|After nine years in China, Tesco is on the point of scaling down and handing its Chinese business to China Resources Enterprise. [Photo / Provided to China Daily]|
British chain Tesco has been forced to take a new tack with its China operations
Although Tesco Plc's spacious stores are well-lit and spotlessly clean with wares tastefully displayed, Helen Wang seldom shops there. Wang, 32, of Beijing, prefers to buy most of her groceries at Wumart Stores Inc, a Beijing-based chain, where she can easily find fresh delicacies including raw chicken feet, which are always heaped on a table, or cheap vegetables.
"It is close to home, the food is fresh and prices are wonderfully low," says Wang on her way home after work and shopping. "For large daily necessities I always shop online," she says.
Shoppers such as Wang are making life extremely difficult for big international retailers including Tesco. The rapid rise of e-commerce firms in China has compounded their problems in a market once seen as full of potential.
Since the early 1990s, foreign supermarket chains from Carrefour SA to Wal-mart Stores Inc have waded into the country, desperate to win over its burgeoning middle class, but lack local expertise or are short of capital.
After nine years of independent operations in China, Tesco, Britain's largest retailer, announced on August 9 that it was in exclusive talks with the State-owned China Resources Enterprise Ltd for a joint-venture agreement merging their Chinese operations.
The proposed deal, following Tesco's decision to quit the United States and Japan, represents a significant scaling down of the UK company's Chinese operations. Under the deal, Tesco's 131 supermarkets, hypermarkets and shopping mall businesses in China would be combined with the Hong Kong-listed CRE's almost 3,000 stores.
CRE, a major supermarket operator in the country that includes the Vanguard chain, would control about 80 percent of the venture. Tesco, the world's third-largest retailer, would have the rest.
It would bring together "a deep understanding of local customers, an established nationwide infrastructure and proven track record with Tesco's global retail expertise, international sourcing scale and supply chain capabilities", CRE said.
Retail analysts said the decision seemed to be good for both sides, but it was essentially a lost battle for Tesco, which failed to make much headway in the Chinese market.