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Wal-Mart in China - Refocuses Strategy on Affluent Consumers with Sam’s Club
1st January 2014
Wal-Mart - the world's biggest retailer - has struggled to establish itself in China. However, the world's second-largest economy must still remain an attractive and strategically important opportunity for Wal-Mart, particularly given its need to find better growth and returns to offset maturing performance in the US.This FT article (and accompanying video below) describes how Wal-Mart is is refocusing its growth strategy in China by using its Sam's Club chain to target affluent Chinese consumers in the main Tier 1 and Tier 2 cities.
Wal-Mart already operates 400 traditional supermarket stores in China. However, it recently announced plans to close a number of those stores due to losses. Wal-Mart has admitted to a hasty approach to expansion in China which has led to poor returns.
The Sam's Club format is quite different. If you have shopped at Costco in the UK then you will be familiar with the concept of a warehouse-style membership club.
Like Costco (the world's leading warehouse wholesaler) Sam's Club sells most of its merchandise in bulk and directly off pallets. The clubs are arranged much like warehouses, with merchandise stocked in warehouse-style steel bins.
Customers visiting Sam's Club come infrequently (typically once or twice a month). However, they come to shop big, often buying all they need for the weeks ahead.
This format therefore plays to one of the most important social and economic changes in China in recently years - the growth of car ownership.
As this article on CNN reports, every two seconds, somewhere across China a customer takes delivery of a new car -- part of a consumer buying blitz that will see China add 21 million new cars, trucks and buses to its fleet total in 2014.
Wal-Mart has opened 10 Sam's Club locations in China, targeting the increasing number of affluent, car-owning consumers living in or near Tier 1 and Tier 2 cities like Beijing, Shanghai and Shengzhen. From the video it looks like the format is proving successful with Chinese consumers. Has Wal-Mart finally found a winning formula in China?