Woolworths Follows Macy's, Costco With Plans for Tmall Shopfront

  • Online retail in China forecast to reach $1.5 trillion by 2020
  • Australian supermarket chain engages eCargo to build site

Woolworths Ltd. is setting up shop on Chinese online site Tmall.com, following the path of overseas retailers including Macy’s Inc. and Costco Wholesale Corp. as Australia’s largest supermarket chain attempts to reverse declining earnings.

Sydney-based Woolworths has engaged eCargo Holdings Ltd. to build a storefront on Alibaba Group Holding Ltd.-owned Tmall, as well as coordinate inventory, packing and distribution, eCargo said in a statement to the stock exchange Tuesday.

The value of online retail in China is forecast to more than triple from 2014 to reach 10 trillion yuan ($1.5 trillion) by 2020, according to a study by Bain & Co. and Alibaba released last month. 

Foreigners are chasing a slice of that market without incurring the cost of physical stores. For instance, China’s annual shopping bonanza -- Singles’ Day -- last month included cut-price Scottish oats from London-based J Sainsbury Plc and Dutch waffles from Royal Ahold NV on Tmall.

“The food and groceries segment will experience huge growth in the coming years between Australia and China,” eCargo Chairman John Lau said in the statement. 

Woolworths has set up a store on the site to sell “a small, selected range directly to Chinese consumers,” a spokesman said in an e-mailed statement. “While we have no significant plans for Tmall at this stage, we will no doubt benefit from the experience it brings.”

Woolworths shares added 0.1 percent to A$23.54 at 1:10 p.m. in Sydney, trimming the stock’s decline this year to 23 percent. eCargo more than tripled to 31 Australian cents, taking the e-commerce company’s market value to A$166 million ($119 million).

Sydney-based Woolworths, which has been trying to replace outgoing Chief Executive Officer Grant O’Brien since June, in October said profit in the first half of this financial year will fall as much as 35 percent. 

Faced by increasing competition at home from Aldi discount stores and Wesfarmers Ltd.-owned Coles, Woolworths Chairman Gordon Cairns has warned that a turnaround will take years.

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