China's Sun Art goes online to chase retail boom

Thu Aug 15, 2013 4:03am EDT
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By Donny Kwok

HONG KONG (Reuters) - China's biggest hypermarket chain Sun Art Retail Group Ltd (6808.HK: Quote) is taking on Wal-Mart Stores Inc (WMT.N: Quote) in the booming domestic e-commerce sector as it seeks new ways to maintain its market share in the face of fierce competition.

With promises of farm-fresh produce to a nation obsessed with food safety, online retailers in China have turned grocery shopping into a business with sales valued at 11.5 billion yuan ($1.88 billion) this year. A rapidly expanding middle class has also propelled the trend.

Sun Art's push into e-commerce comes as competition in the hypermarket sector heats up, with a tie-up between Tesco (TSCO.L: Quote) and China Resources Enterprise (0291.HK: Quote) announced this month potentially posing a challenge to its lead.

Sun Art said it aims to start online shopping and home deliveries to customers in Shanghai in the fourth quarter.

"The products that will be available on our online platform will be way more than what we are selling in the stores," Executive Director Peter Huang told an earnings briefing on Thursday.

"We do not aim to compete in pricing or any cash-burning model," he said a day after the company reported a 14.8 percent rise in first-half net profit.

Sun Art, a joint venture between Taiwan conglomerate Ruentex Group and privately held French retailer Groupe Auchan SA AUCH.UL, said it had set up Uitox E-commerce (Shanghai) Co Ltd, a joint venture with a local company called Excellent First Ltd, to develop its e-commerce business.

"We will also actively explore different business models for e-commerce so as to provide customers with convenient ways in shopping, and to develop future sources of profit for the group," Sun Art CEO Bruno Mercier said in a statement.   Continued...

Employees stand in front of the gate to a Wal-Mart Supercenter in Chongqing municipality October 24, 2011. REUTERS/Stringer