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7-Eleven Inc. has announced that it will deliver to more than 2,000 “hot spots” such as parks, beaches and concert venues in the U.S.

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France-based Carrefour has signed an agreement to sell an 80% stake in its China-based operations to Suning.com. The deal will see Suning pay Carrefour €620.0m in cash, valuing Carrefour China at an enterprise value of €1.4bn.

Carrefour may exit China completely

The transaction is expected to close by the end of 2019, subject to regulatory approval. Carrefour will retain a 20% stake in the business and two out of seven seats on Carrefour China’s Supervisory Board. However, the agreement allows Carrefour to sell the remaining stake in two years’ time.

Carrefour China has struggled in recent years

Carrefour has been presence in China since 1995, but it has been struggling to grow in recent years amid fierce local competition and the rise of the ecommerce channel more widely. Carrefour has implemented several turnaround plans in recent years, but despite these, it has generated negative like-for-like sales since 2011. At the end of its 2018 financial year, the retailer operated 210 hypermarkets and 24 convenience stores and generated total net sales of about €3.6bn and EBITDA of €66m.

About Suning

Suning is a Chinese electronics retailer and ecommerce player. It operates more than 8,881 stores in more than 700 cities and one of the country’s largest B2C ecommerce platform. Suning said in filing to the Shenzhen stock exchange that “the stake acquisition will allow Suning.com to strengthen its brand, as well as boosting its marketing capabilities, food quality control and supply chain management in the fast-moving sector”.

Where does it leave Carrefour’s agreement with Tencent?

One area not answered by Carrefour’s announcements is where the sale of Carrefour China leaves its existing relationship with Tencent. Announced in Q1 2018, the agreement has been highlighted by Carrefour Group’s chief executive, Alexandre Bompard, as supporting its growth, while the president and chief executive of Carrefour China, Thierry Garnier, has said how China is a specific market that has helped us to learn and to understand the future. With Carrefour potentially exiting China over the course of the next two years, where this leaves its agreements and what it can learn from the country in question.

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Costco Wholesale Corp. is set to open its first bricks-and-mortar warehouse in China this August.

A business based on membership strategy

After setting up an online store on Alibaba’s Tmall five years ago, the U.S wholesaling giant is to open its first physical warehouse in Shanghai’s Minhang district on the 27thof August.

Costco’s model in North America has been based on families buying bargain products in bulk, transporting them in their cars and then storing them at home. Its business success is based on building a loyal shopper base through its paid membership program with low price items. Costco pledges refunds even after the goods are consumed. The firm’s membership strategy has been largely successful in most markets, with 88% renewal rate globally.  

Costco China will offer two types of memberships – one for families and the other for corporation, both with an annual price of US$43. Customers have been able to apply for memberships since April.

Our view

Costco will have strong competition from Walmart China’s Sam’s Club, also a membership-only retail club chain.

Sam’s Club has the advantage of entering the China market 20 years earlier and cumulated a wealth of knowledge and experience of the market. During that 20 years, Sam’s Club has gradually shifted its target to high end and upscale market and focuses more on quality premium products than low price. The retailer has been accelerating store expansion the last two years and plan to have 40 stores by end of 2020.

Expansion into China has many benefits for Costco, alleviating over reliance on North America being one of them. The question is whether Costco will change its strategy in China.

Costco currently runs a total of 770 warehouses worldwide, including 12 each in Taiwan and South Korea and 26 in Japan.

 

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Rakuten and Seiyu will deliver products from the Seiyu LIVIN Yokosuka Store in Yokosuka City, Kanagawa Prefecture, to visitors in Sarushima via drones.

Drone service to launch on 4 July 2019

Starting on 4 July 2019, the new initiative will service Sarushima, a popular sightseeing destination and the only uninhabited island in Tokyo Bay. It will run for around three months, and Rakuten Drones will ground at a landing port built on Sarushima. To use the service, visitors will need to download the Rakuten Drone app onto their smartphone and place orders through the app. 

A range of approx. 400 products will be available to order, including fresh produce for barbecues, beverages and first-aid products. This will be supplied by the Seiyu LIVIN Yokosuka Store located on the shore opposite the island.

Our view

The service, once in operation, will also provide invaluable knowledge on the capabilities of drone deliveries for disaster relief, how to support people with limited access to shopping in certain areas of Yokosuka and whether it can be rolled out to other regions. This is not the first time Rakuten has turned to drones for delivery solutions in Japan. It has been offering the service since 2016, and signed an agreement with JD.com to strengthen last-mile delivery earlier this year.

Accelerating innovation to drive convenience

Rakuten’s ??Managing Executive Officer, Koji Ando, said, “We are very happy to expand our collaboration with Seiyu on Rakuten Ichiba and Rakuten Seiyu Netsuper to include the field of drone logistics […] with this service, we aim to offer customers an innovative, advanced shopping experience in which products they order will be delivered by drone. Based on this initiative, we will accelerate innovation so that more people can experience the convenience of drone delivery."

Strengthening existing partnership

Seiyu’s Executive Senior Vice President of EC Division, Tamae Takeda, said, "Seiyu has also been looking into drone deliveries for our online supermarket, and we are very excited to work with Rakuten in this field. In the future, through Rakuten Seiyu Netsuper, which we jointly operate with Rakuten, we want to contribute to enriching the lives of more customers by delivering high-quality products at low prices to everyone, including those who have difficulty shopping at stores."
 

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