David F. Miller Center For Retailing Education and Research
International Retailing Education and Training (IRET )
Retail Internationalization
Chuanyi Tang, Ph. D.
Post Doctoral Associate
Hough Graduate School of Business
Warrington College of Business Administration
University of Florida
Objectives
 Identify Major International Retailers
 Analyze the Motivation of Retail Internationalization
 Gain Insights into Foreign Market Entry Decisions
 Identify the Specific Opportunities and Challenges
for International Retailers
 Understand the Concept of Divestment and Retail
Divestment in China
Location Module
David F. Miller Center for Retailing Education and Research
page 2
Outline
 International Retailers
 Motivation for Retail Internationalization
 Retail Internationalization Opportunities
 Foreign Retail Entries in China
 Retail Divestment in China
Location Module
David F. Miller Center for Retailing Education and Research
page 3
Top 20 Retailers in the World
Information source: GMID, Euromonitor
Ranking
Retailer
Country
of origin
2009 Sales Type
($millions)
# of countries of
operation
1
Wal-Mart Stores, Inc
USA
163,532.00
International
15
% of sales in
foreign
countries
13.9%
2
3
Carrefour Group
The Kroger Co
FRA
USA
52,196.10
45,352.00
40
1
37.70%
0.00%
4
5
6
Metro AG
The Home Depot, Inc
Albertson’s, Inc
GER
USA
USA
44,163.37
38,434.00
37,478.00
35
5
1
40.00%
3.70%
0.00%
7
8
36,762.45
36,728.00
10
3
36.00%
10.60%
9
ITM Enterprises SA
FRA
Sears, Roebuck and USA
CO
Kmart Corporation
USA
International
Single
Country
International
International
Single
Country
International
International
1
0.00%
10
Target Corporation
USA
33,702.00
1
0.00%
11
JC Penney
USA
31,503.50
1
0.00%
12
13
14
15
16
17
18
19
Royal Ahold
Safeway Inc.
Rewe-Gruppe
Tesco plc
Ito-Yokado Co, Ltd
Edeka-Gruppe
Costco Companies, Inc
Tengelmann
Warenhande
The Daiei, Inc
NET
USA
GER
UK
JPN
GER
USA
GER
31,222.15
30,801.80
30,567.69
30,404.40
30,237.57
30,002.57
26,976.45
26,509.12
Single
Country
Single
Country
Single
Country
International
International
International
International
International
International
International
International
12
8
18
14
2
2
8
15
76.40%
10.80%
19.70%
10.00%
29.80%
2.40%
18.40%
47.90%
JPN
26,486.11
Single
country
1
0.00%
20
Location Module
35,925.00
David F. Miller Center for Retailing Education and Research
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Global Map of Tesco
UK
R.O. Ireland
France
Czech
Republic
Russia
Poland
Slovakia
Hungary
S Korea
USA
Greece
China
Turkey
Japan
Taiwan
Thailand
Malaysia
Information Source: www.planetretail.net
Location Module
David F. Miller Center for Retailing Education and Research
page 5
Oversea Market of Tesco
25
Market Share %
20
21.8
2004
19.1
18.1
2008
19.4
14.8
15
10
18.6
18.1
17.7
6.6
5.8
5.5
4.9
13.5
10.9
5
4.9
0
1.6
1.6
UK
ROI
Hu
Thl
Slv
CR
4.3
SKr
3.9
Po
1.9
Mal
0.7
Tky
0.5
0.6
Tw
0.2
China
0.1
0.1
Jp
Information Source: www.planetretail.net
Location Module
David F. Miller Center for Retailing Education and Research
page 6
Oversea Market of Tesco (Cont.)
4,366
4,500
4,000
2004
3,390
2008
3,500
2,599
EUR mn
3,000
2,523
2,489
2,139
2,500
2,000
2,375
1,158
2,080
1,500
855
1,598
1,000
1,535
Skr
ROI
Hu
Thl
Po
487
499
1,190
500
0
724
396
694
547
425
329
195
167
136
CR
Slv
China
Jp
Tky
Tw
Mal
Information Source: www.planetretail.net
Location Module
David F. Miller Center for Retailing Education and Research
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Oversea Market of Tesco (Cont.)
Europe +25%
Asia +122%
2004
Europe
90%
2008
Europe
84%
Asia
10%
Asia
16%
8
Location Module
Information Source: www.planetretail.net
David F. Miller Center for Retailing Education and Research
page 8
Motivation for Retail Internationalization
Overview
 Two Major Drives
 Push factors
Negative aspects of the domestic market
 Pull factors
Attractive aspects of either the retail offer or the foreign
market
Location Module
David F. Miller Center for Retailing Education and Research
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Motivation for Retail Internationalization
 Push Factors
 Saturated home market
and low growth potential
 Intense competition at
home
 Diversify investment
 Expansion at home
blocked by legislation
 Economic downturn at
home
Location Module
David F. Miller Center for Retailing Education and Research
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Motivation for Retail Internationalization
 Pull Factors
 Market size and growth
 Improved channel of
distribution, advertising,
and transportation
 De-regulation for foreign
retail entry
 Great potential for some
mature retail formats from
developed countries
 Undeveloped retail
industry and less
intensive competition
Location Module
David F. Miller Center for Retailing Education and Research
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Motivation for Retail Internationalization
Challenges for International Retailers
 Increased competition
 Look like a single market, but is not
 Additional layers of governmental complexity
 Cultural differences
 Internal coordination and transfer of knowledge
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Criteria for Selecting a Country
 Macro-Marketing Factors
(Sternquist, 2007; Alexander
and Doherty, 2009)
 Economic Environment
Market size
Market growth
 Governmental Environment
Trade barriers
Regulations on foreign retailers
 Social and Cultural Environment
Cultural proximity
 Technological Environment
Retail information system
 Retail Structure and Competition Environment
Market concentration and competition
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Information source: GMID, Euromonitor
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
 Comparison among BRIC (Brazil, Russia, India
and China)
 Market Size
 Market Growth
 Market Concentration
 Country Risk
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Market Size
2005
2006
2007
2008
2009
2010
Brazil
118,687.00
146,325.60
181,181.60
216,101.10
215,774.10
266,813.50
Russia
160,472.40
201,493.10
259,254.20
319,682.20
258,717.70
305,312.90
India
174,688.20
185,528.50
220,980.70
227,851.00
216,107.00
229,944.00
China
520,599.70
609,339.10
723,108.50
886,776.50
985,138.70 1,072,255.70
Information source: GMID, Euromonitor
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Market Growth
2006
2007
2008
2009
2010
Brazil
10.2
10.8
12.3
8.9
12.8
Russia
20.7
21
19.8
3.4
10.5
India
9.1
8.7
8.5
5.5
7.6
China
13.9
13.2
12
9.2
10.9
Information source: GMID, Euromonitor
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Market Concentration
Information source: GMID, Euromonitor
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Market Concentration (Cont.)
Information source: GMID, Euromonitor
Location Module
David F. Miller Center for Retailing Education and Research
page 19
Country Risk (Euromoney)
Country
Overall
Score
Political
Risk
Economic
Performance
Structures
Debt
Indicators
Credit
Rating
Access to
bank
finance/capit
al market
100
30
30
10
5
10
10
Sep 10
Mar. 10
1
1
Norway
93.33
28.19
26.89
8.25
10.00
10.00
10.00
2
3
Switzerland
90.22
26.80
24.99
8.44
10.00
10.00
10.00
3
6
Sweden
88.93
28.04
22.65
8.24
10.00
10.00
10.00
9
16
Hong Kong
87.18
25.25
24.87
8.10
10.00
8.96
10.00
17
13
United States
82.10
26.26
17.91
7.92
10.00
10.00
10.00
36
43
China
72.60
17.37
22.31
6.81
9.95
7.50
8.67
42
51
Brazil
69.57
18.84
20.73
6.62
9.01
4.38
10.00
49
52
India
62.80
16.92
18.04
5.35
9.44
4.38
8.67
52
54
Russia
61.48
14.66
18.46
5.35
9.30
5.21
8.50
Location Module
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2010 Global Retail Development Index
(A.T. Kearney)
Location Module
David F. Miller Center for Retailing Education and Research
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2010 Global Retail Development Index
(A.T. Kearney)
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Why China?
 Economic Factors
 The Largest Market Size
The market size of China is the sum of the other three BIRC
countries in 2010.
 Stable High Market Growth
China has continued a double digit growth rate from 2005 to
2010.
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Why China? (Cont.)
 Industry Structure
 The market is largely fragmented.
 Chinese retailers are regional.
 The sizes of Chinese retailers are relatively small.
 Huge opportunities for foreign retailers.
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Why China? (Cont.)
 Political Environment
 Socialist market economy with Chinese characteristics
 Focus on reforms and economic development
 Technological Environment
 China has better infrastructure than other developing
countries.
 Chinese government encourages retailers to adopt
advanced information system
Location Module
David F. Miller Center for Retailing Education and Research
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International Expansion Opportunities
Interview with the CEO of Wal-Mart, China (Ed Chan)
http://www.mckinseyquarterly.com/Retail_Consumer_Good
s/Sectors_Regions/Chinas_retail_revolution_An_interview_
with_Wal-Marts_Ed_Chan_2459
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entry Decisions
 Entry Mode
 Location
 Time
 Format
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entry Decisions
 Entry Mode
Contract
Licensing
Join
Export Management Franchising
Venture
Wholly
owned
Risk, Control, and Resource
Location Module
David F. Miller Center for Retailing Education and Research
page 28
Foreign Retail Entry in China
 Entry Mode
 Franchising
 MacDonald and Sogo
 Contract Management
 Parkson
 Joint Venture
 Carrefour
 Solely Owned
 Tesco (Merger and Acquisition)
 Best Buy (Green field)
 Increased after 2004
 Foreign Manufacturer’s Specialty Store
 Pierre Cardin and Play Boy
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entry in China
 Entry Format
 Department Store
 Ito Yokada
 Hypermarket/supercenter
 Carrefour, Wal-mart, Tesco, Auchan
 Foreign retailers have 70% market share
 Warehouse
 Metro
 Specialty/ specialist Store
 Ikea, B&Q, Best Buy
 Convenience Store
 7-11
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entry in China
 Locations
 Their first entries are in Beijing, Shanghai, Guangzhou
and Shenzhen, and their headquarters are mainly in
these four cities.
 Eastern China has a much higher density than Western
China.
 Yangzi river delta, Pearl river delta and Bohai Circle have
the greatest density.
 Sichuan and Chongqing are emerging areas.
 Foreign retailers have entered most of the provinces and
all the major economic cities.
 Foreign retailers are conducting large-scale expansion
into lower tier cities.
Location Module
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Geographic Areas
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entries in China
(Li and Wang, 2006)
Retailer
Country
City
Format
Retailer
Country
City
Format
Yaohan
Japan
Shenzhen
(1991)
Department
store
Ahold
Holland
Shanghai
(1997)
Hypermarket
7-11
Japan
Shanghai
(1992)
Convenience
store
Locus
Thailand
Shanghai
(1997)
Hypermarket
Parkson
Malaysia
Qingdao
(1993)
Department
store
Trust Mart
Taiwan
Guangzhou
(1997)
Hypermarket
Carrefour
France
Beijing
(1995)
Hypermarket
Ito-Yokada
Japan
Beijing
(1998)
Supermarket
Daiei
Japan
Tianjin
(1995)
Supermarket
Ikea
Sweden
Shanghai
(1998)
Specialty
Jusco
Japan
Guangzhou
(1995)
Department
Store
Rt-Mart
Taiwan
Shanghai
(1998)
Hypermarket
Metro
Germany
Shanghai
(1996)
Warehouse
Auchan
France
Shanghai
(1999)
Hypermarket
Makro
Netherland
Guangzhou
(1996)
Warehouse
B&Q
U. K.
Shanghai
(1999)
Specialty
Wal-mart
U.S.A
Shenzhen
(1996)
Shopping
center/ Sam’s
club/
neighborhood
store
OBI
Germany
Wuxi (2000)
Specialty
Lawson
Japan
Shanghai
(1996)
Convenience
store
Otto
Germany
Shanghai
(2000)
Specialty
Home
Depot
U.S.A
Tianjin (2006) Specialty
Best Buy
U.S. A
Shanghai
(2006)
Specialty
Location Module
David F. Miller Center for Retailing Education and Research
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Leading Retailers in China (CCFA, 2010)
Ranking
Retailer
2009 Sales（10,000 ¥）
Growth
(%)
# of
stores
Growth
(%)
1
Suning
11,700,267
14.3
941
15.9
2
Gome
10,680,165
2.1
1,170
-14.1
3
Bailian
9,791,537
3.8
6,153
-4.1
4
Dashang
7,053,590
12.8
160
6.7
5
China Resources Vanguard
6,800,000
6.6
2,926
8.5
6
RT-Mart
4,043,169
20.5
121
19.8
7
Carrefour
3,660,000
8.2
156
16.4
8
Anhui Huishang
3,437,883
13.5
2,884
15.5
9
Wal-Mart
3,400,000
22.2
175
45.8
10
Wu-mart
3,270,000
6.7
2,333
16.1
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retailers in China
Ranking
Retailer
Sales（10,000 ¥）
Growth
(%)
# of
stores
Growth
(%)
13
Yum!
2,880,000
15
Best Buy
2,570,000
20
Trust-mart
1,650,000
0.6
104
0.0
27
Tesco
1,330,000
15.7
79
29.5
29
Locus
1,300,000
0.0
77
1.3
30
Parkson
1,237,000
15.7
44
10.0
31
Metro
1,202,277
-4.9
42
10.5
39
Auchan
986,000
21.0
35
12.9
45
Intime
758,659
34.9
22
46.7
50
MacDonald
650,000
6.6
1,100
10.0
62
Ito Yokada
351,380
21.9
3
0.0
68
IKEA
312,000
15.6
7
16.7
100
Home Depot
160,000
4.6
12
0.0
Location Module
David F. Miller Center for Retailing Education and Research
9.9
3,200
18.5
262
page 35
Foreign Retail Entry in China
Expansion of Carrefour in China
 In 1995, they entered China in Shanghai.
 They expanded aggressively and tried to
avoid the government’s regulations.
 They entered major cities 2-3 years sooner
than Wal-mart and Metro.
 In 1999, they had 28 stores in 17 cities.
 They are currently the No. 1 foreign
retailer in China.
 169 Hypermarkets in China
(as of November, 2010)
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entry in China
Expansion of Wal-mart in China
Entered China in 1996
Headquartered in Shenzhen
Operates three formats in China: Supercenters, Sam’s Clubs,
and neighborhood stores.
1996-2004 Slow Growth
 Wal-mart is not flexible and doesn’t adapt to the China market
 Underdeveloped Infrastructures and IT Systems in China
 2004, Ranking 20, <1/2 Carrefour
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entry in China
Expansion of Wal-mart in China (Cont.)
 After 2004, Fast Growth
 Adapted to Chinese Markets
 Worked with Intermediate Agents
 Decentralized Management
 Opened Stores in Urban Areas
 Established Unions and Communist Party Branch
 Adjusted Pricing Policies
 Government Policies Became More Open
 Significantly Improved Infrastructure in China
 Consumer Market Booming
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entry in China
Expansion of Wal-mart in China (Cont.)
No. 2 Foreign Retailer in China
 Three distribution centers in Shenzhen, Tianjin, and
Jiaxing. (By 12/2008)
 189 units in 101 cities in China (By August, 2010)
Location Module
David F. Miller Center for Retailing Education and Research
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Foreign Retail Entry in China
Expansion of Wal-mart in China (Cont.)
The 100th Wal-Mart store in China
http://www.youtube.com/watch?v=x65efvLryqY
300 Wal-Mart stores in China
http://www.youtube.com/watch?v=gGtQDL6OliI
Location Module
David F. Miller Center for Retailing Education and Research
page 40
Retail Divestment in China
Divestment
 It is not necessarily true that all international
companies succeed or would like to stay in China.
 Divestment is defined as “Company actions
resulting in a reduced presence in a foreign
market” (Alexander, Quinn, and Cairns, 2005)
Location Module
David F. Miller Center for Retailing Education and Research
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Retail Divestment in China
Divestment (Cont.)
 Some Retailers That Have Exited China (Li and
Wang, 2006)
 Yaohan (Japanese Supermarket), 1999
 Xiyou (Japanese Supermarket), 1999
 Ahold (Netherland Hypermarket), 1999
 PCD (Hong Kong Department Store), 2000
 Jusco (Japanese Department Store), 2000
 Daiei (Japanese Supermarket), 2004
 Mykal (Japanese Department), 2003
 OBI (German Home Improvement Store), 2005
Location Module
David F. Miller Center for Retailing Education and Research
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Retail Divestment in China
Store Closures in 2008-2009 (Wang, 2009)
Retailer
Store
Format
Reason
Isetan
Huating store in
Shanghai
Department store
Net loss for two years
Parkson
Changsha store
Department store
Lease expired
Tesco
Jilin Store
Hypermarket
High operation cost
Trust-mart
Nanjing Qingliangmen
store and Gulou store;
Chengdu Daye store,
Wuhan Minyi store, and
Fuzhou stores
Supermarket
Bad performance
B&Q
Shekou store in
Shenzhen; Fuzhou
store
Specialty store
Bad performance
HomeDepot
Qingdao store
Specialty store
Broke up with the
landlord
Location Module
David F. Miller Center for Retailing Education and Research
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Case Study
Case Study
 Best Buy in China
 http://www.youtube.com/watch?v=zMABUmlOQdE
Location Module
David F. Miller Center for Retailing Education and Research
page 44
References
 CCFA (2010), Report on Chain Store Retailers’ Performance in China (2009-2010).
 Li, Fei and Gao Wang (2006), The Development of the Retailing Industry in China
(1981-2005), Social Sciences Academic Press, Beijing
 Wang, Qiang (2009), Report on China Retail Business Monitoring and Analysis, China
Economic Publishing House, Beijing.
 Alexander, Nicholas, Barry Quinn, and Patricia Cairns (2005). International retail
divestment activity, International Journal of Retail & Distribution Management, 33(1), 522
Location Module
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