Wal-Mart Stores Inc has sealed a deal to purchase a 35 percent interest in the parent company of Trust-Mart, a leading hypermarket operator in China, a step forward for the world's largest retailer to expand its reach in the country.
The US retail giant may also acquire ownership of Bounteous Co, operator of 101 Trust-Mart stores in 34 cities in China, the company said in a statement.
The possible acquisition will enable Wal-Mart to beat its French opponent Carrefour, and build the largest hypermarket network in China.
No details were released, but previous reports citing a person close to the deal said the company planned to acquire Trust-Mart in an agreement valued at US$1 billion.
The expansion shows that Wal-Mart sees China as an important place to bolster its international revenues after it pulled back from loss-making operations in South Korea and Germany last year. Its sales growth at home in the US has been slow for years.
"Through this investment in Trust-Mart we have the opportunity to expand our presence in China, one of the world's fastest growing retail markets," said Wal-Mart Vice-Chairman Michael Duke.
According to the deal, Trust-Mart retail stores will continue to operate under the Trust-Mart banner.
"This alliance will give our suppliers new opportunities to expand in China and potentially become part of Wal-Mart's global vendor network," said John Yu, chairman of Trust-Mart.
Wal-Mart entered China in 1996. It now operates 73 stores in 36 cities in the country. But its development has lagged behind its major competitor, French retailer Carrefour, which has 240 stores, including 90 hypermarkets.
Wal-Mart's development in China has been slow as its strategy does not quite fit the situation in the country, according to Huang Guoxiong, a retail expert with Renmin University of China. Its logistics system, a major component of the company, does not work well in China, with its underdeveloped transportation system and vast regional differences.
China is one of the fastest growing retail markets in the world, with retail sales growth of 13.7 percent last year. It has begun to allow foreign retailers to operate in the country without local partners since the end of 2004 to meet World Trade Organization obligations.
The booming market and more open access has attracted many foreign retailers. The world's largest home improvement retailer, Home Depot, purchased local retailer Home Way last year and Tesco, a British supermarket chain, also increased its share in Hymall, one of China's largest retailers, in 2006.
(China Daily February 28, 2007)
