Liu Minxia

BRITAIN’S biggest retailer Tesco will open its first store in Shenzhen today, as the latecomer attempts to make inroads into one of China’s most prosperous consumer markets.

The hypermarket will be the sixth store opened by Tesco in southern China, an area Tesco is currently focusing on. At present Tesco, which entered the Chinese market in 2004, has stores in 21 Chinese cities, with eastern China having the largest number of stores.

Located in central Longgang District, the Shenzhen store will be the largest one of its kind in the district with an area of about 20,000 square meters.

“Locating our first store in Longgang is because we think it has good economic growth but under-serviced by retailers,” Tony Hoggett, operation director of Tesco’s South China division, said yesterday.

Even though it lags well behind both Wal-Mart and Carrefour in both sales and brand recognition, Tesco, the world’s third-largest retailer, is not daunted at all.

“We are late to the market, but we try to make sure every store we open will become successful,” Hoggett said. “We will certainly open more stores later in other districts of the city, especially in the special economic zone.”

In China, both Carrefour and Wal-Mart have twice as many hypermarkets as Tesco, with Wal-Mart also having stakes in 102 stores owned by Trust-Mart, a Taiwan-based retailer. Carrefour has opened eight hypermarkets in Shenzhen since first coming to the city in 1995 and Wal-Mart, which opened its first Shenzhen store in 1996, has 14 outlets in the city. However, neither of them has a store in Longgang.

Offering low-priced and high-quality goods is one of Tesco’s strategies, Hoggett said. The new store will offer discounts on more than 100 items and Hoggett said Tesco will try its best not to pass rising costs on to consumers in the long term.

“As the consumer price index goes up quickly, all retailers have the responsibility to drive the price down in order to let the consumers feel unaffected,” Hoggett said.

Hoggett said Tesco will expand faster in China this year, with more than 14 stores scheduled to open around the country. In southern China, the focus will be on first-tier cities and more stores are slated to open this year in Guangzhou.

Tesco hasn’t been expanding as aggressively as rivals, however. In July 2004, Tesco entered China by purchasing a 50-percent stake in Ting Hsin. In the next two years, Tesco opened 18 stores under its own brand. In December 2006, Tesco raised its stake in Ting Hsin to 90 percent.

Shenzhen, with its strong purchasing power, is one of the most affluent regions of China. Last year, per-capita disposable income of Shenzhen residents rose 10.2 percent to 24,870 yuan (US$3,551), 1.8 times China’s average urban per-capita disposable income of 13,786 yuan, Shenzhen Statistics Bureau said. Sales in Shenzhen’s consumer market rose 14.6 percent to 191.5 billion yuan last year, the fourth-largest in China.

But experts have warned the large number of domestic and foreign retailers has made the competition heated, leading to reduced margins.

“With a large number of supermarkets, especially within the special economic zone, there isn’t much room for more retailers,” Hua Tao, secretary general of Shenzhen Retail Business Association, said yesterday.

“The city government has accepted our suggestions and will hold hearings before building any new large shopping venues within the special economic zone. But outside the zone, there are vast opportunities.”