Walmart rolls out robust expansion program

Company plans to open several Sam's Clubs, 28 more supercenters in China

The world's largest retailer by sales, Wal-Mart Stores Inc, will open approximately 30 retail stores and additional distribution centers in China this year after shuttering several underperforming stores.

The new stores will comprise 28 supercenters and two Sam's Clubs. Supercenters will continue to open in first- and second-tier cities, such as Shanghai, Changchun of Jilin province and Wuhan of Hubei province, but also in lower-tier cities, including Fuyang of Zhejiang province and Xingtai of Hebei.

The strategy will allow the company to better serve emerging groups of customers created by the country's ongoing urbanization, according to Walmart.

Its two new Sam's Clubs - Walmart's high-end membership format - are in Wuhan, Hubei province, and Changzhou in Jiangsu province. In fiscal 2014, which ended on Jan 31, 12 new warehouse stores opened, with net sales increasing 1.3 percent to $57.2 billion.

Sean Clarke, Walmart China's incoming president and CEO, said that Sam's outlook is promising, and since this business model is especially relevant to burgeoning middle-income and upper-income consumers, and many Chinese cities are well-suited for this format, the growth of the Sam's Clubs in Walmart China's portfolio should remain strong for years to come.

Clarke said this year that Walmart will focus on long-term investment and steady, quality growth.

"To do this, we are optimizing our operations in China, investing in more stores and distribution centers, enhancing operational efficiency to lower our costs, improving price leadership while ensuring product safety and quality, and helping our customers save money so they can live better," he said.

Last October, Walmart announced plans to accelerate development in China by opening up to 110 new facilities between 2014 and 2016, including stores and distribution centers.

Walmart also plans to invest 580 million yuan ($93 million) in improving the quality of more than 55 existing stores through a robust remodeling program, expanding remodels to 31 and 45 stores in 2012 and 2013, respectively.

Clarke also announced that Walmart will invest in the expansion of its logistics network in China. "A highly efficient supply chain is the foundation of a successful retail business, and our customers will benefit from improved quality assurance and food safety, reduced costs and better in-stock" merchandise, he said.

Walmart China currently operates more than 400 stores. Walmart is closing five stores in China this year as it seeks to reposition itself for a challenging market. According to Zhang Xuejing, media director for the company in China, "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."

According to a ranking of fast-moving consumer goods retailers in China released by the China Chain Store and Franchise Association, Walmart stood at third place, after only China Resources and RT-Mart of Sun-Art group, with sales up 24.5 percent despite its new stores increasing by only 3 percent.

The latest move demonstrated its commitment to improving its market position, said Jason Yu, general manager of Kantar Worldpanel China, who added that Walmart now lags behind the CRVanguard/Tesco alliance and Sun-Art group.

According to Kantar Worldpanel, the market share of retailers is highly correlated with the number of shoppers a retailer can access. Over the 12 weeks ended March 21, Walmart saw fewer shoppers than Sun-Art group.

Yet Yu added that the latest expansion, as well as the renovation investment, showed the retailer is determined to expand its footprint as well as improve shopper loyalty though a better customer shopping experience.