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Will Walmart’s Omni-Channel Strategy in China Work?

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Recapping Walmart’s recent international performance

Walmart (WMT) has operations in the US and 27 other countries around the world, and it operates e-commerce sites in 11 countries.

At the end of March 2016, the company operated 6,286 stores in international (EFA) markets. Mexico, Canada, China, the UK, and Brazil rank in Walmart’s top five international markets.

In fiscal 1Q17, Walmart reported positive comps growth in constant currency terms in ten of 11 markets, with the UK being the exception. Nine of these markets reported comps growth exceeding 4%.

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The UK supermarket industry has faced deflationary conditions for the last several years, brought about largely by the market share gains of discounters Aldi and Lidl.[1. Kantar Worldpanel] At its 2016 shareholders’ meeting, Walmart’s (WMT) management also discussed the performance and prospects of its international segment.

China strategy

Walmart’s recent performance in China (FXI) has been challenged by high levels of competition from local supermarket groups like Sun Art and Vanguard, as have other international hypermarket chains like Carrefour (CRRFY) and Tesco (TSCDY). Market share losses have resulted for international retailers, as has a stake sale in the case of Tesco.

Walmart recently employed a retail reset strategy in China, closing underperforming stores and opening others in new locations. It’s also working on providing a better customer experience in fresh produce, meat, and seafood, a key traffic driver in China.

Warehouse club opportunity

However, Walmart is upbeat on prospects for this market, particularly the Sam’s Club warehouse format stores.

According to David Cheesewright, president and CEO of Walmart International, “The business is roughly 90%/10% Walmart stores to Sam’s Club. And in terms of where you would expect to see the growth from the future, the Sam’s Club format is very, very well suited to China.

“And you will have probably seen a couple of years ago we disbanded our regional real estate function and asked them to only work on one thing, which was a pipeline of store in Sam’s Club.”

Walmart is also looking at an encompassing omni-channel strategy for China, using Yihaodian, its e-commerce business, in China. We’ll discuss this in the next article.

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