Oct. 15 (NBD) -- Chinese retailer Wumart has agreed to buy a majority stake in the Chinese unit of German wholesaler Metro AG (Metro)'s Chinese unit, valued at 1.9 billion euros (2.1 billion U.S. dollars).

As per the deal inked last Friday (October 11), Wumart will own a 80 percent stake while its German counterpart will retain the remaining 20 percent. 

Besides, Metro expects to receive proceeds of 1 billion euros from the stake sale and the deal is forecast to be completed in the second quarter of 2020 at the latest.

Photo/Tuchong

Reorganization of retail enterprises is important: Wumart 

There will be no lay-offs, no pay cuts and its physical stores will continue to bear Metro's name, according to media reports citing Metro's China Chief Executive Claude Sarrailh on Monday.

Wumart should learn the strict quality control standards of European companies, business scale of Chinese retailers needs to be expanded, and in the digital age, the reorganization of retail enterprises is of great significance, remarked the company's founder Zhang Wenzhong when commenting on the recent stake purchase at a forum held on Saturday (October 12). 

"Metro set a good example for domestic wholesalers at its entrance into Chinese market when there lacked high-quality service and products in Chinese wholesaling industry. Metro enlightened the Chinese players and presented new ideas to the market back that time," noted Hu Chuncai to National Business Daily (NBD), the industry insider and general manager of consulting firm Uisharing.

Metro's footprints in China

The move constitutes part of Metro's global reorganization. The wholesaler forayed into the Chinese market in 1996 with its first Cash & Carry store opened in Shanghai. At the time, the German wholesale giant already saw China as an important market for its internationalization, NBD noticed.

"With a real gross domestic product growth rate of some 7 percent, the Far East was the fastest-growing region worldwide. China remained the frontrunner among Far Eastern countries, posting a plus of 9 percent," wrote Metro in the annual report for 1996.

Metro then has been expanding presence in Chinese market until 2012. 

NBD noticed that as of 2011, Metro opened 54 stores in China during the first 15 years of its entry into the market. In 2012, Metro launched 12 outlets in only one year and set a record for the retailer's annual newly-launched stores in a single country. However, the year marks a turning point. 

There saw a considerable decline in the growth of the number of Metro stores in China after 2012, with the tally decreasing from 17.2 percent in 2013 to 1.2 percent in 2015, based on data by China Chain-Store & Franchise Association. 

The slowdown in store expansion has further driven the weak growth of Metro's sales in China. The retailer added 29.7 percent to 17.9 billion yuan in sales in 2012 from year-ago period while the tally decreased 2.2 percent to 17.5 billion yuan in 2013. Furthermore, Metro merely posted single-digit growth in sales from 2014 to 2016.

Email: gaohan@nbd.com.cn