Category Archives: Tesco China

Tesco Stumbles With Wal-Mart as China Shoppers Buy Local

Source: Bloomberg News

Tesco Plc (TSCO) this week is trying to lure Chinese shoppers with promotions on soy sauce, cooking oil and apples. Emily Zhang still won’t do much of her shopping there. Continue reading

Tesco closes stores as expansion stutters

Source: By Tang Zhihao and Wang Zhuoqiong (China Daily)

British retail giant Tesco Plc, the world’s third-largest retailer by sales revenue, confirmed it would close four stores in China, a move to concentrate on its key business regions in the country.
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Foreign retailers feel the pinch of rapid expansion

Source: By Li Woke (China Daily)

The buzz of fast expansion in China comes with a hefty price tag for foreign retail giants.
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Market watching plans of Tesco China’s new lineup

Source: Want China Times

Tesco PLC, the top retailer in Britain and the world’s third-largest retail chain, has set grand plans for business expansion in the pivotal Chinese market alongside other multinational retailers.
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Tesco takes online orders for food

Source: By Tang Zhihao in Shanghai (China Daily)

Buoyed by an increase in demand from the e-commerce industry, the British retail giant Tesco Plc said it plans to experiment with allowing Chinese customers to go online to order food.

Lucy Neville-Rolfe, executive director of Tesco, said Shanghai will be the first city where Tesco will introduce online grocery shopping in China.

Neville-Rolfe did not specify when the company will begin to let Chinese customers order food online, only saying the change will come as soon as possible.

In late 2011, Tesco worked with Taobao.com, the largest Chinese online shopping platform, to offer general merchandise for babies and young mothers.

Its new online plans target people who go on weekly shopping trips.

“With general merchandise, we did cooperate with Taobao as a trial,” Neville-Rolfe said. “I was actually talking about home shopping for food, which is a rather different thing. What we are doing is getting food delivered to homes. We are a world-leading business on that.”

As Tesco pursues its e-commerce business plans, it might not consider working with an independent online business operator.

“The normal thing would be better using your brand website because it would be linked to your retail business,” Neville-Rolfe said.

Figures from the research company Analysys International suggested that online trading operations had 806 billion yuan ($127.9 billion) in sales revenue in 2011, up 55 percent from 2010.

Retailers with physical stores have been paying more attention to online shopping in recent years as they try to gain a stronger position in their industry.

The US-based retail giant Wal-Mart is looking to acquire a controlling interest in Yihaodian.com, a Chinese online store.

In addition, Carrefour SA, a France-based retail giant, and CP Lotus Super Center, a subsidiary company of the Thailand-based Charoen Pokphand Group (CP Group), have also developed online shopping systems.

“The longer-term vision over the Internet is it is an exciting opportunity for us,” Neville-Rolfe said. “It is the next-stage development for retail, particular for general merchandise. We are trying to give a strategic thought for that.”

Peng Jianzhen, deputy secretary-general of the China Chain Store and Franchise Association, said the development of online shopping has become essential for large retailers in recent years, largely because younger shoppers prefer it.

Tesco, to better support its development in China, opened a distribution center in Jiashan, Zhejiang province, last year.

In addition to its plans for online shopping, Tesco intends to open 16 new stores in China this year. Neville-Rolfe did not say where those stores will be located.

To protect the environment, Tesco’s plans call for building the stores in a way that prevents them from using large amounts of energy, Neville-Rolfe said.

She attended the 2nd Retail Sustainable Development Forum in Suzhou, Jiangsu province, on Thursday.

In other news this week, Xinhua reported that Tesco will open 16 energy-efficient stores in China in 2012, according to a senior company official.

Lucy Neville-Rolfe, executive director of Tesco, made the remarks in an interview with reporters before attending a forum on sustainable development in retail businesses in Shanghai.

She said Tesco has opened 110 outlets and 14 small convenience stores so far in China. Since 2008 all newly-opened and renovated outlets have reached the target of reducing energy consumption by 25 percent, the same target intended for the company’s new stores in China.

The company has made efforts to adopt energy-saving storage and logistics technology, as well as expand its local purchasing chain, Neville-Rolfe said, adding that it plans to introduce online grocery shopping for local residents in Shanghai.

Tesco Signs Collective Labor Contract With Employees In China

Source: China Retail News

British retail giant Tesco has signed its first collective labor contract with employees in China.

The contract reportedly covers Tesco’s 30,000 employees in 109 supermarkets, 14 convenience stores, and six logistic centers in China.

According to the collective contract, Tesco will establish a collective wage consultation system. Based on the increase of China’s consumer price index, the profit conditions of the company, and the wage level of the entire industry, Tesco will discuss the salary increase rate with the labor union in February every year. The retailer will also sign a wage-related special agreement to ensure that the employees can share the development benefits of the company.

In addition, the collective contract states that employees who work for the company for five years and above will sign open-ended contracts. All employees will sign labor contracts and no ancillary labor will be used. The company offers seven rewards to employees in China, including free work-time meals; annual per capita holiday gifts of CNY250; quarterly per capita team building funds of CNY80; more paid leaves; physical and exams; and additional medical insurance.

Supermarkets in China to see major changes in 2012

Source: Want China Times

A new round of changes is likely to be seen in the Chinese supermarket industry this year after unprecedented upheavals in 2011, fueled by the outbreak of controversial issues including price fraud, management reorganization, and falsely labeled products.

In 2011, four major retailers — Carrefour, Wal-Mart, Tesco and Metro — all saw top-level management changes in their China operations. Beijing Business Today, a newspaper, reported that industry insiders believe the management reshuffles mirror changes in the four enterprises’ stance toward the Chinese market. New managers will face stiff competition from domestic rivals and rapidly increasing costs.

Price fraud at supermarkets triggered a chain reaction last year; on Jan. 26, the National Development and Reform Commission publicized “forged original prices” and other irregular practices at many major retailers. Despite penalties handed out by the commission, price fraud still persists, including the posting of two sets of prices, falsified price tags and false discounts.

Another change will affect the way retailers deal with farmers. The Ministry of Commerce has asked municipal regulators to assist with the direct supply by farmers to major supermarkets to cut down on costs and enable consumers to buy products at lower prices.

Wal-Mart, Ikea Lead Retailers’ Push in China Land-Buying as Rentals Surge

Source: Bloomberg News

Wal-Mart Stores Inc. (WMT) and Ikea Group are leading foreign retailers that are buying land in China to develop their stores, abandoning a decade-long strategy of leasing as rents climb.

Wal-Mart, the world’s largest retailer, bought sites in northeastern Dalian for the first time last year, while Inter Ikea Centre Group, the developer part-owned by Sweden’s Ikea, invested $1.2 billion to build 510,000 square meters (5.5 million square feet) of malls as the largest home-furnishings company expands in the world’s fastest-growing major economy.

Foreign retailers are buying properties as rents soar after a 4 trillion yuan ($619 billion) stimulus package in 2008 helped revive economic growth. Retail rents in Beijing’s downtown Wangfujing district almost doubled in the second quarter this year from 2007, while in Shanghai’s West Nanjing Road shopping strip they jumped more than 50 percent in the same period, according to Cushman & Wakefield Inc.

“It’s becoming more and more difficult for them to get extraordinary leasing terms because Chinese landlords are becoming more sophisticated,” said Michael Klibaner, head of China research at Jones Lang LaSalle Inc. in Shanghai, referring to leases from 10 years to 15 years. “The economics of doing retail development look very attractive now if you can get the land.”

Demand for retail space helped drive a 42 percent surge in commercial real estate investments in China last year, marking the start of an “era” for malls, according to Cushman & Wakefield, a New York-based real estate services firm.

‘Very Long-Term’

Wal-Mart, which has 339 stores in more than 120 Chinese cities, may keep buying land in anticipation that more people in the nation of 1.3 billion will move into cities where it plans to open more outlets, said Ed Chan, chief executive officer of the company’s China operations. The Bentonville, Arkansas-based retailer will either purchase properties or tie up with a developer for new shopping centers, he said.

“When we open a store, we look at a very long term, many, many years,” said Beijing-based Chan. “Urbanization and the creation of the middle class will be still quite robust for the next 10, 20 years with additional cities being created.”

About 170 million people moved to cities in the last 10 years, the biggest urbanization in history, according to the Chinese Academy of Social Sciences. China aims to increase its proportion of those living in cities from 47.5 percent to 51.5 percent by 2015, it said in its latest five-year plan.

‘Right Conditions’

Owning more of the buildings its stores operate in is in line with Stockholm-based Ikea’s “global approach,” said Gillian Drakeford, the company’s China retail president. Ikea and its local partner own eight of its nine stores in China and lease the location in the southern city of Guangzhou. It plans to buy more properties for new outlets, Drakeford said.

“This allows Ikea to lead the process and to ensure that the right conditions are secured for the stores,” Shanghai- based Drakeford said. “Ikea’s approach to store establishment is long-term with substantial investment in existing and new markets.”

Tesco Plc (TSCO), the U.K’s biggest retailer, formed a second, $280 million joint venture in March to develop three shopping malls in China with HSBC’s Specialist Investments Ltd. and Metro Holdings Ltd. (METRO) The malls in the southeastern cities of Fuzhou and Xiamen, and Shenyang in the north, will generate 2.47 million square feet of space with Tesco hypermarkets as the anchor stores, according to an HSBC statement at the time.

Arriving in China

International retailers started arriving in China in the mid 1990s as the nation worked toward opening its economy to foreign investment in the lead up to its entry to the World Trade Organization in 2001. After China relaxed restrictions on foreign retailers in 2004 to meet WTO pledges, overseas retailers were allowed to wholly own stores in the country and restrictions on where they could operate stores were lifted.

Boulogne-Billancourt, France-based Carrefour SA opened China’s first supermarket in December 1995, while Wal-Mart and Dusseldorf-based Metro AG (MEO), Germany’s biggest retailer, arrived in 1996, according to their websites. Group Auchan SA of Croix, France arrived in 1999 and Cheshunt, England-based Tesco in 2004, according to the companies’ websites.

Carrefour, the world’s second-biggest retailer, bought “a few” sites in China while the majority of locations are leased, Liao Yan, the company’s spokeswoman in Beijing, said in an e- mailed statement, declining to give details.

‘Big-Box’

The plan to develop and own retail space has so far been limited to the so-called big-box retailers, according to Colliers International. Those requiring less space, such as Apple Inc. (AAPL) and Gap Inc., will continue to rent, according to the Seattle-based property broker.

“The profit margin for hypermarkets, which require a large scale of land, is low, and they are rent-sensitive,” said Sherman Yeung, Beijing-based director of retail services at Colliers International North China.

China last year surpassed Japan as the world’s second- biggest economy, and is forecast by PricewaterhouseCoopers LLP to eclipse the U.S. by 2018. Urban household income per capita rose 13.7 percent in 2010 from 2009. The economy expanded 10.3 percent in 2010.

“China is now probably more important to the future of these companies than it’s ever been,” said Jones Lang’s Klibaner.

Pulling Out

Some foreign retailers have pulled out amid growing competition. Richfield, Minnesota-based Best Buy Co., the world’s largest consumer electronics retailer, closed all its nine stores in China this year to focus on expanding a more profitable domestic chain it acquired five years ago.

Chinese supermarket chains have expanded through mergers and acquisitions amid competition as the country made it easier for foreign retailers to do business there. Wumart Stores Inc. (8277), Beijing’s largest supermarket chain, had 123 supermarkets and 390 minimarts by the end of March 31, according to its first- quarter financial statement, after taking over supermarkets from a rival and becoming controlling shareholder of another chain.

“More and more foreign hypermarkets are entering the market and the domestic companies are getting better,” said Klibaner. “That’s becoming more challenging and that’s one of the key reasons why they are pursuing development opportunities now more than in the past.”

‘Not Worried’

China’s retail sales growth slowed to 16.9 percent in May, less than the average of the past five years. Borrowing costs have risen as the central bank raised interest rates four times since October and the government tightened monetary policy to contain inflation and a surge in home prices.

Developers also have become more reluctant to sign longer leases with hypermarket operators such as Wal-Mart and Tesco because they prefer smaller boutique and high-end stores that add to the branding of their properties, Colliers’s Yeung said.

Demand for retail space remains strong with new tenants negotiating for sites at its properties, according to CapitaLand Ltd. (CAPL), the Singapore-based developer with 38 shopping centers in China, of which 22 are anchored by Wal-Mart.

“There are so many other retailers we work with,” said Chief Operating Officer Lim Ming Yan in an interview on June 20. “In that sense, it doesn’t affect us. I’m not worried” about retailers building their own properties, he said.

Currency Advantage

Retailers expanding into second- and third-tier cities, which are less affluent than metropolitan areas including Beijing and Shanghai, may get government incentives to buy land to develop stores, said Richard Ding, chief executive officer of Royal China Group, a Shanghai-based investment and consulting company in retail and property.

“They may get some good conditions in smaller cities because the local governments love foreign brands to be there,” Ding said.

Foreign retailers may be getting an added gain from property investments because they are in the local currency, which is expected to appreciate to 2.5 percent to 6.3 against the U.S. dollar by the end of this year, according to data compiled by Bloomberg. The yuan has increased 26 percent since the government first scrapped its peg to the dollar in July 2005 amid pressure from its trading partners.

“Foreign retailers are also realizing that it makes sense economically to hold yuan-denominated assets in China, which allows them to enjoy extra capital gain from their investment,” Ding said.

Tesco Invests In Chinese Shopping Centers

Source: China Retail News

The British retail giant Tesco PLC has announced plans to establish a joint venture with a financial group to develop shopping centers in China.
 
Tesco says that this financial group is mainly composed of Asian investors such as Metro Holdings. Tesco and the financial group each invests approximately GBP30 million and equally share the equity of the joint venture. This company is the second real estate joint venture of Tesco and its first joint venture has developed three shopping centers in Qinhuangdao, Anshan, and Fushun, respectively.
 
According to Tesco’s statement, the Industrial and Commercial Bank of China and the Standard Chartered Bank will offer loans to the new joint venture, which will develop three shopping centers in Shenyang, Xiamen and Fuzhou in the future.
 
As of today, Tesco has owned 93 hypermarkets and 12 Express stores in China.
 
In 2010, Tesco opened 14 new stores in China.

Tesco signs JV for 3 more China shopping malls

Source: Reuters

(Reuters) – Tesco, the world’s third-biggest retailer, has signed a joint venture to build three more shopping malls in China as part of its plans to rapidly expand in the world’s most populous country.
 
The supermarket group said on Monday that 50 percent of the venture would be owned by a consortium of Asian investors including Singapore’s Metro Holdings.
 
The total value of the project to build the shopping malls in Shenyang, Xiamen and Fuzhou is around 170 million pounds, with Tesco and the consortium each investing about 30 million pounds of equity, it said.
 
Debt will be provided by banks including the Industrial and Commercial Bank of China and Standard Chartered Bank, it added.
 
Tesco said in November it aimed to quadruple revenue in China to about 4 billion pounds over five years by more than doubling its number of hypermarkets to over 200.
 
The group currently runs four Lifespace shopping malls in China, where one of its hypermarkets is the anchor tenant.
 
It plans to have built around 50 Lifespace malls by 2014-15, in collaboration with joint venture partners.