Introduction
Walmart is one of the largest multinational retail corporations and the world’s largest company by revenue. It operates in twenty-six countries outside of the United States, with the Chinese market being one of the primary focuses for the company’s expansion since 1996 when Walmart opened its first hypermarket in Shenzhen (Walmart China, 2019). This paper aims at studying Walmart’s operations in China, the corporation’s reasons for entering this market, and future perspectives.
Walmart’s Entry into the Chinese Market
Walmart started operations in China at the end of the twentieth century, being one of the first American retailers to enter the emerging Chinese economy. As stated on the official website, the reasons for this entry was the company’s belief in the prospects of the Chinese economy and opportunities that the Chinese market has to offer (Walmart China, 2019). Among the possibilities were prospects of a new emerging market, a vastness of the market for traditional and online commerce, infrastructure development, and technology, as pointed out in 2006 and 2009 (NBC Television, 2006; McKinsey & Company, 2009). Thus, over the years, Walmart has managed to establish operations in the new market, adapt to unique circumstances, and form meaningful relationships with customers and local businesses.
The Advantages of Joint Partnerships with Chinese Developers
Walmart has gained several advantages by forming joint partnerships with Chinese developers. Among the recent measures was the 2016 partnership with JD.com to improve its e-commerce strategy (Shieber, 2018). This step aimed to challenge the retail dominance of Alibaba, the largest online retailer in China. Moreover, it allowed to provide customers with the cutting-edge shopping experience and implement innovations which are nowadays deemed as main success-factors.
In 2018, this cooperation was extended to the grocery business, which allowed consumers to place an order through the WeChat app and get their food delivered within 30 minutes. Specialists note that this venture helped Walmart “downsize its stores and move more of its inventory online” (Chu, 2020, para. 8). Apart from these practical advantages, partnering with local developers allows the global company to acquire the necessary local perspective.
Moreover, recently, it was reported that Walmart’s e-commerce sales have been strong. They have seen a 104% increase in the second quarter of 2020 (Lerner, 2020). This achievement coincides with the conclusions made by Collinson and Liu (2017), who state that partnerships of foreign multinational firms and local businesses generate superior innovation performance. All these facts prove Walmart’s partnership strategy’s success and provide the basis for optimism for the future.
Walmart’s Bet on China
Almost 25 years after its entry into the Chinese market, Walmart still considers it the most prospective market. Despite the criticism of its failure to cater to the Chinese consumer and missing out on developing effective business strategies, the retail giant still considers China as its primary focus (Jacobs, 2017; Walmart China, 2019). There are currently more than 400 retail centers and 20 distribution centers in more than 180 Chinese cities (Walmart China, 2019). Even nowadays, when “China’s huge economy is cooling”, Walmart is still planning to expand and open 500 new stores in China over the next years (Pham, 2019, para. 3). The reasons for this determination to repeat the American success are more or less the same as they used to be when Walmart just entered the Chinese market.
China continues to be one of the most prospective markets that are constantly growing, providing multiple opportunities for retailers. It is the world’s second-largest market and the largest exporter by value (Silver et al., 2019). Therefore, succeeding in this scene would mean great success for Walmart. Being already established in the Chinese market and adapting to its requirements would be immensely useful for further development.
Conclusion
Being drawn to the Chinese market by its vast prospects and perspectives, Walmart has managed to build an efficient retail chain. Despite the drawbacks and difficulties that the company had to overcome in the past, Walmart has made significant progress by partnering with local businesses and keeping up with market innovations. This would potentially allow Walmart to expand even more and gain success in the world’s second-largest market.
References
Chu, F. (2020). US retail giants invest in strategic partnerships. SmartBrief.
Jacobs, C. (2017). Why major American corporations have struggled in China: Walmart. ReadWrite.
Lerner, S. (2020). Walmart’s e-commerce strategy pays off big in China. Capital Watch.
McKinsey & Company. (2009). China’s retail revolution: An interview with Wal-Mart’s Ed Chan.
NBC Television. (2006). Shanghai / Walmart takes on China.
Pham, S. (2019). Walmart is doubling down on China with 500 new stores. CNN Business.
Shieber, J. (2018). Walmart brings its partnership with JD.com into the food business. TechCrunch.
Silver, L., Devlin, K., & Huang, C. (2019). China’s economic growth mostly welcomed in emerging markets, but neighbors wary of its influence. Pew Research Center.
Walmart China. (2019). Walmart China Factsheet. Web.