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Wal-Mart Outlines China Expansion

The planned expansion and investment are part of a three-year initiative unveiled last October.

SHANGHAI — Wal-Mart China is opening 30 stores and more distribution centers in the country in addition to investing 580 million yuan, or about $92 million, to renovate 55 existing stores this year, the company said Tuesday.

The expansion and investment are part of a three-year plan unveiled last October. The renovation of existing locations will “enhance store operations and optimize customer experience,” the U.S. retailer said.

Last fall, Wal-Mart Stores Inc. revealed plans to open up to 110 new stores and distribution centers by 2016 in China. The stores will include Wal-Mart Supercenters and Sam’s Clubs. The company said its Supercenters would not only open in first- and second-tier cities but also start to expand into third- and fourth-tier ones. It will open Supercenters in Fuyang, Zhejiang Province near Shanghai and Wenshan in the southern province of Yunnan, for example. Sam’s Clubs will be built in Wuhan, a massive city in China’s interior, and Changzhou in Jiangsu Province.

“Thirty quality stores is very solid progress and reiterates we are well on track to meet the 110 stores in three years that we announced last October,” a spokesman for the company said.

The world’s largest retailer said its renovations and expansions “better serve emerging groups of customers created by the country’s urbanization.” Over the next decade or so, China is planning to move 250 million rural residents into newly constructed cities and towns, representing the largest rural-to-urban migration in human history. Wal-Mart China aims to tap into the needs of the impending segment of new consumers.

Renovations of stores will include better layouts, improved customer flow, repairs and equipment updates and improved parking, the company said, adding that it would also invest in the expansion of its logistics network. “A highly efficient supply chain is the foundation of a successful retail business, and our customers will benefit from improved quality assurance and food safety, reduced costs and better in-stock,” said Wal-Mart China’s incoming president and chief executive officer Sean Clarke.

Wal-Mart China operates more than 400 stores and has upwards of 90,000 employees in China. The retailer, which has been working over the past few years to optimize business processes and operating efficiency, has faced a number of challenges in the China market ranging from quality control of products to new competition from homegrown competitors and leadership issues.

Earlier this spring, Greg Foran, who was named president and ceo of Wal-Mart China in February 2012, was chosen to head the retailer’s Asian division, which has faced weak performance with store closures and waning sales. He succeeded Scott Price, who returned to the company’s headquarters in Bentonville, Ark. Foran in turn was succeeded by Clarke as head of the China operations. Clark previously was chief operating officer of the division.

Price stepped in as interim president and ceo after Ed Chan, president and ceo of Wal-Mart China, resigned in the wake of a food-labeling scandal in 2011. The company’s senior vice president for human resources in China also resigned that year. The company said Chan left for “personal reasons.”

Between 2011 and 2012, Chinese food regulators slapped Wal-Mart China with a litany of violations surrounding the safety of the products on its store shelves. Officials alleged the retailer was selling ordinary pork as fraudulently labeled organic, which resulted in the detention of employees in one of its stores in Chongqing, a city in southern China, and the closure of more than a dozen stores. Later, regulators claimed they found dangerous chemicals in squid and sesame oil in Beijing.

The competitive landscape has also changed. Local chains have upgraded infrastructure, and, given the high-profile food scandals that have battered Wal-Mart in recent years, have potentially become more trusted by Chinese consumers. Analysts have said that Wal-Mart will continue to face more scrutiny by Beijing because of the fact that it is a foreign company and thus held to more rigorous standards than domestic firms.