Chinese supermarket chain Wumart is planning to open 100 new outlets in Beijing as part of an ambitious expansion programme, according to the China Daily website.
The Beijing-based retailer operates more than 400 hypermarkets, supermarkets and convenience stores in Beijing, neighbouring Hebei Province and Tianjin municipality, as well as East China’s Shanghai.
“We are to open another 100 outlets in Beijing and 10 hypermarkets in eastern and northern China this year, while our network will be ultimately extended across China,” Wu Jianzhong, deputy president of Wumart, told China Daily.
Wu said that the 100 new outlets in the capital would be convenience stores or supermarkets, rather than hypermarkets.
Instead of establishing new stores, Wumart’s development strategy is based on mergers and acquisitions of local small and medium-sized retail companies, especially in regions outside Beijing.
Meanwhile, the company is considering buying stakes in companies engaged in businesses complementary to Wumart’s retail operation, including logistics, real estate development, food processing and daily necessities manufacturing.
Wu said Wumart is in negotiations with several possible partners, but declined to name them.
Last year Wumart acquired 12 supermarkets from Daiei – Japan’s third largest retailing enterprise – in Tianjin, as well as a 33.74% stake in local rival Chaoshifa, to become the largest share holder in the company.
“Wumart’s M&A expansion strategy seems practical and efficient, and provides a shortcut for its penetration into unfamiliar markets,” Fan Yanru, deputy secretary-general with the retail enterprises committee of the China Commerce Association for General Merchandise, told China Daily.
The retailing conglomerate can make full use of its partners’ resources, in terms of site networks, equipment, sourcing systems and local relationships, to reduce operational costs and risk, he said.
Wumart opened its first store in Beijing in 1995 and turned a profit in its first year.
After a decade’s development, it has become one of China’s top 10 retail firms, according to a survey conducted by the Ministry of Commerce.
It was the first commercial enterprise in the capital to be listed overseas – shares in the chain are traded in Hong Kong – and plans are afoot to take more of the company public, Wu said.
Wumart’s listing company chalked up a net profit of US$13 million last year, up more than 50% over 2003.
However, the company is facing increasingly stiff competition from the local Bailian Group, China’s leading retailer, which also controls Lianhua Supermarket Holdings Co Ltd, as well as international giants such as France-based Carrefour, US-based Wal-Mart and Germany’s Metro.
But Wu said he believes that his company has the edge over its competitors, in terms of business scale, operational skills, and human resources.
In addition, Wu pointed out that a number of domestic players had matured amid the fierce competition for market share with foreign conglomerates, and are now strong enough to compete on a level-playing field.
Huang Hai, assistant minister of commerce, said in January at a high-level forum for Chinese and foreign retailers that the most urgent task for domestic retailers was consolidation in order to enhance their competitiveness.
Wu and Fan both indicated that Wumart’s expansion strategy coincides with the government’s position.