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Content Guy’s Note: Reuters reports this morning that the Chinese government in Beijing is disputing a report by the World Health Organisation (WHO) that the deadly SARS outbreak is much worse in China than has been admitted. The outbreak of Severe Acute Respiratory Syndrome seems to be having a broad impact on commerce both in China and abroad, though, as this report from makes clear, within the supermarket industry there things seem to be business as usual.

According to the annual list of top 100 domestic retailers drawn up by China
Chainstore & Franchising Association, Shanghai Lianhua has retained its position as the leading retailer in the country. Lianhua generated sales the equivalent of $2.2 billion (US) in 2002, an increase of 30 percent on 2001. Second place Hualian Supermarket closed the gap, with sales growth of 77 percent taking turnover to $1.8 billion (US). Other grocery retailers featured in the top ten included Shanghai Nonggongshang, Beijing Hualian
and China Resources Enterprises.

Total sales of the 30 largest retail companies stood at some $29.7 billion (US) in 2002, up by 52 percent on 2001, and well ahead of the country’s 4.6 percent growth in retail sales in general. It was the third consecutive year growth has exceeded 50%. The 30 largest retail companies had a total of 8,988 stores last year, an increase of 53.2 percent over 2001.

This impressive growth of China’s major domestic retailers continues unabated. Thanks to a buoyant retailing environment in cities such as Shanghai and Beijing, and a programme of rapid expansion, firms such as Shanghai Lianhua, Hualian Supermarket and China Resources Enterprise are enjoying a period of significant growth. With their sales growth exceeding that of the retail sector in general, backed up by the acquisition of smaller players, it is clear that they are gradually gaining a small, but expanding, share of the market.

Not content to rest on their laurels, almost all of the major players are planning further rapid expansion. Aided by its forthcoming stock market flotation, Shanghai Lianhua aims to open a further 1,000 stores in 2003 and is hoping to have some 6,000 stores by 2005. Hualian Supermarket is also looking to add around 1,000 stores during the coming year, while China Resources Enterprise plans to be operating 820 food stores by the end of 2006, excluding acquisitions.

However, a word of caution must be noted. It is clear that not all the retailers will succeed in their plans and many run a real risk of over-expansion. Shanghai Nonggongshang saw its sales growth slow to a relatively low 17 percent during the year, despite a 117 percent increase in outlet numbers. Many of the smaller companies unable to keep pace could be forced out of business or be swallowed up by their larger rivals. And although the growth does sound impressive, it must be placed into an international context. For example, if all of Shanghai Lianhua‚s expansion plans are competed, the retailer is forecasting sales of $9.7 billion (US) by 2005. However, this translates to just 3.8 percent of the present-day size of Wal-Mart and 12 percent of the size of Carrefour, showing just how much the leading Chinese retailers lag behind in terms of global scale.
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