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Wal-Mart closing outlets to meet market

2014-03-25 15:53 China Daily Web Editor: qindexing
A Walmart stores is shown in Yichang, Hubei province, last October. Liu Yunfeng / For China Daily

A Walmart stores is shown in Yichang, Hubei province, last October. Liu Yunfeng / For China Daily

Wal-Mart Stores Inc is closing five more stores in China this month as it seeks to reposition itself for a challenging market.

Earlier this month, the United States-based company, the world's largest retailer by revenue, closed an outlet in Chongqing municipality and one store each in Yancheng, Jiangsu, and Changde, Hunan.

By the end of this month, two stores in Ma'anshan, Anhui province, will also be closed.

Zhang Xuejing, media director for the company in China, said: "As part of this store closure plan, we have announced that we will close some nonperforming stores where needed.

"We sincerely regret any inconvenience caused by this. This is to enable us to continue to grow in China with more quality stores.

"These closures represent up to 9 percent of our total store portfolio, but only 2 to 3 percent of our total sales volume through next year."

Last year, the retailer said it will continue expanding in China and open up to 110 new facilities over the next three years.

But it also stressed that quality should take precedence over quantity.

The new facilities include hypermarkets and Sam's Club outlets, as well as distribution centers.

It also plans to build an "efficient supply chain" over the next three years.

The company has remodeled about 45 stores this year. It will remodel 55 this year and 65 next year.

Walmart said employees at stores that are being closed will be offered the chance to relocate to other stores, with salaries "adjusted to match the income level" of the new city.

Jason Yu, general manager of Kantar Worldpanel China, said the company is just one of many international retailers in China that are under mounting pressure from local competitors and expanding e-commerce.

For example, France-based Carrefour SA, the world's second-largest retailer by revenue, has slowed its pace of expansion in China.

Yu said it is normal for Walmart to close some stores to bring its retail operations in line with its logistics and supply chain systems.

The fast expansion of Walmart in recent years has been partly the result of a move in 2007, when it bought a 35 percent stake in hypermarket chain Trust-Mart, which has 353 stores on the Chinese mainland.

But integrating those stores has posed many challenges, because many of the outlets don't mesh with Walmart's strategy or aren't profitable, said Yu.

Moreover, the strength of Walmart in its home market in the US is "everyday low prices". But that hasn't been so successful in China, where most retailers are constantly competing on price, said Yu.

According to Kantar Worldpanel, many Chinese retailers have been able to expand beyond their core areas at a much quicker pace than the international players, which could significantly change the retail landscape in the coming years.

The largest hypermarket operator in China by sales, the Sun-Art Retail Group Ltd, has seen strong share growth, driven by the opening of 45 new RT-Mart stores during 2013.

The retailer now has 264 stores across China, according to Kantar Worldpanel.

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