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Walmart to continue expanding in China

2013-10-25 10:36 Global Times Web Editor: qindexing

US hypermart retailer Walmart Stores Inc Thursday announced it will further its expansion in the Chinese market, in hopes of raising profitability in the country's competitive retail sector.

The company plans to open 110 new facilities, including stores and distribution centers in the following three years and put more efforts into its operations in second-, third- and fourth-tier cities in line with the central government's urbanization strategy, according to a press release e-mailed to the Global Times Thursday.

At a press conference held in Beijing Thursday, Greg Foran, chief executive of Walmart China, expressed his concerns over the challenges and fierce competition in China's retail industry but said that the company has strong confidence in the market.

In response to this, the company will reduce costs and shut down some unprofitable Chinese stores, accounting for 9 percent of the total amount, which is expected to be on a par with nearly 2 to 3 percent of turnover this year, said Foran.

Given that the domestic retail industry has been suffering from declining demand as a result of the economic downturn since 2011, many multinational retailers continued selling off or closing stores while competing with local retailers which are more experienced in logistics and marketing, said Yan Qiang, an industry analyst and partner with Beijing-based Hejun Consulting.

An October report by a Beijing-based market research firm China Nation Commercial Information Center indicated that the growth rate in turnover of 100 domestic major retailers fell in September to 6.7 percent from 8.8 percent in August.

Walmart's UK rival Tesco has closed five underperforming stores during the fiscal year which ended February 23, 2013.

The optimization of sales network is necessary, but Walmart also needs to tackle a fundamental change in the Chinese retail industry - consumers are more willing to shop on online stores like taobao.com due to affordable prices and convenience, Yan told the Global Times Thursday.

Walmart wants to gain profit from China's emerging e-commerce retail sector, which is expected to see 32 percent composite annual growth in the next two years, Reuters reported Thursday, citing from a US-based market consultancy Bain & Company.

The company now holds a stake of nearly 51 percent in a Chinese leading online shopping platform Yihaodian, which claims more than 20 million registered consumers.

By February 28, 2013, Walmart China was running more than 390 stores in over 150 cities around the country, according to the company's official website.

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