Major retailers
like Tesco, Best Buy and Media Markt are rapidly adapting their
strategies in China, reflecting the unique trading environment
observable in the country.
Tesco has announced a scheme to build three Lifespace shopping malls in China via a partnership with Singapore's Metro Holdings, placing one of its supermarkets at the heart of each complex.
Looking forward, the organisation intends to open around 80 similar centres before the end of the decade, requiring approximately £5bn (€5.9bn; $8.1bn) in investment.
Niamh McSherry, from Berenberg Bank, argued this should not be perceived solely as a move in Tesco's core sphere of competence.
"We are not opposed to property development but we would flag that based on Tesco's plans ... it is likely to make more money in China as a property developer than as a retailer," she said.
Elsewhere, Wal-Mart is aiming to construct "compact hypermarkets" to penetrate underserved regions.
These outlets focus less heavily on a premium in-store experience, and offer a standardised template that can quickly be replicated.
"It is going to help us reach more people, not only in urban markets but also in rural areas and smaller cities," said Doug McMillon, chief executive of Walmart's international arm.
Carrefour recently shut down four stores in lower-tier cities including Dalian, Xi'an, Jiaozuo and Foshan, which may form part of a wider emerging trend.
For example, Home Depot, the US home improvement specialist, has closed its last remaining branch in Beijing, the fifth of the company's Chinese shops to have been shuttered in two years.
Electronics chain Best Buy is taking the same approach regarding its nine branded stores, instead adding between 40 and 50 sites under the Five Star banner it acquired in 2006.
"We are really committed to China, and we are trying to figure out the business model that is going to work for us in China," said Kal Patel, Best Buy's Asia president.
Five Star controls 170 stores, and competes with indigenous rivals such as Suning and Gome, boasting networks of more than 1,000 outlets apiece.
"The Five Star brand has been in the market considerably longer and is a brand people recognise. Not many people in China know what Best Buy is," said Ben Cavender, an analyst at the China Market Research Group.
Paul French, an analyst at Access Asia, suggested the dominance of independents and plazas meant Best Buy, which provided a "a much nicer retail environment" than the norm, was "a concept ahead of the consumer".
"There are too many brands and not enough people buying the high-margin items," he continued. "The pie is going to get cut very thinly."
In contrast, Media Markt, owned by German giant Metro, currently possesses a single store in China, in Shanghai, but hopes to run over 100 branches by 2015.
Media Markt believes the electronics retail sector could be worth €150bn in 2013, as demand among increasingly affluent buyers grows.
"The positive response towards our first store in Shanghai shows that our business concept is working in China," said Ton Wortel, ceo, Media Markt China.
Ding Wenjin, an analyst from Dongguan Securities, warned the discounts available online, and price sensitivity linked to inflation, mean conditions might still prove challenging.
"Foreign companies are sometimes bolder than local ones, but the local companies know more about the local customers. They are better at controlling costs and keeping prices low," said Ding.
Tesco has announced a scheme to build three Lifespace shopping malls in China via a partnership with Singapore's Metro Holdings, placing one of its supermarkets at the heart of each complex.
Looking forward, the organisation intends to open around 80 similar centres before the end of the decade, requiring approximately £5bn (€5.9bn; $8.1bn) in investment.
Niamh McSherry, from Berenberg Bank, argued this should not be perceived solely as a move in Tesco's core sphere of competence.
"We are not opposed to property development but we would flag that based on Tesco's plans ... it is likely to make more money in China as a property developer than as a retailer," she said.
Elsewhere, Wal-Mart is aiming to construct "compact hypermarkets" to penetrate underserved regions.
These outlets focus less heavily on a premium in-store experience, and offer a standardised template that can quickly be replicated.
"It is going to help us reach more people, not only in urban markets but also in rural areas and smaller cities," said Doug McMillon, chief executive of Walmart's international arm.
Carrefour recently shut down four stores in lower-tier cities including Dalian, Xi'an, Jiaozuo and Foshan, which may form part of a wider emerging trend.
For example, Home Depot, the US home improvement specialist, has closed its last remaining branch in Beijing, the fifth of the company's Chinese shops to have been shuttered in two years.
Electronics chain Best Buy is taking the same approach regarding its nine branded stores, instead adding between 40 and 50 sites under the Five Star banner it acquired in 2006.
"We are really committed to China, and we are trying to figure out the business model that is going to work for us in China," said Kal Patel, Best Buy's Asia president.
Five Star controls 170 stores, and competes with indigenous rivals such as Suning and Gome, boasting networks of more than 1,000 outlets apiece.
"The Five Star brand has been in the market considerably longer and is a brand people recognise. Not many people in China know what Best Buy is," said Ben Cavender, an analyst at the China Market Research Group.
Paul French, an analyst at Access Asia, suggested the dominance of independents and plazas meant Best Buy, which provided a "a much nicer retail environment" than the norm, was "a concept ahead of the consumer".
"There are too many brands and not enough people buying the high-margin items," he continued. "The pie is going to get cut very thinly."
In contrast, Media Markt, owned by German giant Metro, currently possesses a single store in China, in Shanghai, but hopes to run over 100 branches by 2015.
Media Markt believes the electronics retail sector could be worth €150bn in 2013, as demand among increasingly affluent buyers grows.
"The positive response towards our first store in Shanghai shows that our business concept is working in China," said Ton Wortel, ceo, Media Markt China.
Ding Wenjin, an analyst from Dongguan Securities, warned the discounts available online, and price sensitivity linked to inflation, mean conditions might still prove challenging.
"Foreign companies are sometimes bolder than local ones, but the local companies know more about the local customers. They are better at controlling costs and keeping prices low," said Ding.
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