Lion Group, the Malaysia-based trading giant, revealed last weekend that it would open 50 more of its Parkson department stores across the mainland, a crucial step in succeeding its "100 stores in China" ambition within five years. As Lion Group continues to take a lion's share of the market, its foreign competitors are saddling up to prevent losses to the juggernaut.
Parkson's outlet on Beijing's East Fourth Ring was opened last March, and was closely followed by the purchases of three stores: 510 million yuan for Nanchang Meikai Department Store; 730 million yuan for a 49 percent share in Anshan Parkson; and nearly 100 million yuan for a 40 percent stake in Mianyang Parkson.
The ongoing expansion has seen tremendously lucrative returns as Parkson netted 2.25 billion yuan with a net profit of 180.2 million yuan in the first half of 2007, marking a 53.7 percent rise in profits over last year.
This high yield has caused confidence in Parkson to soar with General Manager Zhong Rongjun saying: "Last year, the cash flow totaled 2 billion yuan with a low assets-to-debt ratio, which means we have enough capital to sustain a massive business expansion."
Before Parkson was listed on the Hong Kong exchange, Liu Jinduan had already made the "100 stores" plan public. However, the plan's prospects took a hit with low revenues coming from minor sites despite strong showings in Beijing and Shanghai which contributed to a third of total revenue. At present, Parkson owns over 40 department stores in China's mainland but its competitors are moving to head it off at the pass.
Hong Kong New World has finalized a lease contract to open its outlet in Beijing's Wangjing Xinmei Center while Hong Kong-based Lane Crawford will open an outlet in Beijing's Financial Street, a prime real estate area. Players from Taiwan and Japan are also jockeying for position with Isetan looking for a spot in Xidan CBD and Aeon planning to build a shopping mall.
Those companies who have been implemented in the mainland for a longer period of time are reaping vast profits such as Hong Kong New World last year making 4.9 billion yuan in profits, a net 28 percent increase.
According to research by real estate consulting firm DTZ, this year will see 4.1 million square meters of shop floor surface set aside for retail outlets, to maximize the economic sonic boom to be dealt by the upcoming Olympic Games.
The battle will mainly pitch companies from Hong Kong, Taiwan, and neighboring countries against each other with few Western companies in the mix. "Asian companies are more familiar and accustomed to the Chinese market. Western retailers think it premature to venture into China at this point with cultural differences holding them back," Chu Xiuqi, vice chairman of China General Chamber of Commerce, explained.
(China.org.cn by He Shan, August 2, 2007)