Wal-Mart opens its doors to China's richest city
Thu Jul 28, 2005
By Godwin Chellam and Fang Yan
SHANGHAI, July 28 (Reuters) - Tang Ling spent hours on a bus just so she could catch the grand opening of Wal-Mart's first store in China's richest city on Thursday.
"I left Shaoxing last night so I could be among the first to get in today. I've waited so long for a Wal-Mart to open near me," the 32-year-old secretary said, as she struggled with several bags of toilet paper.
Wal-Mart Stores Inc., the world's biggest corporation by sales, has joined the frenzied retail fray of China's economic stronghold, a decade after setting up shop in the country.
The 18,000 square-metre suburban outlet is the first of three planned for the wealthy metropolis, and Wal-Mart executives hope it galvanises a drive to catch up with global rivals Carrefour S.A. and Metro A.G. in the domestic $240 billion retail arena -- Asia's largest after Japan.
By all appearances, Wal-Mart stands some chance of success.
The store on the outskirts of the city was packed with thousands of people, some of whom had travelled from adjacent provinces to queue for hours, waiting for the outlet's doors to open.
Many looked as if they had just gotten out of bed as they dashed around the brightly lit store in pyjamas and flip-flops, arms laden with cans, bottles and plastic shopping bags.
"This is chaos, just utter chaos. I've never seen so many people show up for a store opening and we're struggling to make sure things remain stocked," store assistant Yang Yihua shouted above the cacophony, as shoppers grabbed cans of porridge from her hands before they made it to the shelves.
Customers chanting "cheap, cheap" milled around employees, which Wal-Mart calls associates, touting sale items, including a carton of 8 eggs for 3 yuan (37 U.S. cents).
And 24 cans of Coca-Cola cost 40.4 yuan, compared with Metro's 38.4 yuan per case offered during its own store opening on Wednesday in the southern boomtown of Shenzhen.
BUYING JUGGERNAUT
Wal-Mart may lag its foreign rivals, but China has long been a crucial cog in its worldwide corporate machine.
It bought $18 billion worth of goods from China last year. If the company were a country, it would rank as China's sixth-largest export market, ahead of the United Kingdom, Taiwan, Singapore and France, economists estimate.
Executives say Wal-Mart could even increase buying -- despite a 2.1-percent revaluation in the yuan last week that would in theory make Chinese-goods costlier.
Already, more than 90 percent of products sold in their stores across the country are acquired domestically.
"I don't think there is a major impact on Wal-Mart, the revaluation of the yuan is only 2 percent today. We should have incremental growth" in purchasing, Wal-Mart's Asian chief, Joe Hatfield, told Reuters.
Beyond procurement, Wal-Mart has big plans for China. It expects revenues to grow at least 10 percent this year in the country. It aims to operate 55 stores by the end of this year compared with 43 at the end of 2004 and 90 stores by the end of 2006.
That's still a fraction of the roughly 5,000 the retailer has worldwide, and lags Carrefour's 62 stores in China.
Fuelled by rising spending power as the economy expands at over 9 percent a year, China's retail market is expected to grow 8-10 percent annually to reach some $2.4 trillion by 2020.
Much of that growth is driven by hypermarkets that stock everything from personal computers to bicycles and pet food, and remain a novel concept to many consumers in the world's seventh-largest economy.
Yet China's retail industry is dominated by local giants such as Shanghai Bailian Group, Beijing Wangfujing Group and Wumart Stores
The China Chain Store and Franchise Association has said foreign retailers commanded just 2.6 percent of China's retail market in 2004.
But Stanley Yu, Chief Operating Officer of Wal-Mart China, shrugged off worries about the retailer's relatively slower pace of expansion.
"We take time to study our market. We can't keep opening stores willy-nilly," he told reporters on the sidelines of the ceremony. ($1=8.11 yuan)
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