Wal-Mart adapts in China

03 December 2010

BEIJING: Wal-Mart, the retail giant, is planning to introduce smaller stores in China as it seeks to attract new groups of shoppers.

The US multinational intends to roll out "compact hypermarkets" originally pioneered through its Bodega Aurrera chain in Mexico and Changomas network trading in Argentina.

Doug McMillon, chief executive of the firm's international arm, told the Financial Times these branches had distinctive characteristics from its existing supercentres, primarily aimed at middle class customers.

"[It] is a smaller store, typically a cheaper physical plant; a cement floor, perhaps brick walls, sometimes we don't have air conditioning," he said.

One key objective of this scheme is engaging consumers in lower-tier cities, as demonstrated by the first such site utilising this comparatively modest format, which measures approximately 37,000 square feet.

This outlet, running under the Trustmart banner, is based in Zhang Shu, located in Jiangxi province and housing 500,000 residents.

"It is going to help us reach more people ... not only in urban markets but also reaching people in rural areas," said McMillon.

While these hypermarkets are around half the size of a regular Wal-Mart store, the potential returns match those available from larger alternatives.

"The cost of operating it is less, so the [prices] are less," said McMillon.

This latest initiative seemingly confirms McMillion's statement to investors in October that "compact hypers will become even more important" for its overseas division, which currently yields 25% of revenues.

Other recent programmes in China have included testing SmartChoice convenience stores, with two units now open in Shenzhen, mainly targeted at busy city dwellers.

Wal-Mart's sales rose by 15.2% in China during the previous quarter, when like-for-like totals jumped 6.9%.

The company has launched 30 stores in the world's most populous nation in the last 12 months.

Data sourced from Financial Times; additional content by Warc staff