Wal-Mart said mix of investment and closures would help it grow in China

Wal-Mart said mix of investment and closures would help it grow in China

Wal-Mart Stores has outlined plans to open stores and distribution centres in China over the next three years - after saying last week some existing outlets in the country would close.

The world's largest retailer said it would develop further in China's tier-two, tier-three and tier-four cities as the country's urbanisation continues. The new outlets would focus on Wal-Mart's supercentres and Sam's Club warehouse stores. It also plans to open more distribution centres in the country.

Last week, Wal-Mart said it would shut around 50 under-performing stores in Brazil and China.

"China is a key strategic market for Walmart and we are very well positioned to serve the country’s emerging middle class with great products they can trust," Wal-Mart president and CEO Mike Duke said today (24 October). "Our management team is committed to continued growth in large and smaller cities across China, and doing it in the right way.

Greg Foran, the head of Wal-Mart's business in China, said the country's retail sector had "faced challenges" in 2013.

However, Foran said the retailer would be "upgrading" the products it sells in China, "especially in fresh food and grocery".

Foran said the stores and distribution centres to be opened equated to "110 facilities". He also defended the retailer's decision to shut some existing outlets.

"These closures represent up to nine percent of our total store portfolio, but only two to three percent of our total sales volume through next year. Taking this action is appropriate and enables us to continue to grow in China," he said.

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BEIJING, Oct. 24, 2013 /PRNewswire/ -- During a visit to Beijing today, Wal-Mart Stores, Inc. president and CEO Mike Duke and Walmart China president and CEO Greg Foran told reporters that over the next three years, Walmart will accelerate development in China by opening up to 110 new facilities. The plan calls for developing further in tier-two, tier-three and tier-four cities, and will create nearly 19,000 new retail jobs, all to better serve emerging groups of customers created by the country's urbanization.

"China is a key strategic market for Walmart and we are very well positioned to serve the country’s emerging middle class with great products they can trust," Duke said. "Our management team is committed to continued growth in large and smaller cities across China, and doing it in the right way. Our investments in new stores, innovation, and retail supply chain will create jobs and support China’s plans for growth."

Greg Foran, Walmart China president and CEO,also emphasized that Walmart's focus in China in the future is investment and development, and stressed that quality should take precedence over quantity as the company grows in China.

"In 2013, the retail industry faced challenges and strong competition, but Walmart's confidence in the Chinese market has never been stronger," Foran said. "We adapt to market changes by making adjustments and innovations, and we will modify our operations in China by upgrading the merchandise we sell, especially in fresh food and grocery. We will improve operations and customer experience, establish best-in class food safety practices, and eliminate unnecessary costs in order to build an even stronger business."

Foran outlined Walmart's business plan in China for the next three years, saying the company will focus on the following expansion strategies:

-- Open more stores, including in tier-three and tier-four cities: Walmart plans to open up to 110 new facilities from 2014 to 2016. Foran said the primary focus of this expansion will be on Walmart Supercenters and Sam’s Clubs.

-- Accelerate the development of Sam’s Club: Walmart opened two Sam's Clubs in Hangzhou and Suzhou this past year, bringing the total number of Sam's Clubs in China to 10, and hopes to open several more in the next three years. Foran said that Sam's outlook is promising, that this business model is especially ripe for the burgeoning middle-income and upper-income consumers, and because many cities are well-suited for this format, the growth of the Sam’s Clubs in Walmart China’s portfolio will be strong for years to come.

-- Improve the quality of older stores through a robust remodeling program: According to Foran, Walmart's remodeling plan aims to remodel about 45 stores this year, 55 next year and 65 during the following year. Remodeling existing stores is intended to improve store operations and customer in-store experiences by optimizing the sales floor, improving parking and access as well as increasing the energy efficiency of facilities.

-- Invest in more distribution centers as a long-term strategy and enhance the strength of the logistics network: Walmart opened a new distribution center in Wuhan in August, next month a new distribution center will open in Shenyang, and the company plans to open more over the next year. By end of next year, all stores will have access to ambient and chilled distribution network. Customers will benefit from this network with improved quality assurance and quality control, reduced cost, better in-stock, and improved food safety, Foran said.

"While we undertake these expansion plans and open up to 110 new facilities, we have announced that we will close some non-performing stores where needed," said Foran. "These closures represent up to nine percent of our total store portfolio, but only two to three percent of our total sales volume through next year. Taking this action is appropriate and enables us to continue to grow in China."

"At the end of October 2012, Walmart China announced five strategic initiatives to strengthen the company's business foundation," Foran added. "So far, progress has been made in building price leadership, simplifying business processes and enhancing our supply chain. We have improved our supercenter merchandising system and extended the range of central procurement to achieve unified management in terms of categories, suppliers and merchandise assortment. All of these efforts are resulting in higher quality and safety standards, better service and ultimately lower costs, which will enable Walmart to reduce to prices of goods to customers, and help us deliver on our core mission to save people money so they can live better."

Original source: Walmart China