Foreign retailers shop for new growth model

Foreign retailers aim to pursue new business models in China to compete with their mainland counterparts, as a surge in e-commerce crimps margins across the industry.

In its latest attempt to find the right model for growth in the nation, global retailer Tesco Plc opened a large shopping mall, called Tesco Lifespace, in April in Guangzhou, the capital of Guangdong province.

Tesco owns the mall, which will help the Britain-based retailer maintain sustainable development amid fierce retail competition, according to Chen Pei, operations manager of Tesco Property Ltd.

The company has nine Lifespace stores and 117 hypermarkets across China. The Lifespace mall in Guangzhou includes top international brands, providing food, entertainment and fashion.

"We will continue the policy of buying land and building our own properties for future growth in China," said Chen.

According to Chen, Tesco plans to expand the number of such stores to 15 to 20 in South China within the next five years.

"China remains an ideal destination for retail business expansion. We will concentrate on building the right business model and finding the right market position for sustainable growth," Chen said.

After entering China in 2004, the chain established its property business in the nation in 2008.

Last year, Tesco closed four stores in China as it sought to focus on what company sources called "strategically important areas".

A boom in e-commerce, coupled with a slowing economy, has made retail, characterized by razor-thin margins, even more challenging in recent years.

"For both Chinese and foreign retailers, the traditional model relying on fast expansion to raise leverage with suppliers and therefore increase profits is no longer working amid weakening purchasing demand," said Sun Xiong, director of the Guangdong Chain Management Association.