Wal-Mart not bullied by China authorities - Shaun Rein

Shaun Rein

Unlike Wall Street Journal's columnist Bussey Shaun Rein does not think Wal-Mart - or any other foreign retailer in China - is bullied by the authorities. It's Wal-Mart who betrayed its customers. Foreign retailers gain more and more market share, he tells in CNBC.

Shaun Rein:

Contrary to Bussey’s position that the government is treating foreign retailers unfairly, the largest hypermarket chains, Wal-Mart, RT Mart, Carrefour,Tesco, Auchan, Lotus, are all foreign owned because consumers trust foreign retailers more not to cut corners. Combined, they control the majority share of the modern retail market. Where are the barriers to foreign retail investment? 

Most consumers, before the incident, told my firm they “trusted” Wal-Mart to sell good quality products. The government supports foreign retailers because they positively impact the food supply chain. So when even a trusted Wal-Mart sells bad products, it destroys public trust more and the government needs to make an example of them. 

As one 30-something woman shopper in Shanghai told me, “If Wal-Mart did this, I shudder to think what domestic chains will do. The government needs to stop the problem now by arresting people, not just issue little fines.”

More in CNBC  

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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The barrow boy grocer from Tesco - Paul French

Paul French  via Flickr

Some foreign companies do well in China, others fail. And some have a more rollerskating experience like Tesco, recalls retail analyst Paul French in the Telegraph. The UK retailer set off on a wrong foot with Taiwanese management, but took a good turn when Mr. Towle, a real grocer from the UK moved over.

Mr Towle has been in China for five years, and has no plans to leave. Under his leadership, the operation is clearly gaining momentum. Tesco did not make the best start in China, paying £140m (a rather steep price-earnings multiple of 51 times) in 2004 for a 50pc stake in Hymall, a Taiwanese supermarket chain with 25 stores.

“So many weird things happened at those stores,” said Paul French, a retail analyst at Access Asia. “It probably would have ended in a labour dispute these days. The staff hated the Taiwanese management and they used to talk about sabotaging the products and so on.

"The UK management sent over some people to try to tell the Taiwanese what to do and in the end they just got rid of them all. Since then, it has all been running well.”

A year after his arrival in China, Mr Towle took 90pc control of the venture for a further £180m and last year Tesco finally clinched the remainder.

Inside his stores, Mr Towle, who has been with Tesco for 25 years, working up from the bakery section, can reel off the prices of any of his products and will happily discuss catchment areas, layout and volumes.

“He’s a good old-fashioned grocer,” said Mr French. “Basically, to understand the Chinese consumer, you have to be a barrow boy grocer. They get it immediately. What was needed was a good deal of ruthlessness. In a business where you have a 2pc margin, you need to be ruthless.”

More in The Telegraph.

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Paul French is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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