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BEIJING — Walmart is ramping up its expansion plans for China, even while it intends to shutter numerous underperforming stores. In contrast to its growth strategy for the United States, the focus in China will be on its big-box formats: the Supercenter and Sam’s Club.
Walmart is ramping up its expansion plans for China, even while it intends to shutter numerous underperforming stores. In contrast to its growth strategy for the United States, the focus in China will be on its big-box formats: the Supercenter and Sam’s Club.
At a press conference here, executives revealed that the world’s largest retailer will open as many as 110 stores between 2014 and 2016, in addition to the 30 that have already opened this year.
"China is a key strategic market for Walmart, and we are very well positioned to serve the country’s emerging middle class with great products they can trust," said Walmart president and chief executive officer Mike Duke. "Our management team is committed to continued growth in large and smaller cities across China, and doing it in the right way. Our investments in new stores, innovation and retail supply chain will create jobs and support China’s plans for growth."
According to Greg Foran, president and CEO of Walmart China, the main vehicles will be the Walmart Supercenter and Sam’s Club. In fact, Sam’s Club development will be accelerated as part of the program. In the last year Walmart has opened two Sam’s Clubs, one in Suzhou and one in Hangzhou, bringing the total in China to 10.
While not giving a specific number, Walmart intends to open "several more" of the membership warehouse clubs in the next three years and beyond. According to Foran, the format is particularly well suited to China’s growing middle-income and higher-income segments and to deployment in China’s cities.
Foran also emphasized that Walmart’s focus will be on quality more than quantity. During Walmart’s recent annual analysts conference, Walmart International president and CEO Doug McMillon revealed that 50 underperforming stores would be closed in both China and Brazil, without breaking down the number by country. Walmart has closed 11 locations so far this year and plans to shutter another 15 to 30 over the next 18 months, Foran said. While that total represents around 9% of the total China store portfolio of 398, Foran pointed out that the closures would represent only 2% to 3% of the country’s sales volume.
In addition to store openings and closures, Walmart will remodel about 45 stores this year, 55 next year and 65 in 2015. The company will also bolster its logistics network with more distribution centers. It opened one new warehouse in Wuhan during August and will unveil another in Shenyang in November, with more planned for next year. By the end of next year the distribution network will enable all stores to have access to ambient and chilled distribution.
The quality and capacity of Walmart’s logistical base will assume greater importance as its next wave of expansion carries it further into China’s interior, into smaller tier-two, tier-three and tier-four cities.
Walmart is also looking to expand its e-commerce activity in China to supplement its store expansion plans. E-commerce is expected to grow by 32% annually between 2012 and 2015.
"Customers are using technology more, and especially here in China," said Duke. "We love customers to understand price and the safety of the product they’re purchasing. E-commerce is a great enabler, allowing Walmart to grow globally."
Duke added that Walmart’s online business grew about 30% during the first half of the current fiscal year.
"At the end of October 2012, Walmart China announced five strategic initiatives to strengthen the company’s business foundation," Foran concluded. "So far, progress has been made in building price leadership, simplifying business processes and enhancing our supply chain. We have improved our Supercenter merchandising system and extended the range of central procurement to achieve unified management in terms of categories, suppliers and merchandise assortment."
