PARKnSHOP to close last remaining shops, exit Shanghai market
Global Times | May 13, 2012   By Ji Beibei

百佳关闭最后剩下的商店，退出上海市场
“环球时报”2012年5月13日，姬北碚

Supermarket chain operator PARKnSHOP has closed one of its remaining two shops in Shanghai, a decision analysts said was a result of increasingly fierce competition in the retail sector, rising rents and operational problems.

PARKnSHOP closed its outlet in Westgate Mall on the West Nanjing Road in Shanghai after 15 years of operation, China National Radio reported Sunday.

Another outlet of the chain in Shanghai's Changning district is set to close on May 21, the report said.

PARKnSHOP could not be reached for comment by press time Sunday.

The company entered Shanghai in 1994 and had over 20 outlets in the city at the peak of its business.

PARKnSHOP told media Friday that closing its last two shops in Shanghai does not mean it is abandoning the market forever. But analysts said both external and internal problems contributed to the failure of the supermarket chain in Shanghai.

"After 10 years of growth, the retail sector is entering a mature phase, in which giant retailers are seeking higher growth while some market players are closing shops," Wang Xianqing, an expert on circulation economics at Guangdong University of Business Studies, told the Global Times, noting that the withdrawal of PARKnSHOP from Shanghai is just a beginning of a reshuffle of the whole sector.

Rising rental costs and supply prices, as well as administrative controls on retail price hikes are weighing on the profit margins of retailers, Yan Qiang, an analyst on consumer goods at Beijing-based Adfaith Management Consulting, told the Global Times Sunday.

Rents of high-end retail malls have been climbing in recent years in China amid foreign brands' push to establish or grow presence in the market and a growth of urbanization in the country.

It is especially true of central business areas of big cities like Beijing and Shanghai. For instance, rents of malls in Wangfujing area of Beijing have surged 100 percent year-on-year in the second quarter of 2011, according to a report by commercial real estate consultants Cushman & Wakefield.

Besides external factors, PARKnSHOP had its own problems to reflect upon, analysts said.

"With only two shops in Shanghai, PARKnSHOP could not compete with other retail giants in terms of procurement and logistics chain," Yan said. "It calls for 5 to 10 shops for the supermarket chain to achieve the economy of scale. Besides, being close to giants like Carrefour, which is quite popular in Shanghai, creates serious split flow."

Though successful in Hong Kong and performing well in Guangzhou, PARKnSHOP seems to have failed in its localization in Shanghai.

"In some cases, whether a retailer can offer goods and services that cater to the taste of local consumers is also very important," Wang noted.

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