|
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads |  |
OCTOBER 6, 2003
China: The Next Big Conquest? They are eye-popping numbers: Some $12 billion worth of goods made in China were sold to Wal-Mart Stores Inc. last year. That's a full 10% of all U.S. imports from China. But the Chinese aren't just Wal-Mart suppliers. They're also Wal-Mart shoppers. The Arkansas company operates 29 stores in 13 mainland cities and employs nearly 15,000 people. It took in almost $1 billion in sales last year. New stores are planned for Shanghai and Beijing, and Wal-Mart expects to have at least 35 stores open by yearend. It's selling into a retail market that today is estimated at $370 billion and is expected to grow by 8% to 10% annually. "There is a retail revolution happening," says Jacques Penhirin, a partner at McKinsey & Co. in Hong Kong. "No retail company that wants to be serious internationally can afford to ignore China." But, unlike in its home market, Wal-Mart isn't exactly trampling the competition in China. It's going head-to-head with major international retailers, including 7-Eleven, Britain's Tesco, and Germany's Metro. And archrival Carrefour has a jump on Wal-Mart. With 36 stores across mainland China, Paris-based Carrefour topped Wal-Mart with $1.4 billion in sales last year, estimates China International Capital Corp., a Beijing-based investment bank. "Wal-Mart has not been as aggressive as Carrefour," says CICC analyst Guo Haiyan. The foreign operations are all joint ventures with Chinese companies; outsiders are allowed to own from 30% to 65% of the venture, depending on the city.  Meanwhile, China's thousands of local retailers are fighting for survival against the international onslaught. The China retail market for both groceries and dry goods is now fragmented. The mainland's 50 top retailers control less than 5% of the market. Those smaller stores, not to mention mom-and-pop operations in provincial towns, are threatened by the big international megastores. To help local companies compete, China's central government is orchestrating a series of mergers -- racing against a 2005 deadline after which, under China's agreement with the World Trade Organization, the foreign companies will be allowed 100% ownership. The biggest combination came earlier this year, when three regional retail chains merged to form Shanghai Bailian Group Co. The new company has more than 4,000 outlets and annual sales close to $10 billion, dwarfing its foreign rivals. "Our ability to compete has just become much stronger," comments one official from Shanghai Bailian.A LABOR CHALLENGE. Some snags have arisen on the procurement side of the China trade. Chinese suppliers regularly complain that multinational retailers like Wal-Mart are too tough on local manufacturers on price and delivery time. Carrefour faced a small media storm last summer when suppliers loudly complained about the French company's purchasing policies, including a range of extra charges, among them so-called "entry fees" that the company assesses suppliers just to sell their products in its stores, plus other fees for special shelf placement. And Wal-Mart faced its own headache recently when newspapers reported that China's official labor movement, the All-China Federation of Trade Unions, had been repeatedly rebuffed in its effort to sign up employees in Wal-Mart's stores. Wal-Mart denies that it does anything to interfere with labor organizing in its stores. But it also says unions are not needed. "We believe as a company that we can deal directly with our associates in a way that will be so positive that they will not feel the need for a union," says Wal-Mart spokesman William Wertz. The ACFTU declined to comment on the dispute, but it is fair to assume it won't go away without a fight. Tough stuff. But with a $370 billion market up for grabs, Wal-Mart and its competitors know it's worth the trouble.  By Dexter Roberts in Beijing
BW MALL
SPONSORED LINKS
Get BusinessWeek directly on your desktop with our RSS feeds.
Buy a link now! Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
