Tesco has announced plans to sell its business in Japan, the smallest of its international retail businesses. The retailer began its operations in the country eight years ago; it has 129 stores in the Greater Toyko area accounting for less than 0.5 per cent of the market share in the city.
"We have concluded that we cannot build a sufficiently scalable business," said Tesco’s chief executive Philip Clarke. "It has proven very difficult to shift consumers from the stores that they use. You are competing with some extremely large Japanese retailers, both national and regional." Japan's ailing economy had affected trade, with the last couple of years being "particularly difficult", he added. The division made a small operating loss in 2010.
“Tesco has been in Japan since 2003, and has been unable to make major inroads into what is a distinctive and challenging grocery retailing market,” said Gavin Rothwell, research manager at IGD. “While Asia is a priority for Tesco, Japan is its least significant Asian market by sales - aside from its fledgling Indian business.” With sales growth in Japan hard to come by, the wider market growth has remained modest. “The retail market is fragmented and there are many strong regional players, often family-owned. Convenience stores dominate, particularly in the city centres, and a culture of ‘immediacy’ supports large numbers of vending machines/kiosks.” Under new chief executive Philip Clarke, this move shows a willingness on the part of Tesco to re-evaluate those areas of the business that have not delivered on expectations to date, according to Rothwell. “The move should free up Tesco’s resources to focus more strongly on key growth opportunities across Asia.”
Last year Tesco’s Asian business grew by over 20 per cent and delivered revenue of over £10 billion. China and South Korea have been among the key growth markets in Asia for Tesco. (1 Sept)
© 2011 - ESM: European Supermarket Magazine
