View Full Version : Wal-Mart in fight for China's market

25-07-06, 23:30
Wal-Mart in fight for China's market

By Don Lee

Los Angeles Times

URUMQI, China - In this remote region along the old Silk Road, Carrefour is on the march.
The Paris-based retailer has already opened two stores in Urumqi, one in the northern end where many ethnic Chinese live and another next to a mosque in the Muslim section populated by Uighurs. This fall, Carrefour will open a third mega-store in the city of 2 million, selling groceries alongside its other goods.
What about Wal-Mart Stores?
``I can't imagine they will come here,'' Christian Roquigny, who manages Carrefour's Uighur store, said as he walked past a golden-domed mosque.
Roquigny boasted that his store sold no pork and was certified as halal, or permissible under Islamic dietary law. Wal-Mart managers, he said, aren't given the same flexibility to adapt.
As the world's leading retailers battle for new markets around the globe, they are increasingly setting up in places like Urumqi, where Carrefour's average checkout total is just over $5.
Wal-Mart and Carrefour, the world's No. 1 and No. 2 retailers, have stepped up their expansion in China in recent years, virtually matching each other, store for store, in many locales.
Carrefour's operation in this western city demonstrates why the French company has raced ahead of its multinational rivals in the world's most-populous nation. By joining with Chinese partners, adapting to local culture and employing a supply chain that includes 18-wheel trucks and three-wheel bicycles, Carrefour has become the biggest foreign retailer operating in China.
It operates 79 stores in 32 Chinese cities compared with 60 locations in 30 cities for Wal-Mart. Last year, Carrefour's sales in China totaled $2.2 billion, compared with $1.2 billion for Wal-Mart, according to the Commerce Ministry in Beijing.
Wal-Mart is accelerating its store openings in China -- it plans to open at least 18 this year, six more than Carrefour -- and analysts are reluctant to bet against the Bentonville, Ark.-based discount retailer given its enormous resources. Its global sales last year reached $285 billion, triple that of Carrefour's. Wal-Mart bought $18 billion in goods from Chinese manufacturers last year.
But as a retailer in China, Wal-Mart is a small fish. Its strategy of offering tian tian ping jia, or ``everyday low prices,'' hasn't had a big effect on Chinese mom-and-pop shops that are used to cutthroat pricing. Wal-Mart has been unable to replicate its super-efficient logistics system in China largely because it lacks scale.
Even Wal-Mart's staunch anti-union stance is being challenged, ironically, in a country where unions have little power. Government-backed trade union officials in China have been trying to organize workers at foreign enterprises and have been especially critical of Wal-Mart's resistance to the idea.
Carrefour has more international experience than Wal-Mart. The French company operates in 29 countries, about double the number for Wal-Mart. Both chains have struggled in Asia, however, pulling out of countries such as South Korea. And despite their push in China, Chinese retailers dominate.
The more stores it can open, the better chance Wal-Mart can leverage its mass scale to squeeze prices lower and drive efficiencies in purchasing, inventory management and distribution.