Retailing, Franchising, and Consumerism Business Intelligence in China

Beijing Company Hopes To Get Convenience From 7-Eleven

China Daily reports that the Beijing Wangfujing Department Store Co Ltd (Group) wants to buy a 25% stake in Seven-Eleven Beijing Co Ltd, a Chinese joint venture with Seven-Eleven Japan Co Ltd.

The retailer is willing to spend millions of dollars because it wants to tap into the convenience store market.

In a statement to the Shanghai Stock Exchange, Wangfujing Department Store said it would pay US$8.75 million for the stake, currently held by the Beijing Shoulian Commercial Group Co Ltd, a State-owned company engaged in logistics and department store operations.

Seven-Eleven Japan Co Ltd owns a 65% stake in the joint venture company, while the Beijing Shoulian Commercial Group Co Ltd and the China National Sugar & Alcohol Group Corp hold 25% and 10%, respectively.

The deal is still waiting for approval from the Ministry of Commerce and agreement from US Seven-Eleven Inc and Seven-Eleven Japan; they have first refusal on the stake, according to an anonymous marketing official at the Wangfujing Department Store. The same official declined to reveal any detailed plans.

The Wangfujing Department Store said in the statement that it wants to diversify its business in the retail industry, and the purchase might help it quicken penetration of the market.

The store should also be able to help Seven-Eleven Beijing get out of debt.

According to an unaudited financial statement from Seven-Eleven Beijing Co Ltd, the venture made a net loss of 7 million yuan (US$864,000) in the first half of this year. The venture had total assets of over 200 million yuan (US$24.69 million) at the end of June.

When the first Seven-Eleven outlet opened in Beijing in May 2004, Li Yong, deputy general manager of Beijing Seven-Eleven Co Ltd, said 100 new stores would be open within a year in the capital and 500 were set to open there over the next five years. The annual sales volume of the convenience store operator was expected to reach 2.8 billion yuan (US$345 million) by then.

However, since May last year, only 27 Seven-Eleven convenience stores have opened in Beijing.

Seven-Eleven Beijing's poor performance is also due to the involvement of domestic supermarket operators, such as Wu-mart, Lianhua, Hualian and Haolingju in the convenience store sector.

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