British retailer Tesco’s expansion plans in China have received a set back with the announcement it is to close four unprofitable stores there.
The China Daily has reported the store closures in Bengbu, Anhui province, Tieling, Liaoning province, and Taizhou and Changshu, both in Jiangsu province, will enable the retailer to focus on key regions.
Tesco has 132 stores in China at present, with the majority located in coastal cities.
'It is not an easy decision, but we believe it will help us better cope with changes in the Chinese market,' the company stated in a media release.
'China will remain an ideal business destination and we will spare no efforts to find our right market position and capture all business opportunities,” the release continued.
Tesco had previously outlined plans to open 16 stores in China during the year from March 2012 to February 2013. However, according to the China Daily, as of Monday, only two stores had been opened.
Shenzhen Franchise Association head Hua Tao told the newspaper Tesco was a relatively new entrant to the Chinese market and had struggled to secure good locations and suppliers.
China’s current economic slowdown meant remaining profitable in the retail sector there, which operates on razor-thin margins, was increasingly difficult, the newspaper reported, while the growth in online retail was also cutting into profits.
Guangdong Circulation Chamber of Commerce managing head Huang Wenjie told the newspaper many supermarket chains' profit margins had fallen to 6 percent from 12 percent a decade ago. Surging rent costs and rising labour expenses were also exerting pressure on margins, he added.
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