China becoming more crowded retail space

China becoming more crowded retail space

Wal-Mart Stores' move to slow its pace of store openings in the Chinese market should come as little surprise, according to a leading Chinese retail analyst.

The company confirmed this morning (26 October) it plans to open 100 new stores in China over the next three years.

A spokesperson for Wal-Mart told just-food China was a "great market... [where] we continue to grow". However, this rate of expansion marks a considerable slow-down for the US retail giant. Previously, the company was typically opening 50-60 stores a year in the market.

"It is no surprise to see that several of the foreign players are going through a period of 'consolidating' their current network, focusing on enhancing their peoples' skills and their operational processes," Torsten Stocker, head of Greater China consumer and retail practice at consulting firm Monitor Group, told just-food.

According to Stocker, a number of factors are hampering retailers' ability to maintain rapid expansion in China.

Significantly, the amount of existing "white space" where urban communities with attractive locations are under-served by modern trade is diminishing.

Stocker said that as a result there is "intense competition" for these locations as international groups compete with a range of domestic players - from chains with a multi-regional footprint to those with a handful of outlets in a city or province.

In this situation, Stocker suggested domestic players have the advantage. "Being local often means having an advantage in knowing where good locations will develop or open up," he said.

Domestic players are also becoming more formidable in the development of their banners and brands, Stocker suggested. "Domestic players have also become much better in terms of how they compete, expanding their portfolio of brands to have the right store and brand profile for different locations and market environments."

Another factor hampering expansion is a lack of talent, in the form of store managers, supervisors and buyers.

Nevertheless, Stocker emphasised it is far from the "end of the growth opportunity" for multinationals in China. Particularly as the continued process of urbalisation results in the development of fresh "white space" in newly urban areas and retailers continue to introduce modern retail formats to smaller towns and cities.