Business abroad is booming: China, Japan suddenly on everyone's radar - Annual Industry Report Top 150 - Illustration

DSN Retailing Today, July 7, 2003 by Tim Craig

After a year in which a retailer was named the world's largest company, it's understandable how the U.S. retail community has come to view the global scene as a one-horse Wal-Mart town. After all, its fast-growing International Division--if viewed as an independent entity--would rank ninth on this year's Top 25 Global list (without making much of a dent in Wal-Mart's sizeable lead over No. 2).

However, to ignore the activity of the world's other foreign retailing giants would be to miss out on some of the most intriguing retailing developments of the last 12 months, including intense activity in China, Japan, South America and Western Europe.

In addition to the well-documented progress that the world's No. 1 retailer made in Great Britain and Japan, the "other" global leader, France's food giant Carrefour, made some noteworthy headlines of its own. After much speculation as to whether Carrefour could manage the digestion of its mammoth Promodes takeover in 1999, the world's No. 2 retailer made good on its promise of giving Wal-Mart a run for its money- at least on the international scene.

In the last year, Carrefour beefed up its presence in China to 33 units by adding eight new hypermarkets, with plans for 12 more this year, and continued driving new stores beyond its core European stronghold. In fiscal 2002, it added more than 250 new stores beyond the French border.

One of Carrefour's quietest, but perhaps most impactful, decisions, which was to ramp up its investments in South America, comes on the heels of the untimely difficulties of fellow international behemoth Royal Ahold. In addition to--and probably because of--Ahold's massive financial quagmire, Netherlands' largest retailer is single-handedly responsible for shaking up the South American retail scene by abandoning its longheld Disco operations there. Strapped for cash, and intent on focusing efforts on its main business of U.S. food retailing, the company also announced in the last few months that it's divesting its Dutch-based Jamin and De Tuinen businesses as well as its TOPS Retail units in Malaysia and Indonesia.

While important in its own right to the Asian retail scene, Ahold was far from the only newsmaker in the region. In Japan alone, Costco, Tesco, Metro and Wal-Mart all opened stores in the last year, either organically or through acquisition. In the case of Wal-Mart, the share it holds in Japanese retailer Seiyu was increased to 34%, and is expected to jump to 66% with a year or two.

While Wal-Mart may not be in any hurry to ramp up its investment in the Japanese market (its contract gives it until 2007 to build up its majority ownership) the race for a retailing presence in neighboring China is another story. After the world's most populated nation entered into the World Trade Organization at the end of 2001, the number of foreign retail companies staking a claim for a piece of the market has jumped. In the last 12 months, even second-tier international companies such as Pricemart, Trust Mart and Auchan have tried to snatch a share of the Chinese market. Parhaps the largest coup in the last year, however, was Carrefour's arrangement with China's largest supermarket chain Shanghai Lianhua to run discount outlets in Shanghai.

As for the continued speculation that distressed U.S. retailer Kmart would make an attractive takeover prospect for Carrefour, management has continuously and adamantly denied any interest in the company--or even its market.