tanner brown
Big chain stores struggle with e-commerce and specialization among smaller players
Chinese supermarket chains are in trouble.
There were signs of relief when China lifted strict coronavirus travel restrictions last year, with observers predicting a surge in shoppers flocking to big-box stores after months confined to their homes. Ta.
That didn’t happen.
The reasons range from evolving consumer preferences for e-commerce to infighting between corporate partners.
So far this year, China’s supermarket retail sales have fallen by 0.4% compared to comparable figures in 2022, despite a 6.8% increase in overall consumer goods over the same period, according to the National Bureau of Statistics are doing.
The consumer sector has been particularly buoyant over the past few months, driven by services, with strong growth in hospitality and catering, IT and software, transport, warehousing, postal services and financial services.
Eight of China’s 13 listed supermarket operators posted losses or decreased revenue in the first half of this year, according to their financial reports.
Department stores and convenience store chains are similarly experiencing negative or single-digit growth rates.
Meanwhile, online retail sales increased by 11.6% in the first nine months of this year, according to data from the Bureau of Statistics.
Carrefour China had 260 stores in 2017 and was the country’s largest supermarket chain at the time. By the end of 2022, that number had fallen to 150.
“I have witnessed the decline of Carrefour in my hometown,” said Yang Lihua, 28, who lives and works in the western metropolis of Chengdu. “Right now, the store is half empty and appears to have very few customers.”
Carrefour, like other Chinese supermarket operators contacted by MarketWatch, declined to comment.
Carrefour China’s decline since 2017 has set the stage for the rapid rise of e-commerce giants Alibaba Group Holding (BABA) (HK:9988) and JD.com (JD) (HK:9618). It started from nothing. We are launching our own labels and investing heavily in our existing distributors.
Things only got worse.
The pandemic has taken its toll, and brick-and-mortar Carrefour has been hit particularly hard.
The company is currently partnering with Chinese conglomerate Suning, which operated stores under the Carrefour banner, after purchasing an 80% stake in French retailer Suning’s China operations for $656 million in 2019. We are fighting a legal battle.
The situation worsened when Carrefour exercised a put option requiring Suning to buy the remaining 20%, which it failed to do, according to Hong Kong court documents.
Rivals aren’t doing so well either.
Sun Art Retail (Surrey) (Hong Kong: 6808), the country’s largest supermarket operator that operates the popular RT Mart chain, will close in 2022 despite Alibaba increasing its stake from 36% to 72%. More than $100 million in cash was lost. The company has since cut costs and returned to profitability, according to its filings.
Better Life (TW:1805), which lost $61 million in the first half of this year, is facing worker protests across the U.S. for failing to compensate employees when it closed numerous stores. .
Lian Hua Supermarket Holdings (Hong Kong:980)’s losses this year have only worsened its share price, which has fallen by around 80% since 2021.
Wal-Mart (WMT), which has been in China since 1996, had even more mixed results.
Over the past few years, the company has begun selling most of its overseas operations, including Japan, the United Kingdom, and Brazil. However, the company maintained a retail presence in China.
From the Archives (December 2021): Walmart and Intel face Chinese backlash after avoiding imports from Xinjiang under new US law
After years of consecutively closing more stores in China than opening them, Walmart realized something when the pandemic hit. Sam’s Clubs, which are scattered across the country, were one of the few brick-and-mortar stores to succeed during the coronavirus era. Families can stock up on long-term storage supplies.
Sam’s Club has become as important to Walmart’s China prospects as the stores themselves. Sam’s Club plans to have 48 locations across China by the end of the year and reach 4 million members by December 2022, according to company documents.
Sam’s Club rival Costco (COST) hopes to open its sixth store in China by the end of the year.
But in MarketWatch’s conversations with more than a dozen Chinese consumers, many cited the specialization of smaller stores as a reason to avoid traditional supermarkets, which are currently struggling.
“I order my meals from restaurants in my district and my groceries from small shops nearby,” said Chen Gan, who works from home at a tech start-up in Beijing. He said delivery is free in most cases and orders can arrive in as little as 15 minutes.
Tanner Brown covers China for MarketWatch and Barron’s.
Other dispatches from Tanner Brown:
American companies operating in China are experiencing confusion and uncertainty. Here’s why:
China’s economy is in trouble, and consumers won’t open their wallets unless they’re watching a movie.
China’s youth job market is a nightmare. It is changing the face of the country.
China’s real estate crisis opens the door to the end of the country’s economic boom
-Tanner Brown
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10/26/23 1719ET
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