Shin-Kong Mitsukoshi, Beijing Hualian to Jointly Run Department Stores in China

Oct 07, 2005 Ι Industry In-Focus Ι General Items Ι By Judy, CENS
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Taipei, Oct. 7, 2005 (CENS)--Shin-Kong Mitsukoshi Department Stores, Taiwan's largest department store chain, recently signed a letter of intent with the Beijing Hualian Group to jointly establish a company to tap the retailing market in mainland China.

Last year Shin-Kong Mitsukoshi raked in NT$54.8 billion (US$1.61 billion at US$1 = NT$34) in revenues, the highest among Taiwan's department stores. Beijing Hualian, which operates supermarkets and shopping centers, is the No. 6 retailer in the mainland, boasting 16 billion renminbi (RMB, or Chinese yuan) or US$2 billion, in revenues last year. The cooperation of the two companies is expected to have a big impact on the retailing market in the mainland.

Insiders disclosed that the paid-in capital of the projected company is estimated at around RMB500-600 million, or US$62.5-75 million, which will be equally contributed by the two parties. The aim of the company is to operate department stores in the mainland, and Ji Xiao An, chairman of Beijing Hualian, will head the projected company.

At the beginning, the company will copy the models of Shin-Kong Mitsukoshi department stores in the capital city of Beijing and Chongqing in Sichuan Province. The investment in each of the two department stores is expected to be more than one billion RMB, or US$125 million, and the targeted consumers for the two stores are higher income local people.

The new Shin-Kong Mitsukoshi in Beijing is expected to open in late 2006 or early 2007, with an area of more than 30,000 pings (1 ping = 36 sq/ft) for shops inside the department store. The new store in Chongqing is slated to open by the end of 2008. A ranking official at Shin-Kong Mitsukoshi indicated that the projected department store in Beijing should generate revenues of at least two billion RMB, or US$250 million, per year.

Ji disclosed that the two parties have spent more than one year discussing the joint venture, and did not reach agreement until recently. Ji believes that Shin-Kong Mitsukoshi is an excellent operator of department stores, and will be a good partner. He is confident of making Shin-Kong Mitsukoshi a top brand among the department stores in the mainland.
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