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Walmart in Shanghai

Since entering the market in 1997, Walmart has grown both its sales and store base in China at

over 40% a year. After turning its first profit in 2009, Walmart China stands as a huge growth

opportunity for the company. With 96% of the store base and even more of the revenue, it is an

understatement to say that hypermarkets are their dominant format in the country. Walmart

currently has 319 hypermarkets operating under the Walmart and Trust Mart banners that

average 20-25 thousand SKU’s and 90 thousand square feet – about half the size of their

western counterparts. The stores target A,B, and C urban households, making them perfectly

positioned for the booming Chinese middle class.

Walmart International Conference for Investor Community

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RNG recently visited China and a Shanghai Walmart. See the full store tour here [S] and over

20 other recent Chinese store tours here [S].

Key Points to Consider

Marketing & Merchandising

Fresh Food & Local Chinese Flavor

Marketing & Merchandising

Similar to most stores in China, Walmart’s hypermarkets provide ample opportunity for

promotion, with many large brands featured in eye-catching displays.

Walmart – Shanghai, China

Brands are also heavily promoted through demo stations, pallets, and end caps, with no split

end caps. Curiously though, there is hardly any vendor signage other than on display.

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Walmart – Shanghai, China

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Walmart is pushing their Great Value private label in food, however, with the entry wall

dedicated to it.

Walmart – Shanghai, China

Pricing is EDLP, with single price point bins and displays across the store in both food and non-

food.

Walmart – Shanghai, China

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Fresh Food & Local Chinese Flavor

As discussed in RNG’s recent article on a City’super in Shanghai, having a solid fresh food

offering is extremely important for retailers in China. This is perhaps the most important thing to

get right in order to bridge the gap from wet markets to modern trade.

Hypermarkets in China serve as an introductory format for many to modern trade, appealing to

people in the middle class who want to demonstrate that they do not have to shop at wet

markets.

Walmart recognizes the importance of food, and fresh food in particular, making it the most

impactful area in this store. The store has local Chinese foods that one would find in a wet

market, but in a cleaner, packaged environment.

Walmart – Shanghai, China

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Walmart – Shanghai, China

The store features several bulk food bins, with consumers being able to choose their own

portions as they are accustomed to.

Walmart – Shanghai, China

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Other than the name of the store, Walmart does not do much to promote the fact that it is an

American company. Many signs are strictly in Chinese, with English being in small subtext on

others.

Walmart – Shanghai, China

Conclusions & Implications

Passing Japan in GDP in 2010, China has established itself as the economic hot spot in the

world. This growth, in addition to a rapidly growing middle class and an under-developed

modern retail market, poses China as an unbelievable growth market for all large-scale retailers

and brands.

Currently, the most successful approach for mass merchants entering China has been to use

hypermarkets to anchor large shopping centers, guaranteeing solid foot traffic. Going forward,

Walmart has a solid build out plan in place. They will begin to target tier 2 and 3 cities in addition

to tier 1 and use their hypermarkets to attract the growing middle class. Given their strong

foothold, Walmart could easily become the number one retailer in yet another market.

Visit retailnetgroup.com for more recent research on China and Walmart and stay tuned for

more to come.

As always we appreciate your comments and feedback

Let us know what you think!

Nate Holmes Research Analyst RetailNet Group nate@retailnetgroup.com