UK's Tesco Buys Into Hypermarket Retailer in
China
Tesco, one of the UK's leading retail chains, has bought
into the Hymall chain in China with a US$260 million purchase
of 50 percent of the Taiwan-owned retail company. The
HyMall chain is owned by Ting Hsin, a leading food group
in China.
For Tesco, this represents an opportunity to expand its
presence outside the UK and European retail markets, and
into the fast-growing Chinese retail market.The valuation
of Hymall's 25-superstore chain puts it at 50 times last
year's earnings, putting a premium on a presence in the
China market.
Tesco is a comparative latecomer to the market, and many
were questioning whether it had a strategy to get into
the Chinese market. The acquisition represents a quick
way to get into the market, but the main question will
be how much they see eye to eye with their new Taiwan
partners. In a rapidly growing market like China's, it
will be very important that the Tesco executives adapt
quickly to the realities of the China market and consumers.
The greatest challenge, both time and money-wise, for
retailers in China is setting up a retail distribution
chain. The most successful retailers have considerable
leverage with their suppliers and distributors, but second
and third tier companies have much less negotiating leeway.
Building strong logistics
teams which communicate quickly and efficiently with
their marketing and advertising teams are also hard to
find now. But signs are that the Chinese local staff are
learning quickly in what has become the world's most competitive
retail environment.
In a few cases, multinationals are already using China
as a training ground for their management trainees, figuring
if they do well in China, they can do well anywhere.
The move will put Tesco on the map for the highly competitive
retail market in China, competing with Walmart, Carrefour,
Gome and other retail
groups which are heading into the Chinese market.
Chinese consumer retail sales are surging across all sectors,
as growth is going up, especially in the main Chinese
cities of Beijing, Shanghai and Guangzhou. Early reports
suggest that the consumer retail revolution is now quickly
spreading to China's second and third tier cities as the
retail outlets expand their presence in China.
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