Leading UK retailer Tesco has described its plans to move into the Chinese grocery market as “having some urgency”.
The company’s deputy chairman David Reid said in an interview with the McKinsey Quarterly’s Paris office: “We have had a team out there for two years and that costs money. But there is no danger of getting closed out of the market yet as it’s too big.”
Tesco is already active in the Czech Republic, Hungary, Ireland, Poland, Slovakia, South Korea, Taiwan and Thailand, and is keen to enter Japan and China. As in other markets, Tesco is likely to seek a local partner to facilitate its entry.
Regarding Japan, Reid said Tesco would most likely adopt the Wal-Mart approach of buying into an existing retailer, adding: “Opening hypermarkets from scratch in Japan, as Carrefour has bravely done, puts a huge strain on any profit and loss account.”
Tesco has quickly swept to the forefront of Internet home shopping in the UK. The company currently puts together customers’ orders in stores, but Reid said the company was likely to test out a warehouse model at some point.
He said that at some stage if the company did not have warehouses, the turnover might eventually hinder the smooth running of the stores.