European discount chain challenges hypermarkets
Joint venture led by Carrefour unit Dia opens the first four of 50 stores planned for Shanghai this year
One of the world's biggest discount chains yesterday opened its first stores in China, choosing four locations in Shanghai, the country's most crowded and competitive market, promising lower prices than the hypermarkets.
Headquartered in Spain, Dia International has 4,000 stores employing 28,000 people in Spain, Portugal, France, Greece, Turkey, Argentina and Brazil, with global sales last year of six billion euros (HK$52.4 billion). It is a subsidiary of French retail giant Carrefour.
In March, Dia set up a joint venture with Shanghai Lianhua Supermarket, the city's largest retail chain, with capital of 93.08 million yuan (HK$87.2 million), of which Dia holds 55 per cent and Lianhua 45 per cent.
The stores the joint venture opened yesterday in the Putuo, Xuhui, Hongkou and Yangpu districts of Shanghai are Dia's first outlets in Asia. The joint venture aims to open 50 stores in Shanghai this year and 300 by 2006.
A company spokesman said its formula was to open stores of between 300 and 500 square metres in size, with prices about 10 per cent less than those in hypermarkets, which offer the cheapest prices in Shanghai. The size is larger than a convenience store but smaller than a supermarket.
'We choose locations with low rent, a dense population and in areas with few supermarkets and hypermarkets,' he said.
Dia said it could offer low prices by buying directly from manufacturers and selling only two or three brands of each kind of product, of which it sells about 1,000, mainly food, cleaning products, cosmetics, clothing and everyday necessities.
An economist at the Shanghai Commerce Information Centre said the city's retail market was not yet saturated.
'The city centre is full of convenience stores but not the outskirts,' he said. 'At the end of 2001, Shanghai had 1,800 to 2,000 convenience shops and the number will reach 3,000 by the end of this year. We put the saturation level at 5,000 stores.
'Discount stores in Shenzhen closed because they sold clothes. Dia has learned its lessons and is concentrating on food, especially fresh food.
'Its stores will be 5 to 10 per cent cheaper than supermarkets and will target middle-class, salaried people in densely populated residential areas. They have a place in the market.''
However, a researcher at Haitong Securities disagreed. 'Their stores are too small. To be competitive, you need at least 5,000 to 10,000 square metres,'' he said.
In June last year, Dia signed an agreement with the Shou Lian Group of Beijing to set up Beijing Dia Shoulian Retail Company, which plans to open stores this year in the capital and other parts of north China.
