Walmart reassesses its China strategy

Walmart is one of China’s leading hypermarket operators, but after more than 25 years there it still hasn’t quite found the right strategy, The Wall Street Journal suggests. 

Context 

Ten years ago, Walmart was China’s second-largest operator of hypermarkets, but in 2021 it was fourth-largest (Euromonitor International). 

Walmart closed 10% of its 400-or-so hypermarkets last year, but has plans to boost the number of Sam’s Club stores (the economics are different as membership fees are the primary source of profit) this year by 25% to around 45. 

On an international level, Walmart has persevered with China even as it has cut back in other markets such as the UK, Brazil and Japan. One reason is that China remains a crucial source of many of the manufactured goods the retailer sells. Another is that maintaining a presence there helps it keep on top of the latest trends in retail and e-commerce. 

China’s retail environment

• COVID: Movement restrictions resulting from China’s zero-COVID policy have limited some shopping opportunities.
• Speed: The hypermarket model feels dated as more people shop online for home delivery of groceries. Walmart has introduced one-hour delivery through its partnership with JD.com and has also trialled dark stores to fulfil online orders.
• Local knowledge: Chinese retailers are more attuned to changing tastes and have a huge array of local products. 
• Politics: There is a degree of uncertainty as policies can change with little advance warning; foreign retailers also have to tread a careful line to avoid inflaming nationalist sentiment.

Key quote

“The Walmart format is not what Chinese consumers want” – Han Hu, consumer analyst at Euromonitor.

Sourced from The Wall Street Journal [Image: corporate.walmart.com]