A Best Buy outlet in Shanghai on Feb 22, before it was closed. International retail chains are facing more and more challenges from local competitors and difficulties in adapting to local consumers' demand. [Photo / China Daily]

Even as the sector booms, cautionary tales abound

China continues to be an attractive destination for foreign retailing businesses seeking development, but not all companies who venture into the Middle Kingdom has found that life was easy.

Many companies had taken on the Chinese market with great confidence, but ended pulling out of the country with their tails between their legs.

In February 2011, for example, the United States electronics giant Best Buy said it would close all its nine stores, along with its Shanghai headquarters, after just a five-year presence.

A month later, Barbie doll manufacturer Mattel said it would close its flagship store in Shanghai, and French decor maker La Maison shut all its seven stores in Shanghai in a complete withdrawal from the Chinese mainland market.

All the companies said the change is part of their development strategies.

Analysts said the potentially lucrative Chinese market is not where every foreign company can easily make a profit, although many of them have advanced management systems.

The Chinese consumer market has been booming over the past decade, particularly since China joined the World Trade Organization in 2001.

A report from consultant A.T. Kearney (ATK) said sales revenue generated from the retail sector reached 2.1 trillion yuan ($331 billion) in 2010, with growth rate remaining at 15 percent.

Figures from consultant Euromonitor International showed sales revenue generated by hypermarket operators in China reached 444.66 billion yuan in 2010, an increase from 39.76 billion yuan in 2001. Revenue from other retail sectors such as home appliances and online shopping, have also recorded tremendous growth.

The opening-up policies after joining the WTO and the booming market demand provide tremendous opportunities for global retailing giants.

Liao Yan, public relations manager of French retail giant Carrefour China, said while the company has brought into China some of Europe's advanced retail experiences, the country has become "one of the most important supporters for Carrefour's growth in the world".

Carrefour operates more than 190 stores in China. The company, which entered the Chinese mainland in the early 1990s, is the country's fourth-largest retail giant with a market share of 8.1 percent in 2010, Euromonitor said.