Wal-Mart Stores Inc. global president and chief executive officer Doug McMillon on Wednesday reiterated the retail giant’s commitment to China, promising to build 115 new stores by 2017 and upgrade 50 stores this year.
“China is a key strategic market for Wal-Mart,” McMillon said at an event in Beijing. “Our aim is to become an integral part of China’s economic development, serving customers the highest-quality products, creating jobs and economic stimulus and working hard to build on our position as a trusted corporate citizen in China.”
The 115 new stores in China will include Supercenters and at least seven Sam’s Clubs, creating more than 30,000 jobs in Shanghai, Shenzhen, Changsha, Wuhan and other cities. The world’s largest retailer had more than 411 stores in China at the end of January.
McMillon said Wal-Mart will increase its investment in emerging cities to serve consumers emerging from China’s urbanization. The retailer will also strengthen its penetration in mature markets, he said.
Wal-Mart has invested 600 million renminbi, or $97 million at current exchange, to upgrade 90 units in China, and plans to invest more than 370 million renminbi, or $60 million, to remodel more than 50 stores this year.
McMillon said Wal-Mart is also supporting e-commerce in China through its 51 percent stake in Yihaodian, where it launched a hypermarket flagship. YHD.com has expanded delivery in China and grown the number of items it offers from 180,000 in 2011 to eight million last year. A hypermarket app is in the works.
McMillon said Wal-Mart is aiming to improve the safety and quality of the food it sells in China. Local authorities in Chongqing, China in 2011 accused the retailer of mislabeling food and closed stores and arrested employees, an offense for which the company was fined $421,000. McMillon said Wal-Mart will invest 300 million renminbi, or $48 million, in food-safety management.
“It’s strategic and synergistic moves meant to tie in to YHD for site-to-store potential,” Carol Spieckerman, president and ceo of Newmarketbuilders, said of Wal-Mart’s plans to open new stores. “They need more stores to realize the ship-to-store potential. But they won’t need as many stores as if they were solely relying on physical scale.”
Spieckerman also noted that “Wal-Mart can’t rest on its laurels in China and assume that a few hundred stores will do the trick when someone is a couple of deals away from opening enough stores to drown them out,” Spieckerman said, referring to competitors such as Aldi and Lidl.
The retailer will close an unspecified number of poorly performing stores in the country after shutting 29 outlets in China last year. Wal-Mart’s sales have slipped as retail in China has softened. However, the retailer said its market share grew there in the first two months of this year.
McMillon also addressed ongoing investigations by the company and the U.S. government into possible corruption and bribery in several countries. He said Wal-Mart is investing in systems and processes to improve compliance with the U.S. Foreign Corrupt Practices Act.
“Being compliant with the law,” McMillon said. “That’s a high priority for us.” For the year ended Jan. 31, Wal-Mart spent $173 million on investigations and compliance programs, after spending $282 million a year earlier.