German retail giant Metro Group is looking to press harder into China's first- and second-tier cities, a market crowded with domestic and overseas competitors.
With a 24 percent jump in China sales last year, Metro plans to open as many as 10 new stores per year here, with a special team focusing exclusively on scouting for suitable properties.
Metro is also building a nationwide distribution network with the help of a professional logistics service provider to lower costs and boost its competitiveness.
The mainland's retail sector, dominated by local players like Shanghai Bailian Group, Beijing Wangfujing Group and Wumart, has attracted investment from foreign giants such as France's Carrefour and US' Wal-Mart.
China's 2006 retail sales grew 14 percent to US$770 billion, equivalent to a quarter of the US market. Sixteen overseas retailers including Carrefour and Wal-Mart reported a combined 168.8 billion yuan in 2006 sales, accounting for 32 percent of the total.
"China is a fast-growing market, where we can generate the biggest turnover in future," Peter Schweighofer, vice-president of Metro China, said yesterday.
In 2006, Metro Group, with 34 stores in 29 Chinese cities, achieved a sales volume of 9.4 billion yuan. Its corresponding global sales figure was 60 billion euros.
But instead of an aggressive strategy of expansion through acquisitions, adopted by its peers, Metro plans to boost its presence in China through organic growth.
"We have offices in Shanghai, Beijing, Guangzhou and Wuhan. These are the main cities we are focused on. Our strategy also includes the second-tier cities," Schweighofer said.
To support faster growth in China, Metro has put in a place a special team in Shanghai to look for property for new stores.
"It's a big challenge to find good property," Schweighofer said. "But we have a well-developed process."
In addition to the team, Metro has a system to monitor where its customers are located. "Our business model and system are not comparable to those of Wal-Mart or Carrefour," Schweighofer said.
Instead of individual customers, the group mainly targets star-rated hotels and premium restaurants as well as enterprises.
"Opening stores rapidly, like 50 or 100 a year, is not important for us," he said. "We can open a store in three months, but it takes time to facilitate new stores with the right merchandise and fulfill customer needs."
The company said it has reached an agreement with Sinotrans, a Hong Kong-listed logistics provider, to help Metro build a multi-channel national network for distribution of dry food and non-food products by 2010.
(China Daily May 11, 2007)