Bottom line: Wal-Mart’s new layoffs underscore the intense competition in China’s retail market, which could cause it to miss its new store target, while Heinz’s expansion reflects the big potential for big global food brands.
Two new stories are casting a spotlight on diverging trends in the retail and consumer space for major multinationals, with retailing giant Wal-Mart (NYSE: WMT) making big new cuts in its China operations even as US food maker Heinz launches a massive new China factory. Wal-Mart’s move highlights the intense competition that has gripped China’s retail sector over the last 3 years, forcing several major players to leave the market or consider doing so. At the same time, there’s still huge opportunity for makers of quality food and other consumer products, especially from major foreign brands that are generally more trusted by Chinese buyers than domestic names. Read Full Post…
The China retail scene is buzzing with conflicting signals from these last few weeks, as established names like Tesco (London: TSCO) sound negative notes amid a rapid economic slowdown, even as newcomers like Apple (Nasdaq: AAPL) and Forever 21 open massive new stores. In fact, there really aren’t too many contradictions in this latest news, since these new mega-stores were probably in the planning stages before China’s economic slowdown began. Thus these newer stores are more indicators of investments for the future rather than bets on the present.
Let’s start off this Friday before the long Labor Day weekend with a couple of retail items, one from British grocery giant Tesco (London: TSCO) in the online space and another from mainstream clothing maker Perry Ellis (Nasdaq: PERY), which is entering China with a new joint venture. The Tesco plan attests to the incredible popularity of buying things over the Internet in China. As an American living in China, I’ll be the first to say the growing Chinese fondness for buying things online is quite unlike anything I’ve ever seen in the west. Nearly anything can be ordered over the Internet these days, from a McDonalds (NYSE: MCD) hamburger to books, clothing and just about any other merchandise you can think of. Now Tesco will be adding grocery store items to that list, according to a media report citing a company spokeswoman. WalMart (NYSE: WMT) is also playing in the online grocery game through its investment in Yihaodian, while Carrefour (Paris: CA) is developing the space through a tie-up with a Thai partner. This kind of online service differs from many more traditional ones because deliveries take place very soon after an order is placed, and same-day delivery is essential. But the economics for this kind of initiative seem to work in China, thanks to its high population density and the fondness for shopping online to avoid the throngs of people and long lines at grocery stores. I would expect this kind of initiative to be quite successful if Tesco and other big names can execute their plans well, perhaps meaning trouble for smaller operators like Lianhua (HKEx: 980). The other retail news will see Perry Ellis form a joint venture with local partner China Outfitters (HKEx: 1146) to open new stores selling the US company’s Manhattan brand. (
