Sun Art Retail Group Ltd RT-Mart in Beijing. Sun Art has around 140 stores in the Chinese mainland operating under the RT-Mart brand.[Photo / Agencies]

Advance shows confidence in China's rising consumption, analysts say

SHANGHAI - The share price of the hypermarket chain store operator Sun Art Retail Group Ltd rose by more than 40 percent on the company's first day of trading following its IPO. Industry experts said investor confidence in increasing demand on the Chinese mainland was one of the factors behind the first-day advance.

Observers said booming consumption and the country's policies designed to further boost domestic demand have forced investors to pay more attention to companies in the retail industry.

Sun Art's share offering in Hong Kong, which aimed to raise $1 billion, is among the largest listings in the Chinese hypermarket sector.

The company, a joint venture between the Taiwan-based supermarket chain RT-Mart International Ltd and France's Groupe Auchan SA, was formed in 2000 and currently operates around 190 stores in more than 20 Chinese provinces. Around 140 of the stores operate under the RT-Mart brand, while the remainder are either Auchan-branded or contracted stores.

Sun Art originally intended to list on July 15, but that plan was delayed because of an error in the IPO prospectus. The retailer said the funds will be used to build new stores and upgrade existing outlets. The company plans to open 35 new outlets in China by the end of 2011.

Industry insiders said Sun Art is competitive compared with other large retailers, despite entering the market slightly later than international giants such as Carrefour SA, which began operating in China in 1995.

"Auchan had a strong presence in large cities, while RT-Mart did very well in second- and third-tier cities, so the joint venture has allowed the company to establish a better customer base around China," said Peng Jianzhen, vice-secretary-general of the China Chain Store and Promotion Association (CCSPA).

According to figures from the CCSPA, RT-Mart ranked first in the supermarket chain store sector in terms of sales revenue in 2010, when it reported 50.2 billion yuan ($7.8 billion). France's Carrefour was second in the table with sales revenue of 2 billion yuan, while Auchan reported 13.5 billion yuan.

Media reports suggest that Sun Art may become the dominant player in China's hypermarket sector, with RT-Mart making a huge contribution in terms of revenue. Meanwhile, figures from the market researcher Euromonitor International show that RT-Mart's branded stores overtook Carrefour in 2008 and have held the largest market share in China since 2009.

RT-Mart had market share of 9.7 percent in China in 2010, an advance from the 7.9 percent it had in 2007. Carrefour's share of the market declined to 8.1 percent in 2010 from 9.7 percent in 2007.

"It's centralized management system means that RT-Mart has better control over its logistics system and other related operations," said CCSPA's Peng. "RT-Mart also has performed well in building itself into a supermarket serving ordinary people."

For many consumers, RT-Mart has a reputation of being a supermarket where products can be found at a relatively cheap price.

"RT-Mart may not have a price advantage in some branded products. However, it can offer more lower-end products to consumers than other international companies, so it has gained a good reputation among ordinary people," Peng said.

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