval from Beijing.”
Lee Scott, Wal-Mart’s chief executive, said he did not think the new rules freeing foreign firms from the joint venture structure would affect his company’s business model.
“We do not see ourselves, and have no immediate plans, to move away from a partnership structure,” he said.
But he shied away from directly addressing China’s threat last week to blacklist foreign firms, such as Wal-Mart, if they did not set up trade unions at their China units.
“I can assure you that Wal-Mart, as we do with taxation, sanitation and a number of areas ... will always abide by the law in the countries that we are in,” Scott said.
“It really isn’t a position that is anti-union. It’s just a position that has been focused on the associate and on the customer and it has worked out well for us.”
Wal-Mart says it had invested 1.6 billion yuan ($193 million) in China.
Last year, it sourced $15 billion worth of goods in low-cost China, from bicycles to fish. Scott said Chinese products made up about 80 percent of imports sold by Wal-Mart at its more than 3,200 U.S. outlets.