1992, another spring. Thinking of this song, 30 years have passed. In 1992, the State Council promulgated the "Approval on Issues Concerning the Use of Foreign Investment in the Commercial Retail Sector," formally allowing foreign enterprises to enter the retail industry in specific regions through joint ventures. That year, mainland China began piloting the opening of the retail industry to foreign investment, with the scope limited to six cities—Beijing, Shanghai, Tianjin, Guangzhou, Dalian, and Qingdao—and five special economic zones including Shenzhen. Each city was allowed to pilot one or two joint venture retail enterprises. Initially, the opening was limited to clothing and department stores, and it was not until 1995 that it expanded to food and chain operations. In that year, foreign retailers began to enter mainland China and open supermarkets. At that time, supermarkets were a novelty to the Chinese, who had only seen small shops and department stores. The sudden appearance of large supermarkets with a wide variety of goods and huge sales areas greatly impacted the visual senses of the Chinese people. Walmart, Sam's Club, Makro, Metro... one by one, foreign supermarkets opened in various Chinese cities. Many opened with great fanfare, so crowded that people could not squeeze in. They witnessed the most prosperous era of China's retail industry. In recent years, with the development of domestic e-commerce, online retail and instant retail have risen, greatly impacting the retail industry. Among these foreign retail enterprises, some have chosen to cooperate with e-commerce delivery, some have expanded their scale, some have chosen to close stores, and some have left China quietly. Their stories are nostalgic and thought-provoking...
01 First Arrival in China, Foreign Retail Sales Were Hot "In the 1990s, goods were not abundant. When a foreign supermarket opened, everyone crowded in like it was New Year to watch the excitement," recalled Mr. Mo, a Shanghai citizen, about the scene when Carrefour first opened in Shanghai. He said he got up early to queue, and the line stretched for hundreds of meters. People rushed into the store and started crazy shopping, as if the goods were free and could be taken at will. In 1995, Carrefour entered mainland China and opened its first store in Beijing. In 1996, Sam's Club opened its first store in Shenzhen. Around 1998, foreign supermarkets such as Germany's Metro, the Netherlands' Makro, and America's Walmart had already opened stores in Shanghai, Beijing, and Shenzhen. These large foreign supermarkets gave the Chinese people a huge shock. The spacious sales halls, neatly arranged goods waiting for customers to choose—these practices were very advanced at the time. Most of these large supermarkets chose to open in suburban areas, adopting models such as hypermarkets, warehouse stores, one-stop shopping, open-shelf sales, and customer self-selection. This provided a different paradigm and model for China's then department store and supply and marketing cooperative-based commercial formats. Carrefour and Walmart were almost the models that many Chinese private supermarkets, such as Yonghui, learned from and imitated in their early days. A research report from China Merchants Securities showed that from 2004 to 2011, foreign supermarkets entered an "expansion period" in China. Before 2004, Walmart had only opened 27 stores in 10 provinces; by 2010, it had opened 219 stores in 24 provinces. Carrefour was not to be outdone, with its stores increasing to 182 by 2010. In 1997, Lotus (卜蜂莲花) entered mainland China, opening its first store in Shanghai. Lotus was originally called "易初莲花" (Yichu Lotus), and the name change caused a small "storm." Lotus is a retail enterprise under Thailand's well-known multinational group Charoen Pokphand Group. "易初莲花" was the name used when it was first created in Thailand; "易初" is the name of the founder of Charoen Pokphand, Xie Yichu, and "莲花" (Lotus) is the national flower of Thailand. In 1997, Yichu Lotus had been operating in Thailand for five years with about 35 supermarkets. But at that time, its parent company, Charoen Pokphand Group, resolutely sold 80% of its shares in all Thai Yichu Lotus supermarkets to TESCO Group, the largest retailer in the UK, and focused on developing in China. In Thailand, Yichu Lotus only began to make a profit when it reached its 17th store, while in China it achieved profitability by its 5th store. In 1968, Makro opened its first store in Amsterdam, the Netherlands, and expanded to neighboring countries such as Belgium, Poland, the Czech Republic, Greece, Portugal, Spain, and the UK. In 1996, Makro entered the Chinese market, opening its first warehouse-style supermarket, "CP Makro," in Guangzhou, and expanded from south to north, opening more and more stores. In December 1997, "Shantou Makro" opened, and in the same year, Makro came to Beijing, opening the "Zhongmaolian Makro" Yangqiao store, which was one of the first officially approved Sino-foreign joint venture chain retail pilot enterprises in China. Makro stores worldwide generally cover more than 10,000 square meters, with abundant goods and prices much cheaper than department stores. In addition to retail, they also have a wholesale nature, so stores are usually built in suburban areas with convenient transportation, similar to what we call "cash and carry" stores. The influx of foreign retail brought new vitality to mainland China's retail industry.
02 Site Selection and Store Opening: Mixed Fortunes After China officially joined the WTO in November 2001, foreign retail's retail layout in China had become quite active. More foreign companies, such as Thailand's Charoen Pokphand Group's Lotus, Japan's Ito Yokado, and France's Auchan, completed their initial layout in China. In 2001, Carrefour already had 27 stores in China, ranking first among foreign retailers. Walmart followed closely with 19 stores, Metro had 15 stores, and 7-Eleven also obtained China's first foreign convenience store chain license. In 1996, Metro entered the Chinese market. Metro also preferred to open stores in suburban areas. With its model of "warehouse supermarket + enterprise-oriented customers + professional services," it was highly favored by corporate clients. Financial writer Wu Xiaobo believed that Metro provided a model for multinational companies. He attributed Metro's success in China to three points: product quality, business model, and comprehensive services. Metro always maintained the rigorous attitude of German enterprises towards product quality, with all stores following the internationally recognized HACCP standard system, which means Metro stores must achieve full transparency in food safety and quality control. As one of the world's top three retailers, UK's Tesco had over 6,700 stores globally, 470,000 employees, and annual sales of nearly £71 billion. However, it was not until 2004 that Tesco entered the mainland Chinese market by acquiring the chain supermarket brand Hymall (乐购) under Taiwan's Ting Hsin International Group, a full decade later than Walmart and Carrefour. After Tesco acquired Hymall and entered the Chinese market, the British side sent senior executives to fully control Hymall, but the foreign executives lacked sufficient understanding of the Chinese market. For example, in terms of new store site selection, Hymall did not pay much attention to whether the store was away from the business district or whether there were enough consumers around; it often chose remote locations with large spaces and ample parking. In the UK and the US, there is a strong car culture, and large supermarkets are usually located in suburbs, with people accustomed to driving dozens of miles to shop. However, the reality in China is that many cities have heavy traffic and fewer cars per capita, and consumers usually shop nearby. When discussing Tesco's management style, many industry insiders likened it to a gentleman in a suit with pure British blood, but in China, it often needed to fight bare-chested. Especially when domestic enterprises promoted discounts and engaged in price wars, Hymall's operations in China were relatively mild, and its hundreds of self-operated products imported from the UK at high prices became its unique feature. In 2019, Costco arrived in China belatedly. Costco is the largest membership warehouse club in the US. As the "pioneer" of the membership economy, Costco has a huge appeal to the American middle class, attracting them with an average gross margin of 7% and generating revenue through membership fees. In mainland China, Costco has many followers. Earlier, Xiaomi CEO Lei Jun often mentioned Costco: "The most important reason Costco has been invincible for so many years is that it has grasped the essence of its existence: products are extremely good, prices are extremely low, and services exceed expectations." A year earlier, in 2018, German retail giant ALDI (called 奥乐齐 in China) entered the Chinese market through Tmall Global, and later opened more than 40 stores in Shanghai, focusing on community-based dense network layout and market expansion. Auchan was founded in France in 1961 and officially entered the mainland Chinese market in 1999. RT-Mart was founded in Taiwan in 1996 and entered the mainland Chinese market in 1997. In 2000, Auchan and RT-Mart's parent company, Ruentex, signed a joint venture agreement, and together they created Sun Art Retail Group to promote the development of RT-Mart and Auchan in the mainland Chinese market. In 2011, Sun Art Retail was listed on the Hong Kong Stock Exchange as a holding company. Last year, RT-Mart publicly stated that it had 69 Auchan stores nationwide, which would gradually be renamed RT-Mart. The experience of Korean retail enterprise Lotte in China has been quite astonishing. Lotte Group is a large comprehensive multinational enterprise, one of the Fortune 500 companies, and one of the top five Korean conglomerates (Samsung, LG, Hyundai, SK, Lotte). In 2008, Lotte Group's supermarket business began to explore the Chinese market. Lotte Group cooperated with China's Yintai Group to establish Beijing Wangfujing Lotte Yintai Department Store, and later opened branches in Chengdu, Tianjin, and other places. In May 2008, Lotte Mart entered the Chinese market by acquiring 8 stores of Beijing Makro. By 2009, Lotte Group continued to expand, with more than 70 stores in China. In 2012, Lotte Group established Lotte Enterprise Management Co., Ltd. in Shanghai to manage its multiple enterprises in China. As of the end of 2016, Lotte Group had 22 subsidiaries in China, with hundreds of stores in Beijing, Shanghai, Shandong, and other places, and more than 20,000 employees. Later, affected by the "THAAD" incident, in May 2018, Lotte Group sold 96 of its 112 stores in China, and the remaining stores were to be sold sporadically or closed. In August 2022, Lotte Group expressed its intention to sell its Lotte Department Store in Chengdu, which was its last store in China. Lotte was not the only one closing stores. On October 28, 2022, a "Supplier Notice" stamped with the official seal of "Chengdu Ito Yokado Co., Ltd." stated that, upon notification from the property owner, the property lease service would be terminated, and the Chengdu Ito Yokado Chunxi store would cease operations after December 31 of that year. Ito Yokado officially entered the Chinese market in 1997, with the Chunxi store being its first store in China, opening on November 21, 1997. In fact, in recent years, Ito Yokado has been continuously closing stores in China. For example, in Beijing, it has gone from more than ten stores to only one left. Once, the Ito Yokado Chunxi Road store was a landmark shopping center in Chengdu. The brand's advanced business philosophy and refined operational management experience also became its legacy to China's retail industry. Also exiting the Chinese market was Spanish retail enterprise Dia. In 2003, Dia, Spain's second-largest retailer, entered China, but its development in China was not smooth. In 2014, Dia closed more than 160 stores in Beijing and withdrew from Beijing, retreating to the Shanghai market, where it had about 2.5 million members and more than 300 stores. In April 2018, Suning acquired 100% of Dia's China operations and rebranded them as "Suning Xiaodian," making Dia a thing of the past in China.
03 Waves Wash Away the Sand: Some Transform, Some Exit In the last century, when hypermarkets were just emerging abroad, to save rental costs and meet store opening requirements, coupled with the convenience brought by the popularity of cars and refrigerators, opening stores in urban-rural fringes became the first choice. It was not until the end of the last century, when they entered China, that hypermarkets first developed in city centers. First, because China's market economy was just starting, rents in city centers were low; second, city centers were also traffic hubs with superior locations. Foreign hypermarkets that enjoyed the dividends of the Chinese market soon welcomed their golden period in China. Many retail supermarkets have closed because their leases expired and they could not bear the high rents. The most recent examples include Ito Yokado's Chunxi Road store in Chengdu, their first store in China, which had to close due to high rent. Walmart's store inside Xi'an's West Gate also closed because its lease expired and it could not bear the new rent. Some foreign retail enterprises chose to engage with online e-commerce. In August 2012, Walmart quietly acquired a controlling stake in online supermarket Yihaodian; in 2014, RT-Mart invested to create Feiniu.com. But at that time, for most retailers, online business was more seen as a supplement to offline business. Around 2014, all retailers began to re-examine the e-commerce industry led by Ma Yun and Liu Qiangdong—changes in consumption habits began to drive the full prosperity of e-commerce. At that time, it had been 10 years since Taobao was founded. Walmart kept pace with the times, and in 2011, it foresightedly acquired 17.7% of Yihaodian from China Ping An, venturing into e-commerce. Subsequently, Walmart increased its stake in Yihaodian and fully acquired it in 2015. However, as a traditional retail system, Walmart faced multiple problems in operating Yihaodian, such as the inability to coordinate online and offline orders and inventory, and differences in development ideas with the founding team. Therefore, in 2016, Walmart decided to abandon its O2O e-commerce strategy of building its own platform in China, and exchanged Yihaodian, which had been invested in for years without success, for shares in JD.com, thus starting a new e-commerce model cooperating with JD.com and Tencent. The sell-off model of foreign retail began with TESCO Hymall, and reached its peak in 2019 when Carrefour was sold to Suning. Major foreign retail giants staged a five-year sell-off phase, gradually exiting the Chinese market. In October 2013, China Resources Vanguard reached an agreement with TESCO to take over TESCO's China business by forming a joint venture, including 135 TESCO Hymall stores, shopping centers, and convenience stores, with China Resources holding 80% of the joint venture. In 2020, TESCO sold its remaining shares in the joint venture, completely exiting China. On November 20, 2017, Alibaba Group, Auchan Retail, and Ruentex Group announced a new retail strategic cooperation. According to the strategic agreement, Alibaba Group would invest approximately HK$22.4 billion (about RMB 18.99 billion) to directly and indirectly hold 36.16% of Sun Art Retail (the listed company of RT-Mart and Auchan). Three years later, Alibaba announced again that it planned to invest HK$28 billion to increase its stake in Sun Art Retail, and with direct and indirect shareholding of 72%, it became the controlling shareholder. Since 2018, Suning has successively acquired Dia China, Wanda Department Stores, etc. On June 23, 2019, Suning.com acquired 80% of Carrefour China for RMB 4.8 billion through its wholly-owned subsidiary Suning International. After the transaction, Suning.com became the controlling shareholder of Carrefour China. Suning has been accelerating its full-scenario retail layout and frequently attacking high-quality offline retail resources. "This is a key step in Suning's smart retail layout," said Zhang Jindong, chairman of Suning.com, when discussing the acquisition earlier. However, these may have become a burden for Suning's later operational difficulties. On October 11, 2019, China Wumart announced the acquisition of a controlling stake in Metro China, holding 80% of the shares in the joint venture established by both parties, with Metro holding 20%. Now, Metro is undergoing a bold transformation into "PLUS membership stores," a localization transformation quietly underway. Warehouse membership stores have once again become a new format and battlefield for foreign retail in mainland China. Looking back at the 30-year history of foreign retail enterprises in China, we see a magnificent historical picture. Over the past 30 years, many excellent enterprises have entered China, bringing beautiful shopping experiences to the Chinese people. Some enterprises have chosen to exit the Chinese market due to various reasons such as not adapting to local conditions. We also thank them for their contributions to the prosperity of the market. Looking back and looking forward, in the next 30 years, I believe the retail industry will have more exciting stories...