China's Retail Outlets Growing Too Fast: ACNielsen

SHANGHAI -- The number of retail outlets in China has grown significantly in recent years, posing a challenge for retailers as they struggle with lower sales revenue per store, say ACNielsen officials, Dow Jones reports.

In 2002, the number of retail outlets -- including supermarkets and convenience stores -- in China grew 35 percent to about 25,000, a recent ACNielsen study shows. However, same-store sales have dropped, with sales of fast-moving consumer goods declining more than 20 percent from 2001.

"There is very, very strong competition ... putting a lot of pressure for retailers to drive down prices that will lead to lower profitability," said Glen Murphy, managing director of ACNielsen China.

The problem may force retailers to reassess their expansion plans and improve their service, product range and prices to bring in more shoppers, ACNielsen officials said.

Murphy noted that some retailers have started their own brands by repackaging certain consumer and food products in an effort to attract budget-conscious shoppers -- an idea borrowed from their overseas counterparts.

Mergers and acquisitions within the industry may take more time. Kosta Megaloconomos, associate director of retailer service, said that Chinese retailers have different market targets and corporate cultures, making M&A among themselves quite difficult. And foreign companies are cautious in choosing local partners. "It will be a slow process," he noted.

China has promised to fully liberalize the retail industry by the end of 2004.

Anticipating fiercer competition, the Shanghai municipal government merged the parent companies of four retailers earlier this year.

The merged group includes the parent companies of Lianhua Supermarket Holdings Co., Hualian Supermarket Co., Shanghai No. 1 Department Store Co., and Shanghai Material Trading Centre Co. No other major mergers have yet been announced.
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