There is no doubt that Chinese shoppers are willing to embrace international chains, as shown by the chaotic scenes at the opening of Costco’s first physical store in Shanghai last week.
Demand was so intense that the US chain’s maiden store in China quickly became too crowded for it to stay open and local police had to be deployed to restore order.
But other Western chains have fared less well and, as the Financial Times reports, some have pretty much given up on continuing their operations in the country.
French chain Carrefour, for example, recently agreed to sell a majority stake in its Chinese stores to domestic retailer Suning for $700m, while German wholesaler Metro is reportedly in the process of selling its operations to a local bidder.
Spanish supermarket chain DIA checked out of China in 2018 after 15 years, while the UK’s Tesco sold 80% of its Chinese business to China Resources in 2013.
Even mighty Walmart, which has been operating in China since 1996, has just a 1.7% share of the $692bn Chinese grocery market, according to research firm Euromonitor.
Part of the problem is that shopping habits differ in China from those in the US and Europe, the Financial Times noted. For example, Chinese consumers tend to make several trips a week to buy fresh produce rather than opting for one big weekly shop by car.
And in addition to preferring local chains that specialise in fresh produce, they like stores that deliver a lively shopping experience. “Foreign retailers made things a bit too hygienic and clinical. That was a mismatch,” observed Jack Chuang of consultancy OC&C.
Beyond consumer preferences, Western supermarket chains also encountered some practical difficulties, such as disagreements with local partners or soaring rental costs, as Carrefour experienced with its rollout of small convenience stores.
But some are now adapting their strategies to focus on private label products, which are often imported directly from their home markets.
As witnessed last week in Shanghai, Chinese shoppers rushed to buy Costco’s Kirkland private label products, while German discounter Aldi, a very recent entrant to China, has found its branded and imported wine and beer are among its most popular products at its Shanghai store.
Walmart also intends to expand the number of its Sam’s Club stores to at least 40 by next year and they will concentrate on private brand items sourced from overseas markets.
E-commerce also has an important role to play and Walmart has acquired a 12% stake in JD.com, China’s second-largest online retailer, after giving up on its own online platform in the country.
Sourced from Financial Times; additional content by WARC staff