Walmart accelerates China expansion

Walmart plans to add 115 new stores in China over the next three years, increasing its presence in the country by more than a quarter even as many of its international rivals scale back or withdraw from the difficult market.

"China is a key strategic market for Walmart," Doug McMillon, Walmart global chief executive, said in Beijing on Wednesday. "Our goal is not to be the biggest retailer in China, we want to be the most trusted retailer."

Like its domestic and international competitors in China, Walmart has struggled to make money in an immature market that faces stiff competition from burgeoning ecommerce services, led by the likes of New York-listed Alibaba.

It has also been hurt by several food safety scandals in China, where toxic and adulterated consumer goods are commonplace.

Walmart itself is trying to expand into ecommerce through its 51 per cent stake in Chinese online retailer Yihaodian and Mr McMillion said the company planned to better integrate that business with its existing stores.

For many years, the company procured the bulk of the products it sells globally from China but more recently it has tried to focus on selling to the rising Chinese middle class.

The company opened its first stores in China 19 years ago, and operates 412 stores in 165 cities.

Mr McMillon said it would add 115 new stores by the end of 2017 and also invest more than Rmb370m ($47.7m) this year on remodelling and upgrading 50 existing stores.

In an attempt to deal with recurring food safety issues in China, Walmart announced a Rmb300m investment in food safety management in the country last year.

The plan included various levels of audits as well as DNA tests on meat products to make sure that meat from rodents and other animals is not passed off as lamb, pork, beef or other foods.

While several of Walmart's international competitors have scaled back or quit the Chinese market, the retailer's executives said they were confident that the company can be successful in the world's most populous nation.

They quoted Nielson's data that they said showed Walmart's hypermarket share in China increased for eight consecutive quarters to the end of 2014.

In February, the company said its net sales in China fell 0.7 per cent in the quarter ended January 31, while same-store sales contracted 2.3 per cent in the same period.

Walmart is one of many foreign grocers struggling in China. Tesco, the UK chain, failed to make it alone in the country and was forced into a joint venture with China Resources Enterprise in 2013. Trying to turn round Tesco's business has depressed CRE's profits since then.

In the past few years, big grocery chains in China such as Tesco, Walmart and Carrefour have struggled with increasing competition, rapidly changing consumer tastes and the rise of online grocery sales.

Sales at Chinese hypermarkets grow 6.7 per cent in 2014, year-on-year, while online grocery sales rose 49 per cent, according to a report by OC&C retail consultants in Shanghai. OC&C said most of the growth in hypermarket sales came from new store openings.

"Consumer spending power in China is rising at about 10 per cent per year and tastes are changing, keeping up with that for retailers is tough, and there is increasing competition with each other," says Matthew Crabbe, China retail analyst at Mintel.

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