April 10, 2008 -- British retail giant Tesco will open the first of a planned five stores in Hefei by the end of this year, the Hefei Foreign Trade and Economic Cooperation Bureau announced recently.
The Hefei store will be the first Tesco in Central and West China, Tesco China vice president Zhuang Nanbin said, according to Anhui Market newspaper. Investment for the first project is estimated at US$5 million (35 million yuan), it said.
"Talks between Tesco and Anhui officials began during the 2007 Expo Anhui China," Lei Liu, investment promotion director at the Hefei foreign trade bureau, told Emerging China.
"The talks went smoothly and we are pleased to have Tesco enter Hefei soon," Liu said.
He said talks are ongoing on the possible expansion of Tesco elsewhere in Anhui province, particularly the northern cities of Bengbu and Huabei, as suggested by provincial officials during a meeting with a Tesco delegation last February.
"We are still at the stage of inspection and talks. But we are optimistic about the overall Anhui market," Fan Sun, Tesco spokesperson, told Emerging China. She said the British retail giant is also considering opening stores south of the province in such cities as Wuhu and Ma On Shan.
Sun said Tesco has done a feasibility study on Anhui, which concluded that the province is "satisfactory" in terms of logistics and consumption capacity. "We hope to bring Tesco's expertise and technology in the retail operation, its own brand development, logistics, IT systems, and food security to our new outlets in Anhui," she said.
Tesco is only the latest to enter the local market. Retailing giants like Wal-Mart, Carrefour and Metro are already operating shopping malls in the province.
Carrefour, which has opened five stores in Anhui, has enjoyed sales beyond expectations, according to Xiaoquan Yang, general manager of Carrefour East China, in an interview with Anhui Market newspaper.
The same surging demand has prompted Wal-Mart to expand into small and mid-sized cities, according to Ling Dai, economics professor at Anhui University.
April 10,2008--Big retailers are optimistic about the market, which is gradually bursting forth with tremendous consumption capability," Dai told Emerging China. The global brands are now racing to grab a larger share of this surging demand in second-tier markets like Anhui, she said.
Tesco has opened 54 outlets since it first entered China in 2004 through a joint venture with the Ting Hsin group, China's largest food conglomerate. Tesco is the third largest retailer in the world next to Wal-Mart and Carrefour. It now owns 90 percent of the Ting Hsin group.
While Carrefour and Wal-Mart have a 10-year head start over Tesco, the latter's acquisition of the Ting Hsin group has substantially narrowed the gap with its major rivals, according to Baiqiao Huang, securities industry analyst at China International Trust and Investment Corp.
"China's retail industry is most intensely competitive," Anhui University's Dai said. "Through competition, retailers will improve their overall service and seek their different orientations in the market."