Traditional retailers fight to maintain market share

In their competition with online giants, which have recently expanded to offering fresh food in physical stores, traditional brick-and-mortar retailers are gearing up to secure their market shares in this sector.

Sam's Club, the membership store and high-end format of one of the world's largest retailers by revenue Wal-Mart Stores Inc, has decided to set up "club depots", or storehouses, with Dada-JD Daojia, a food-delivery unit of the country's second largest e-commerce platform JD, at places where their physical stores have not yet reached.

The system will be built together by Sam's Club and Dada, including selecting locations for the storehouses, managing the inventory and deliveries.

Each storehouse will cover about 1,000 merchandise items, mostly high-frequency fresh groceries. That category currently takes up 20 percent of the Sam's Club stores' revenue. Every storehouse will cover a neighborhood market of three to five kilo-meters, offering delivery within one hour.

Chen Zhiyu, Walmart China vice-president, said since the testing of two club depots in Shenzhen, the delivery time has been shortened to 40 minutes on average, with orders quickly raised to 200 a day and repeating orders to 30 percent.

"We've often heard that despite consumer's preference in products at Sam's Club, they are often restrained by the long distance to the store or large packages of each item," said Chen, who is also in charge of Sam's Club's e-commerce and marketing and membership.

"The new storehouse will increase customer's shopping frequency and loyalty by satisfying their needs for convenience, especially for fresh goods," he said.

Chen, who held several positions at Alibaba Group Holding Ltd prior to his current role, said Sam's Club expects to increase its online sales to as much as the level of its physical stores within three years.

Sam's Club's digital services have seen three-digit annual growth in recent years.

French leading retailer Carrefour SA is also planning to expand its digital and online reach to 18 cities in China from the current 12. The six new cities include Guangzhou, Dongguan, Haikou, Changsha, Hefei and Dalian.

Carrefour has built its own shopping application and its stores have worked with online-to-offline delivery platforms including Metian, Ele.com and Baidu Waimai. Meanwhile, in Beijing and Shanghai, Carrefour has started to sell fresh goods directly from overseas, with a special focus on lobsters and oysters.

Meanwhile, traditional department store Ito Yokado has initiated upgrades on its remaining Yayuncun store after closing its seven other stores in Beijing.

The revamping efforts include expanding its food supermarkets, introducing catering, entertainment and education businesses and gyms, which cover nearly half of the total area, while the general merchandise area will be downsized.

Founded in 2002, the Yanyuncun store of Ito Yokado has an operating area of 21,200 square meters. The new store will set up a central kitchen to offer processed foods and half-processed food for consumers.

Fresh merchandise has also been upgraded to meet the demands for high-end products. Imported beef from Australia, food from Japan and packaged processed food for neighboring working families are now also available.