Wal-Mart to open 30 stores, upgrade 55 outlets this year

Wal-Mart China announced on Tuesday it will open more stores and distribution centers, and invest in upgrades for current outlets this year.

It will open 30 new stores and also invest 580 million yuan ($93 million) to upgrade and remodel 55 existing stores in the country this year to enhance store operations and optimize customer experience, the company told the Global Times in an e-mail on Tuesday.

The announcement comes before Sean Clarke, incumbent chief operating officer in China, takes over the China CEO role on June 1.

With over 400 stores in China, Wal-Mart said the expansion is part of its three-year growth plan announced last October, in which it vowed to open up to 110 new stores from 2014 to 2016, while shutting down underperforming stores which account for about 9 percent of its total number of stores.

"The expansion shows that the retailer giant is still confident about the Chinese market despite a slowdown of the retail business in China," Yan Qiang, a partner with Beijing-based Hejun Consulting, told the Global Times on Tuesday.

Burgeoning domestic e-commerce retailers including Alibaba and jd.com have taken a large chunk of the market by diverting customers from brick-and-mortar retailers, attracting young customers with convenient online shopping and cheaper prices, he said.

Store rents have been soaring over recent years, placing traditional retailers at a cost disadvantage, Yan said.

China's e-commerce retail sales revenues hit 1.89 trillion yuan in 2013, growing 42.8 percent from a year earlier, according to a recent report of China e-Business Research Center.

A rising number of local supermarkets and domestic rivals such as Beijing-based Wumart Stores also make it harder for foreign retail chains like Wal-Mart and Carrefour, he noted.

Retailers used to experience a 30 to 40 percent annual growth in revenue before 2008, but the growth has been slowing down to about 10 percent, he said.

China is key to Wal-Mart's international market though the retailer giant's several food safety scandals in the nation in recent years have tainted its reputation, analysts said.

"Wal-Mart has a fairly broad spread of around 400 stores in about 140 Chinese cities, and is possibly the best example of the strategic indecision over whether to open or close stores," according to a China retail report released recently by the Economist Intelligence Unit (EIU).

The world's largest retailer has repeatedly announced plans to embark on an ambitious store-opening program, however, the reality has been more muted, with the firm recently angering unions by announcing plans to close underperforming Chinese stores, the EIU said in the report.

Five Wal-Mart stores in the nation were closed in March.

Wal-Mart was troubled in labor dispute after it shut down its Shuixinglou store in Changde, Central China's Hunan Province in March, with over 100 store staff staging a protest with the support of labor unions due to the short notice of contract termination and unsatisfactory compensation.

"Gone are the days of cheap labor in China, and the authorities will pay more attention to labor disputes as massive layoffs lead to social unrest," which requires the retailer to respect the local laws and regulations as well as be more accommodative to employee rights and requests, Yan said.