Walmart closes outlet amid difficulties in China

The world's largest retailer, Walmart Stores, on Wednesday closed an outlet in east China's Hangzhou city, in its seventh closure in the Chinese mainland since March.

The store near the Zhaohui neighborhood was shut down because of its "unfavorable operating performance," said Li Chengfang, regional public relations director of Walmart China.

"Closing an outlet in China is a tough decision. We tried our very best to avoid the closure," he said.

Greg Foran, president and CEO of Walmart China, said in October that Walmart would close 9 percent of nearly 400 outlets in China, which contributed just two to three percent of sales revenue to the company.

Meanwhile, the next three years would see the retailer open 110 outlets mainly in small and medium-sized cities.

Walmart is not the only retailer closing outlets in China. According to the statistics of the Linkshop, a portal website for China's retail industry, 31 foreign-funded stores were closed last year, including 14 of Walmart and three of Tesco, the world's third-largest retailer.

Business insiders believe increasingly fierce competition from domestic retailers is one of the reasons for the closures.

Near the Walmart Zhaohui Store in Hangzhou are grocery stores and domestic supermarkets, such as Century Mart Citylife and China Resources Vanguard.

Compared with these stores, the Walmart outlet was old-fashioned in appearance and not attractive in prices, either, said Yao Li, a resident living near the Walmart Zhaohui outlet.

The popularity of online shopping has also affected high-street sales, but the overall business slowdown is the fundamental reason for difficulties experienced by international retailers like Walmart.

"The profit margin of the retailing industry is less than 10 percent, and rising costs have made business even harder," said a manager of Walmart China, who declined to be named.

On the other hand, a series of scandals connected with Walmart was believed to have affected its reputation, although the company said it was suppliers that had provided defective commodities.

In the latest case, Walmart recalled donkey meat from some Chinese stores after tests found traces of foxes' DNA in an outlet in the eastern Shandong Province in January.

Media reports said the retailer had been fined more 9.8 million U.S. dollars as penalties by Chinese authorities over the past three years for selling shoddy goods, but director Li Chengfang did not confirm the figure.

To prevent cases like that, Li said the company had tightened up supplier selection, designating only the Shenzhen headquarters in China to find commodity suppliers.

Zhang Handong, head of the Zhejiang Academy of Commerce, said international retailers' closure of outlets is a practical market strategy.

"Both foreign and domestic retailers are facing the difficulty of increasing costs. Taking such problems into consideration, government authorities should lower administration costs as well as taxation to help enterprises with their development," he said.