Wal-Mart to add 110 stores in China as it closes underperforming outlets
The world's largest retailer is accelerating its expansion in the second-largest economy even as it faces intense competition from local chains
Wal-Mart Stores, the world's largest retailer, plans to add as many as 110 stores on the mainland over the next three years, while shutting some outlets and remodelling dozens more as it seeks to overhaul its business.
The retailer expected to shutter up to 30 underperforming outlets over the next 18 months, Greg Foran, its China chief, told reporters in Beijing yesterday.
Wal-Mart is closing less profitable stores and revamping business units on the mainland amid increasing competition from regional rivals Sun Art Retail and China Resources Enterprise. The US retailer has been battling setbacks in emerging markets including the end of a six-year partnership in India with local billionaire Sunil Mittal.
"China presents one of the biggest opportunities for us around the world to grow our stores and clubs, so it's really important," Doug McMillon, the president of Wal-Mart's international business, said yesterday.
The retailer cut its annual profit forecast in August after US shoppers' reluctance to buy more than the bare necessities hurt second-quarter sales.
International operations would be an area of growth for Wal-Mart, chief executive Mike Duke said at yesterday's briefing. He was among international executives who met President Xi Jinping this week.
Wal-Mart faced several hurdles on the mainland including intense competition from local chains and a lack of scale that made it harder to offer lower prices than wet markets, said Shaun Rein, the Shanghai-based managing director at China Market Research.
"They haven't been as quick to react to competition and local players are able to cater to customers' preferences faster than Wal-Mart," Rein said.
Sun Art is the mainland's largest hypermarket operator, with a 14 per cent share of the 574 billion yuan (HK$731 billion) industry last year, according to Euromonitor International. Wal-Mart and China Resources tied for second place with 11 per cent each last year.
The mainland's hypermarket industry is going through a wave of consolidation. Tesco, Britain's largest retailer, said this month it would pay US$558 million to merge its more than 130 stores on the mainland into a joint venture with Hong Kong-listed China Resources.
Wal-Mart plans to ramp up expansion in smaller cities outside Beijing and Shanghai. The company is also investing in distribution and will add a new centre in the northeastern city of Shenyang next month. It is also remodelling 45 mainland stores this year.
"We have supercentres and we have Sam's Club," McMillon said. "We'll be investing in both formats, as well as in distribution areas to help us improve in areas such as fresh food."