Hong Kong-based Sincere Company Ltd is taking a big step in the mainland by dramatically enlarging its network to compete with convenience-store giants.

With five major convenience-store companies vying with each other, including Alldays, 21 Convenience and Lawson, Shanghai now has about 4,500 outlets.

"The market still has much potential though the competition is fierce," said Philip Ma, chairman of Shanghai Sincere Daily Stop Chain Corporation, a subsidiary of the Hong Kong company.

Sincere is adopting an Australian concept to manage its stores on the mainland; and Shanghai is the first destination.

"The service is targeted at office workers and communities," Ma said.

The Hong Kong investor plans to develop about 300 outlets by the end of next year. "We will make them profitable as soon as possible so that we can double the number quickly," he said, adding that each is expected to cost less than 200,000 yuan (US$24,184).

Sincere entered Shanghai in 1993 with the opening of the city's first overseas-funded department store on Nanjing Road East.

The store chalked up good business in the first year, but fierce competition combined with poor management led to losses in the next two to three years; and it had to be converted into a snack-food shop, he said.

"We will not be involved in general merchandise in the short term, for Shanghai has too many department stores," Ma said.

As a multinational company specializing in general goods, Sincere has no more room to develop in Hong Kong, which is monopolized by supermarkets and convenience stores such as 7-Eleven, he said.

Sincere's plan is to develop convenience stores in Shanghai first and then extend them into East China. Within the next five years, it plans to set up 3,000 outlets in the region.

Its survey shows that a 60-square-metre store in downtown areas generates daily sales of about 3,000 yuan (US$363).

Sincere expects to recoup its investment in the city in two to three years, with each outlet contributing daily sales of about 7,000 yuan (US$846), said Jackee Lam, chief executive officer of Shanghai Sincere.

Lam said about 30 per cent of food items sold in the stores would the imported while the rest would be bought domestically. With tariffs reduced, Sincere expects to earn 25-30 per cent of pre-tax profits from its sales, much higher than the current 15 per cent, he said.

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