Wal-Mart Is Laser Focused On Its Growth In China

by Trefis Team
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Wal-Mart
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Wal-Mart (NYSE:WMT) is focused on strengthening its presence in China, the second largest economy and most populous country in the world. Despite having a presence in China for over a decade and some recent setbacks over food, Wal-Mart continues to expand its footprint in the region. China’s grocery retail market is expected to reach ~$1.5 trillion in 2015, according to the Institute of Grocery Distribution. [1]

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A Special Approach to China

Wal-Mart entered China in 1996 and currently has about 370 stores in the region. Expanding and establishing a dominant presence in China has been an uphill task for retailers given the country’s large size and the vast differences in consumer preferences among various regions, making localization of products imperative. However, Wal-Mart hasn’t given up on China just yet. The company continues to grow stores rapidly and continues to improve its supply chain. The company is increasingly focusing on lower tier cities where it believes urbanization will drive economic growth even faster than the more established cities.

In addition to its brick and mortar strategy, Wal-Mart is also focused on increasing its share of the Chinese e-commerce market. According to consulting firm AT Kearney, China’s e-commerce sales are expected to increase from $23 billion in 2011 to $81 billion in 2016. [2]

In February, Wal-Mart took a majority stake in the Chinese e-commerce firm Yihaodian. Yihaodian runs logistics centres in many major markets in China and offers same day deliveries in these markets. Through its stake in Yihaodian Wal-Mart will be able to coordinate online and brick and mortar purchases.

Wal-Mart’s proactive initiatives suggest a good future for the company in China. The company still has a long way to go in China and continues to face stiff competition, however, if it is successful with its efforts, it could have a major impact on its profits and thereby its stock price.

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Notes:
  1. See: Wal-Mart to Work Harder on Growth in China, Wall Street Journal []
  2. See: China leads ecommerce growth charts, Warc []
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