"Farm to supermarket" pulls in customers.

Wal-Mart held a Chinese national press teleconference at the end of 2008 during which it disclosed that five new stores would be opened in Chongqing in 2009.

These include a Nanbin Road store, a Lianglu store in Yubei district, a Jiangbei store, a Shapingba store and a Wanzhou store. At the same time, domestic sourcing is being strengthened and farmer-to-retailer link-up bases are to be built.

Leading supermarket groups Shangshe Group and Yonghui Group earlier indicated that in 2009, apart from quickening the pace of expansion, they would also start building or operating distribution centres in the country's southwestern region.

It is understood that since Wal-Mart entered China in 2005, it has now opened four stores in Chongqing. The company's plan of opening five new stores in 2009 testifies to its determination to expand in a lacklustre market environment.

In addition to Wal-Mart, Yonghui of Fujian also announced plans to open 20 new stores in 2009. Reportedly, Yonghui opened 12 new stores in Chongqing in 2008.

Chongqing Department Store and New Century Supermarket also disclosed that they would open more than 10 new stores each in 2009, while Shangshe Group's target for 2009 is to open 30 new stores.

Why are supermarket groups expanding despite the down market? High level executives of Shangshe and Wal-Mart said the current crisis can bring about opportunities. With rents and labour cost dropping, the cost of expansion for enterprises will be lower.

As the number of new stores continues to increase, more and more sourcing will have to be done domestically in order to lower costs further. All leading supermarket groups are seeking rural co-operatives and agricultural bases as partners in co-operation.

Reportedly, the fresh and live food departments at supermarkets such as New Century, Chongqing Department Store and Yonghui have already started to link up with farms in a bid to cut costs by eliminating intermediaries in the distribution chain.

Under the current financial crisis, apart from opening new stores and expanding domestic sourcing to increase economic benefits, all the major supermarket groups in Chongqing are building logistics and distribution centres in the southwestern region in order to cut distribution cost.

According to Shangshe Group, the largest logistics and distribution centre in the southwest with an investment of Rmb240 million will be ready for operation by the end of 2009.

This logistics and distribution centre will not only provide logistics service to Chongqing Department Store and New Century under the Shangshe banner, but will also offer third party logistics service. Meanwhile, Yonghui revealed that the Yonghui Logistics Southwest Distribution Centre in Panxi will start under construction this year.

from Jane Zhang, Chengdu Office

(Image courtesy of Xinhua News Agency)