The world's major retailers, facing reports that the China market is becoming saturated, are increasingly turning to mergers and acquisitions to advance their expansion plans.

Given the difficulty of finding a good location to build a new store from the ground up, the big retailers from overseas will follow industry trends in other sectors and start snapping up existing businesses, industry analysts said.

The most recent acquisition involved Best Buy Co Inc, which bought a majority stake in Jiangsu Five Star Appliance Co Ltd - China's fourth-largest home appliance chain. With the deal, Best Buy became the first foreign home-appliance chain to acquire a Chinese outfit.

Best Buy, the biggest consumer electronics retailer in North America, gained immediate access to Five Star's 136 stores in China with an investment of US$180 million.

"This relationship complements our other efforts to learn about the Chinese retail environment," said Robert Willett, chief executive officer of Best Buy International.

In addition to the new joint venture, which was inaugurated on Monday in Nanjing, Best Buy also announced plans to open its first self-branded mainland store in Shanghai.

"The US-based retailer's ambitions were made clear by its two-pronged investment in China," said Fu Su, an analyst at Xiangcai Securities Co.

"And it is not alone. Just like in China's beer market, M&As will become the trend for future expansion in the retail sector."

Carrefour, the world's second-biggest retailer and the largest in China, is reportedly in talks with Taiwan-based TrustMart to take over the latter's stores in China.

The France-based retailer plans to open more than 80 new stores in China over the next three years. In January, Carrefour opened a Qibao store after buying the facility from Nextmall, a joint venture that closed its seven hypermarkets in Shanghai and neighboring Jiangsu and Zhejiang Province due to poor business.

"The rising store density makes it increasingly difficult to find ideal places to open new stores," Fu said. "Buying an existing one from the rival is a good choice."

Among its other expansion efforts, Carrefour will open an outlet in Shanghai Cloud Nine Shopping Mall near Zhongshan Park on Tuesday. The store site was originally a supermarket operated by the mall company.

Among the reports characterizing China's retail market as saturated, an ATKearney study marked down the country one notch to No.5 on its list of retail markets in emerging economies and said intensified competition will likely limit expansion opportunities for overseas retailers. 

Editor: Yan