NEW YORK — Call it the battle of the behemoths in the market that every company wants.
Seeking to blunt Wal-Mart’s entrance into China, Carrefour of France said Thursday that it plans to aggressively expand into that country with about 300 discount units primarily selling food. The expansion, seen going through 2006, will be conducted through an agreement with the Beijing Shoulian Group, an arm of the Beijing municipal government seeking to strengthen the area’s retail industry.
The stores will carry the DIA banner, since the venture involves Carrefour’s Distribuidora Internacional De Alimentacion SA division. The new DIA units will be smaller than the typical Carrefour hypermarket. Carrefour has opened 35 hypermarkets in China since 1995.
Last month, Carrefour signed an agreement with Lianhua Supermarket Holdings Co. in Shanghai to open around 300 discount stores in the next two to three years.
While Wal-Mart is both the world’s largest company and retailer, Carrefour is the world’s second-largest retailer. However, its international business is larger than Wal-Mart’s non-U.S. operations. Wal-Mart currently has 20 supercenters, four Sam’s Clubs and two neighborhood stores.
Ray Bracy, vice president of international corporate affairs, called Carrefour’s expansion plans "not surprising at all," but said it wouldn’t alter Wal-Mart’s game plan.
"Carrefour is a good competitor everywhere we operate," he said. "They have to do the same things we do over there, which is work with the local government to get the permits and so forth."
Bracy would not confirm reports that Wal-Mart is closing in on a site for its first store in Shanghai. He acknowledged, however, the city is exploding with growth, ringed by factories and rumbling with new construction, and is "a great market" and one the company is "starting to consider."
Wal-Mart is opening its first store in Beijing, a Sam’s Club, this year. Bracy said the near-term expansion plans would focus on major metropolitan areas like Beijing and Shanghai. Wal-Mart has its Chinese headquarters in Shenzhen, where it opened its first store, a supercenter, seven years ago.
"It doesn’t make sense to go out to rural China just yet," he said. "The baskets are kind of small over there — there’s less spending per transaction. So you need to make a large amount of transactions and a substantial population to be profitable."The company operates 26 stores in China: 20 supercenters, four Sam’s Clubs and two Neighborhood Markets. It opened 14 doors in fiscal 2002, 11 of which were supercenters. Bracy predicted the country could eventually support more than 60 doors. It wasn’t a given, he added, that they would mostly be supercenters.
In fact, the company appears to consider its Neighborhood Markets — experimental, smaller, grocery-cum-convenience stores clustered mostly in the southern U.S. and Texas — a potential fit for China, which has dense metropolitan areas.
"China has a growing middle class and they’re investing in infrastructure, which are all signs of a good retail market to come," he said.
In other news at Carrefour, first-quarter sales dropped 0.4 percent to $19.56 billion. Excluding currency shifts, however, the group said sales increased 6 percent. Dollar figures are converted from the euro at current exchange rates. Carrefour does about $70 billion in sales annually.
Sales in Carrefour’s core European markets — France, Spain, Italy, Belgium and Greece — increased 4.2 percent and accounted for 82 percent of total turnover in the quarter.
Sales in Latin America dropped 34.5 percent due to currency shifts, but increased 14.1 percent at constant levels. Sales in Asia also were punished by currency changes, dropping 5.3 percent; they advanced 11.4 percent at constant currency levels.
In the quarter, the group launched 159 stores, including three hypermarkets.
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