In China, Wal-Mart meets its match: Sun Art Retail Group

AP News
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Posted: May 31, 2016 7:22 AM
In China, Wal-Mart meets its match: Sun Art Retail Group

At the store in Shanghai, signs promote "everyday low prices," along with temporary promotions — similar to what Wal-Mart does.

But this isn't an outpost of the world's largest retailer. It's an RT-Mart, a branch of a chain that is doing better in China than Wal-Mart.

Wal-Mart ranks No. 3 in market share in the big store sector and faces stiff competition from local and regional players like No. 2 Sun Art Retail Group, RT-Mart's parent. These rivals have both copied Wal-Mart's ways, but also rely on what they say is their better knowledge of the Chinese shopper. RT-Mart and other rivals seem to have poached Wal-Mart's "everyday low price" slogan — though they last just a few weeks, instead of prices that remain low for months. Their tactics have muddied Wal-Mart's message and forced the American retailer to find another slogan, "Worry Free."

Sun Art, a French-Taiwanese joint venture which also operates stores under the banner Auchan, has fewer stores in China than Wal-Mart has. But it boasts it's almost everywhere in the country.

In a recent phone interview, Bruno Mercier, CEO of Sun Art Retail Group, talked to The Associated Press about the cautious Chinese consumer, how his company stands out from Wal-Mart, and the future of the super-sized stores as the Chinese rapidly move online.

Q. How has the slower economic growth affected the Chinese consumer?

A. We can see quite a bit of focus by consumers on deals. Whenever we do a very strong promotion, we can see a good consumer response. Sales on a day-to-day basis may be tepid. Whenever we push a button, and we do something strong, we can see the consumer comes back.

Q. How have food scares affected shoppers' behavior?

A. There is a great deal of caution by the consumer in terms of food quality. We are trying to deal with that image as being a safe food provider. I cross my fingers. We haven't had any really bad things at the stores. On the whole, the situation has been pretty good. But we are putting quite a bit of effort (in food safety).The move to imported food has been really driven by the food scares. For better or worse, the Chinese consumer is very skeptical about food production in China. We're just responding to that need by enlarging our shelf space that we devote to imported items.

Q. You're doing a mix of everyday low price and temporary promotions? Why? Did you copy Wal-Mart?

A. No. ... Everybody is trying to find what works better in the eyes of the consumer. Therefore, there's an increased level of activity in terms of what can be done with promotions in China.

Q. How are you different from your competitors like Wal-Mart?

A. There's no single item that makes us different. Everybody is copying everybody. Overall, location is very important. We've been for a number of years in the best locations. As a result, we've been closing less stores than the competition. You don't want to be only in the basement floors. We are also one of the retailers that have the largest parking spaces. In this country, car ownership is increasing. We are also able to offer a range of products that are very suited to the local tastes of the consumers. We have a nationwide footprint, but everywhere we are, we want to have the products that are known by the consumers in each area. We have large scale therefore we can drive reasonably good bargains with our suppliers.

Q. Given the rise of online shopping, what's the future of the big store? Are you nervous?

A. It is our job to be nervous about whatever happens. We need to find another way to respond to the consumer. We are experimenting with other formats. Of course, home delivery by our e-commerce is another option. ... We've been moving some appliances (from the store) online.

Q. What about opening convenience stores?

A. We haven't opened convenience stores. The problem with convenience stores is that so far in China, many of the players are losing money. Domestic players have the advantage of being able to sell cigarettes, which are contributing increasingly to the profitability to their stores.

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