Tesco to shut down first Chinese store

Tesco plans to close its first China store, located in Shanghai's Changning district, on Saturday, an indication that foreign supermarket operators are struggling to compete in the country's shuffling retail market, experts said Tuesday.

The Changning Tesco outlet, located in Shanghai's International Gymnastics Center, recently put up an announcement saying that the 15-year-old store will be shut down and its employees will be transferred to other outlets, China Business News reported Tuesday.

UK-headquartered Tesco shut down four outlets last year, and closed one outlet in Shanghai's Zhenning district in late May.

Also, US retail giant Wal-Mart Stores Inc closed three outlets in April and might close even more in the future, according to a Wall Street Journal report in late June.

China Business News cited an unnamed employee with Tesco's China division saying that the Changning store's performance was in fact "not bad."

"The closing down is a strategic reorganization, and we will seek more expansion opportunities in China," the employee said.

Tesco could not be reached by the Global Times to offer further details as of late Tuesday.

Hong Tao, a trade and economics professor with Beijing Technology and Business University, told the Global Times on Tuesday that many large multinational grocery and daily goods retailers have been selling off or closing stores because they are struggling to compete with local retailers in logistics and marketing.

"Because of the relatively small number of outlets they have, especially in the third- and fourth-tier cities, large foreign retailers are not flexible and cost-effective enough in fields such as transporting and promoting their products," Hong said.

Although the slowdown of China's economy challenges the foreign retailers, it is not the fundamental reason behind the constant shutting of their outlets, he noted.

"China's retail market is still expanding around 13 percent annually, so the key threat that foreign retailers face are difficulties in offering customized services and products," Hong said.

The store's closing prompted many shoppers at Tesco's Changning outlet to leave comments on store and restaurant review website dianping.com, a local equivalent to American website Yelp. Several commenters said that they will turn to local retailers after the outlet is closed.

Wang Xianqing, an expert on circulation economics at Guangdong University of Business Studies, told the Global Times Tuesday that as China's retail market reaches saturation and as its consumers get wealthier, the country will need more specialized stores.

"A mega-market that sells undifferentiated products cannot satisfy Chinese consumers now, who are looking for specialized services and goods," Wang said. "For example, China's young consumers are turning to online stores such as taobao.com and jd.com for the convenience and affordable prices."

Hong agreed with Wang, noting that e-commerce is a major threat to multinational retailers in China.