Posts Tagged ‘China Resource Enterprises’

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What do you want to do today? How about starting off with a nice coffee and at Harris + Hoole’s coffee shop, a bit of yoga, followed by some shopping at a trendy boutique followed by lunch at a Giraffe restaurant, and then off to the supermarket complete with a ‘Euphorium’ and something called the ‘Bakery Project’. If that all appeals to you, that might mean you would like a visit to Tesco’s new leisure and shopping destination in Watford. But here is some bad news for Chinese shoppers who fancy a similar experience in downtown Beijing. Tesco might be trying to do something big in the UK, but its plans are quite different in China. Is this the company’s opportunity to re-establish itself as an irrepressible force of nature, or is this Tesco giving up on the dream of creating a global super supermarket?

Around a year ago, research firm IGD waxed lyrical about Tesco. Of the world’s four largest retailers, (Tesco sits at number three in that list) IGD predicted the UK company was set to benefit the most from globalisation. It said: “Tesco’s international markets, particularly China, Turkey and India, will be a key element in driving their long-term growth and returns. The company will try to replicate its successful concepts in the UK, such as Express stores and Clubcard rewards scheme, in other countries.”

Well, the quest for world domination seems to be on hold. The company was probably right to pull out of the US. Its Fresh and Easy venture was like a black hole draining it of money. But the timing was awful. It moved into the US just as the world’s largest economy entered its worst recession since the 1930s. It exited just as the US economy appeared to be recovering. Maybe Tesco will be back, maybe it has learnt from its initial foray into the US, and will be back, but this time redoubtable. Maybe…

In China, Tesco has agreed to a joint venture with China Resource Enterprises. It has opted for a 20 per cent stake in the venture, throwing in its 130 stores, to form part of a 3,000 store empire. From a distance of several thousand miles it rather seems as Tesco has chosen to give-up on advancing its brand name; has given up promoting the Tesco business model worldwide, and has opted for a very logical and sensible joint venture rather than trying to create a truly global giant retailer.

As for Blighty, the problem faced by the company is that already has a massive share of the UK retail market. Maybe in creating a retail destination Tesco has chosen the only way it can expand in a market where it already has such a strong presence. Perhaps this approach can translate into other territories, and Tesco will be back in the US and via its partner in China, in the world’s second largest economy but this time as a pioneer of retail/leisure destinations.

But frankly it does rather look as if the dream of creating a global retail super heavyweight is over.

© Investment & Business News 2013