Retail News
- Aeon turns to China for development
Date: 25-Jun-2007 Sources: (Shenzhen Daily)
AEON Co. plans to triple its number of stores in China over the next five years, a country from which Japan's largest supermarket operator predicts it will eventually generate more revenue than domestically.
'Sales growth in Japan has stalled,'the Chiba, Japan-based company's assistant chief representative for China, James Kazumasa Ishii, said. Aeon's Asia business, including China, Malaysia and Thailand, accounts for less than 5 percent of the group's revenue now.
The operator of the Jusco brand of supermarkets is diversifying its business outside its home nation, where growth is limited because of the declining and aging population. China will probably surpass Japan by 2010 as the world's second-largest consumer goods market, Chinese Vice Premier Wu Yi said last month.
Retail sales in China, where Aeon operates 35 supermarkets, have grown at more than 10 percent a year since March 2004 as disposable incomes in urban areas increase. The economy expanded 11.1 percent in the first quarter.
Aeon operates 1,201 supermarkets and 156 discount stores in Japan, according to its 2006 annual report. Japan's sales at department stores fell for the third consecutive month in May, according to the Japan Department Stores Association.
A quarter of Japan's population will be 65 or older by 2014, according to the country's health ministry.
Overseas retailers sped up expansion in China after being allowed to operate without domestic partners in 2004 as part of a pledge to the World Trade Organization. Wal-Mart Stores Inc., the world's biggest retailer, has built a network of 78 stores while Paris-based Carrefour SA., the world's second largest, has 95 outlets.
'It will take time for China to contribute significantly to Aeon's total earnings,'said Masafumi Shoda, a Tokyo-based analyst at Nomura Holdings Inc. 'In order to succeed in China, Aeon has to lower its operating costs, including rents and labor, amid tough competition.'
The market is still dominated by local players. Bailian Group, China's biggest retailer, has 7,180 stores and Gome Electrical Appliances Holdings Ltd., the nation's biggest electronics retailer, owns 623.
'We cannot compete with Chinese retailers in terms of sales,'said Toshiji Tokiwa, former chairman of Aeon Stores Hong Kong and now Aeon Co.'s corporate adviser. 'However, we will beat them by profitability.'
As part of Aeon's five-year plan, the retailer plans to open its first store in Beijing before next year's Olympic Games and another shopping center in Macao within two years, according to senior vice president Akihito Tanaka. Its first lunchbox store, selling Japanese-style 'bento?meals, will open this year in Hong Kong, where it operates 21 supermarkets, he said.
Aeon's supermarkets in China are on average three times bigger than those in Japan and take three to four years to break even, a much shorter time span than those in its home country, Ishii said in an interview earlier last week. A shopping center in Qingdao is the most profitable Jusco outlet and together with another store in the northeastern Chinese city contributed about 1.1 billion yuan (US$144 million) of sales last year.
The retailer has opened four stores in Shenzhen since 2002. Customers buy produce such as organic cucumbers for three times the price of ordinary vegetables sold in nearby traditional markets.
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