Wal-Mart Stores, Inc. (NYSE:WMT) is now evaluating acquisitions that could help it expand into more Chinese cities. Walmart already has a strong network of stores n China’s major cities, but has not penetrated many of China’s secondary markets.
Tapping into these markets may prove essential, however, as they figure to be key areas of economic growth for the fast growing nation. Wal-Mart Stores, Inc. (NYSE:WMT) will also continue to build new stores and is aggressively working to build up its online store, Yihaodian, which has more than doubled its user base in the last year alone.
China is home to more than 1.2 billion people and its middle class is among the fastest growing and numerically largest in the world. The high levels of discretionary income currently enjoyed by China’s middle class is enticing for any retail company. Still, many Chinese consumers prefer to shop at traditional mom and pop stores or higher end luxury Western brands.
Wal-Mart’s business model can work in places like China
There are questions about whether Wal-Mart Stores, Inc. (NYSE:WMT)’s business model can work in places like China. Walmart has traditionally relied on cost advantages to beat out its competitors. Shoppers across Asia, however, often expect Western brands to offer higher quality products and a better shopping experience, not necessarily the lowest prices. Walmart’s stores in China and across Asia have been criticized for not being as nice as foreign and domestic rivals.
Wal-Mart Stores, Inc. (NYSE:WMT) believes that its strategy can work in places such as China, however, even in the face of strong headwinds. The company is working to ensure that it has the lowest prices on key products in any local market it enters. By doing so, the company feels that customers will eventually come to appreciate the stores’ low prices and recognize Walmart as the cost leader.
Wal-Mart Stores, Inc. (NYSE:WMT) is also involved in several other Asian markets. Its stores in Japan have been growing for the last 4 years, and while they are nowhere close to dominating the market, they are working to build new stores. Perhaps a bit ironically, Walmart has been especially successful in the last few years, which has seen a marked increase in people struggling economically. As more Japanese join the ranks of the working poor, Walmart is one of the biggest benefactors because its cot advantages suddenly look very appealing.
Wal-Mart Stores, Inc. (NYSE:WMT) has been one of the most important companies in terms of linking Western buyers with Asian manufacturers. People across North America and elsewhere have bought trillions of dollars’ worth of Asian manufactured goods through the store brand over the last several decades. Now, Walmart is hoping to become an important local player by connecting Asian consumers themselves with low cost goods.
Wal-Mart presented its current vision to world leaders
Wal-Mart Stores, Inc. (NYSE:WMT) is also using an aggressive PR and CSR campaign to build up its image throughout the region. While the recent APEC summit was dominated by politicians and business leaders, Walmart presented its current efforts vision to world leaders. Beyond continued expansion of stores, Walmart has claimed that it will help train women, support efforts to develop sustainable energy, donate food to needy communities, and numerous other things.
Not every effort at expansion has panned out as planned in Asia. For example, Walmart has been in a joint venture with the Indian firm Bharti and has built up a network of wholesale warehouses. The warehouses themselves seem to be doing well enough in the complex and difficult to navigate Indian market, and it was assumed that Bharti would be a natural partner for Walmart’s efforts to expand to more traditional stores.
Bharti and Wal-Mart Stores, Inc. (NYSE:WMT), however, recently announced that the two will not be forming a partnership to expand to traditional stores and that Bharti is actually looking to exit its joint venture. The exact reasons for the cooling relations between the two companies are not known. It appears, however, that the future ambitions of both companies simply do not match up.
Asia will be a key source of growth for Wal-Mart
Either way, Asia will be a key source of growth for Wal-Mart Stores, Inc. (NYSE:WMT). With traditional markets such as the United States already being fully tapped and economies stagnant across the West, Walmart must look for new sources of growth. Asia, which is home to billions of people and many of the world’s fastest growing economies, represents one of the richest prizes. Wal-Mart Stores, Inc. (NYSE:WMT) may be able fuel corporate revenues and profits to new heights if it can figure out how to navigate local regulations and consumer preferences.