With Chinese economy and retail suffering a downfall, coupled with mediocre success with 400 stores, new stores may not prove to be the major source of growth.
Walmart Store, Inc. (NYSE:WMT) has committed to open around 115 new stores in China, including super-center and Sam’s Club formats, which will create around 30000 jobs in the process, mostly in second tier cities, such as Shenzhen, Changsha, Wuhan, etc.
Walmart’s CEO and global President, Doug McMillon, says that the move is not meant to become the largest in the country, but to be the most worthy and trusted. However, this decision looks questionable, given the ongoing slowdown in the Chinese economy, especially when the retail sales are flagging down at 0.7% for the recent quarter and 2.3% compared to a year ago. Given the US retail market nearing the point of saturation, China seems like the next ‘big bet’.
However, the retail superstore company is expected to face many headwinds, which seem to be more difficult to navigate than before. Since 18 years, when the company first set up a shop in the Asian giant, Walmart has only around 400 stores to its credit in the giant Asian nation, compared to more than 2000 in the US. The problem here is that, while Chinese consumers have a deep fondness for Western products, they have a different perception on retailers though.
That is because retailers tend to sell products not made by them – since there is no guarantee that whatever is sold in retail stores, be it local or Western, is actually produced from abroad. This is especially the case with many food safety scandals that have rocked many local Chinese food suppliers, such as chicken suppliers, unscrupulous beef, and tainted milk.
In addition, if history is anything to go by, Best Buy and Home Depot shuttled down their business, as the local shopping culture was not a point of pride as it is in the States. However, CEO McMillon has shown his fearless attitude by pledging to take the plunge by breaking away from traditional company tactics and do what fits best for the company’s operations in China. The fact that it has acquired Yihaodian.com, a local online retailers website, shows that its thinking is in the right direction. How the opening of the 115 stores in China will materialize is yet to be seen.
Meanwhile, the company has announced that it will hire around 350 workers at its new Walmart store in Estero, which is scheduled to open this summer, which was first talked about in 2003. Newly hired workers will begin working around July. Walmart stock price ended the day at $77.65, almost flat from the previous day.