Walmart’s announcement in late 2013 that it will open 110 new stores in China over the next three years reveals how the country's rapidly evolving retail industry continues to be a significant draw for foreign retailers. The announcement comes after the US retailer shut down a number of under-performing stores in China throughout 2013, and has also scaled down its operations elsewhere in Asia, including in India, where, in mid-2013, it dissolved its partnership with Indian conglomerate, Bharti Enterprises.
The company's decision to boost its presence in China forms part of a wider reorientation by the world’s largest retail company, to boost its revenues by focusing on China’s swelling middle-class consumers in the country’s inland cities. While Walmart has become a well-known name in the Chinese retail sector, most of the company’s stores remain clustered within the country's tier-one coastal cities. The company has now made a series of greenfield and brownfield investments, as part of a wider move to expand its stores across China’s tier two, tier three and tier four cities, in order to tap into the growing retail needs that accompany rapid urbanisation in these cities.
Jon Copestake, a retail analyst at the Economist Intelligence Unit, maintained that the Chinese retail market was “very competitive, very low-margin” for foreign companies, but said that the market still remained attractive as several inland cities have populations of more than one million people. “Chinese retail growth is still fairly strong,” said Mr Copestake.
One key difference that Walmart has been quick to capitalise on is the growth of China’s e-commerce market. According to a report by consultancy firm McKinsey sales from 'e-tailing' in China totalled $190bn in 2012, a figure that the firm predicts could climb to $650bn by 2020. Underlining the observation that China’s consumers shop differently to western consumers, Mr Copestake said that “in the UK and US… a lot of [online] purchases are non-food purchases”, whereas in China, a lot of people go online to shop for groceries that are usually delivered on the same day, “because they don’t have time to go grocery shopping”.
Tier-four cities across the country are expected to lead this growth in online grocery shopping, as McKinsey found that 27% of online shoppers in China’s tier four cities usually shop online for groceries that are delivered on the same day. As a result, the move by Walmart to acquire a controlling share in the Chinese e-retailer Yihaodian reveals how the retailer is working to capture market share in China’s retail industry through digital platforms.