Wumart feels pressure of rising costs and tougher competition

The Chinese subsidiary of Walmart closed more than 10 stores in 2013 and invested nearly 500 million yuan to upgrade about 50 existing stores. It said these moves would optimize its distribution network and make inventory management more flexible

Liu Hui, a senior analyst of Beijing-aced Join Uni-retail consulting company, said that Chinese retailers are going through a period where they must renew their leases-and finding that they can no longer afford the soaring rents.

"It's a turning point for retailers in China. With already-slim margins, rents have become the last straw for retail outlets, forcing many out of game;' he said. 'Retailers have to adjust their business strategy and focus more on consumers' preferences and purchasing habits to get food right"

He noted that Chinese consumers, who usually tend to buy only a few items per visit, prefer small local stores, so the big-ox store model is no longer popular and grocers need to change their strategies accordingly.

Last year, Wumart established a fresh food business unit to improve its business in produce, meat and prepared meals, which are driving forces for Chinese hypermarkets.

In December, Wumart had 547 stores, mainly located in northern and eastern regions such as the cities of Beijing and Tianjin, as well as Hebei and Zhejiang provinces, compared with 529 a year earlier.

They comprised 155 superstores and 392 minimarts.

National retail sales totaled nearly $2.1 trillion in 2012. It is estimated that by 2015, China will be the world's third-largest consumer market after the United States and Japan, lifted by an expanding middle class.

But 2014 is expected to be another challenging year for retailers, which face slowing sales, higher costs and a tough challenge from e-commerce, according to Kantar Worldpanel.

"We are seeing visits to traditional retailers by shoppers continue to drop," Yu said.