China is the world’s largest economy with a growing consumption propensity, and American retail giant Walmart (WMT, Financial) is determined to make it big in the geography. Recently the Arkansas-based retailer announced plans to open 115 new stores by 2017. On the face of stiff competition and dynamic consumer preferences, several big-box retailers found China to be a difficult market to cater to and have been forced to confess defeat. In such a situation, how does the world’s largest retailer plan to make it big in China? Here’s a look at that.
China’s a tough nut
Walmart has been serving China for almost two decades and it very well knows what a tough nut the market is. Several retail mammoths such as Best Buy (BBY, Financial), Home Depot (HD, Financial), UK’s Tesco, etc., have found it difficult to penetrate into the market, particularly because of the popularity of local retailers. The local retailers are equipped with a better understanding of consumer preferences, leading to serving the customers better and automatically taking a big bite of the market pie. While the rising demand from China’s emerging middle class is tempting, the market is characterized by cut-throat competition.
But Walmart knows how to work its way up
While others have been struggling to gain grounds, Walmart has been slowly spreading its reach within the geography, and it is determined to create ripples even as it faces slowing sales and dropping comps. As per market data, Walmart is the most visited supermarket brand in China and almost one-third of the supermarket shoppers prefer to shop at the company’s outlets. This clearly implies Wal-mart’s efforts haven’t been in vain. The retailer has also invested north of RMB 600 million in upgrading its China stores that has resulted in increased efficiencies related to operating cost and business performance.
Another things that set’s the retail giant apart from its peers is its focus on China’s ecommerce market. Walmart-owned Yihaodian, a specialist online grocery retailer in China, has been witnessing success with customers located in the major cities of China. In December last year Yihaodian started a faster delivery service to several Chinese markets, delivering the ordered items in less than three hours, for items such as fresh food products, meat and fruits. The portal’s total offering count has gone up massively, and now it offers close to 8 million items compared to less than 200,000 items four years back. With focus on both supermarkets and online sales, Walmart’s chances of succeeding in China more than double.
Taking the bull by its horns
With whatever it has done in China, Walmart has achieved positive returns, and now it plans to add another 115 stores across the country in the next two years. In his latest announcement, CEO Doug McMillon mentioned that the new store count will include supercenters and Sam’s Club outlets and will result in creating employment for more than 30,000 jobs in Shanghai, Shenzhen, Changsha, Wuhan and other Tier 1 and 2 cities. With these new stores the retailer plans to provide better service to customers and penetrate deep into maturing and already mature markets. At the same time, some of the new stores that will be located in emerging cities, will help Walmart to benefit from the urbanization process that’s going on in China.
China has always been a crucial part of Walmart’s strategy to expand internationally and it will continue to be so according to Sean Clarke, president and CEO of Walmart’s China operations. The company will increase its investment in the geography in the coming years that will result in increased store count, expanding capacity to support the growing demand, develop ecommerce operations, and ultimately help the retailer become an integral part of China’s growth story.
