Walmart’s mastery of brick-and-mortar retail depends largely on a peerless supply chain that enables its stores to sell Chinese-made goods to U.S. consumers on the cheap. But the company has struggled to score big in the Chinese market itself.
That could change soon, as Chinese consumers beset by a slowing economy start hunting for discounts. And no one does discounts better than Walmart. Chinese regulators this week approved Walmart’s plan to take a majority control of a major Chinese e-commerce site, giving the world’s biggest retailer a digital doorway into the homes of the world’s biggest country.
Walmart owns 370 stores in China under several different brands, including its signature Supercenters, as well as Sam’s Clubs and its smaller Neighborhood Market stores. The company rarely breaks out its sales figures country-by-country outside the U.S. but has said it brought in $7.5 billion from its then 329 stores in China, or a little less than $23 million per store. Walmart opened its first Chinese store, a Sam’s Club in Shenzhen, in 1996. By comparison, combined sales in Walmart’s more than 3,800 U.S. stores last year topped $264 billion, or nearly $70 million per store.
Walmart faces challenges in the Chinese market that simply don’t apply in the U.S., where the Bentonville, Arkansas-based chain enjoys almost-mythological status as the invincible low-price slayer of all competition, including mom-and-pop small businesses. In China, European and domestic retailers vie competitively with Walmart for the coveted Chinese consumer’s yuan. Walmart’s image took a hit when authorities in the city of Chongqing shut down several Walmart stores and detained dozens of employees over allegations the stores mislabeled conventional pork as organic. Foreign companies must also navigate a government bureaucracy that exists in part to keep non-Chinese businesses from gaining too much control over domestic markets.
But with its takeover of Yihaodian, an established Chinese online retailer of groceries and other everyday items, Walmart gains instant access to an established brand already well-known among China’s hundreds of millions of online shoppers. This access comes at a time when the number of Chinese consumers both shopping online and seeking bargains is spiraling upward. The vast ranks of China’s new middle class have spent the past few years displaying a nouveau riche disregard for price in pursuit of conspicuous consumption. But during the current slowdown, Chinese shoppers have quickly developed a taste for discounts. And if Walmart knows anything, it’s how to market lower prices.
To showcase that expertise in China, Walmart needs the internet. Despite the country’s speedy embrace of Western-style consumerism, the American way of shopping still hasn’t had as much time to make inroads. China’s factories might make the products that fill the shelves of the world’s chain stores, but the relative newness of both Chinese wealth and the country’s openness to Western franchises setting up shop means Chinese consumers have had less time to grow accustomed to the kind of big-box retail that has flourished in the U.S. since supermarkets began their march across the landscape in the 1920s. But since the internet makes where you are almost irrelevant to where you shop, price becomes the only real game in town.
Walmart plays that game better than anyone. As a result, the near future could see an American company that became one of the richest in the world by selling Chinese-made goods cheaply in the U.S. become even richer by selling those same cheap goods back to the people who make them.
No comments:
Post a Comment