Beijing-based retailer Wumart Stores Inc will establish a joint venture with Beijing Aoshikai Group Co, a traditional grocery operator and food processor, in a bid to further tap the capital's retail sector, according to reports.

 

Wumart will inject capital while Aoshikai will invest assets, according to a Beijing News report. Both sides declined to reveal how much money is involved in the deal or the percentage of ownership.

 

The new firm, Beijing Aoshikai Wumart Co Ltd, will consolidate Aoshikai's outlet resources and turn them into supermarkets under Wumart's business model, the report said.

 

Aoshikai is a State-owned firm, headquartered at Beijing's Dongcheng district. It has several traditional large-scale grocery stores, including Chaonei Grocery Market, Xinxingli Grocery Market and Jiaodaokou Market. It also has two traditional Beijing food brands, Quansuzhai bean curd and Puwufang meat, both of which have over 100 years of history.

 

The new company will renovate some Aoshikai outlets into large-scale supermarkets, making use of Wumart's modern management mechanism and distribution channel operations.

 

In the meantime, Aoshikai's traditional products will be marketed through Wumart's distribution network.

 

Wu Jianzhong, chairman of Wumart, said with the rapid expansion of overseas retailing giants, domestic players should actively seek partnerships with each other.

 

"If local players 'fight' independently (against overseas rivals), most likely a large number of them will be defeated," Wu was quoted by Beijing Youth Daily as saying.

 

Gao Xiuyun, general manager of Aoshikai, called the partnership a win-win deal. Aoshikai has network of resources in the city's downtown area, and Wumart has the advanced retail concept, management and technological experience.

 

Wang Yao, deputy secretary-general of China General Chamber of Commerce, said it is a trend for the traditional grocery markets to be upgraded into modern supermarkets. As living standards improve, customers prefer a cleaner and better-organized shopping environment and open-shelf product display.

 

Wang said increasing the number of stores is important for local chain retailers, but enhancing overall strength is the key to compete against overseas operators.

 

"The strength can be seen from the personnel resources, management methods and abundant capital support," he explained.

 

In the first quarter of the year, Wumart's profit jumped 25 percent as rising incomes spurred consumption. Net income rose to 78 million yuan from 62.4 million yuan a year earlier, and sales increased 50 percent to 2 billion yuan.

 

(China Daily June 26, 2007)