Wal-Mart hitting a great wall in China

Before the fox-tainted donkey-meat scandal, Wal-Mart struggled to find its place



The news last week that Wal-Mart had to recall packages of donkey meat from its stores in China because they contained bits of fox ricocheted around the world as only a story about fox-tainted donkey meat can. But, for all the attention given to the proclivities of Chinese grocery shoppers, the incident shone a light on a particular problem for the company: For a retailer that’s come to be synonymous with cheap Chinese goods, Wal-Mart is having a hard time finding its identity in the Middle Kingdom itself.

When Wal-Mart entered China in the mid-1990s, it was among the first American retailers to do so. From its early days, it appealed to wealthy shoppers looking for imported goods of higher quality than was available at local Chinese shops. The customers drove BMWs and were willing to pay higher prices for grocery items that wouldn’t put their health at risk. It became a status symbol to shop at the world’s largest retailer.

But, as the store’s footprint grew to the current 404 Wal-Mart outlets, including 10 Sam’s Clubs—with another 110 more stores set to open over the next three years—Wal-Mart has struggled to maintain its upscale consumer base in recent years. For one thing, specialty retailers have popped up to serve the wealthy. At the same time, Wal-Mart’s brand identity as a discount retailer caused it to lose some of its appeal for well-heeled shoppers. “The wealthier consumers didn’t like being confronted with discount signs,” says Shaun Rein, a Shanghai-based retail consultant at China Market Research Group and author of The End of Cheap China. His firm’s data show Wal-Mart is losing market share, even as it ramps up its expansion. “The atmosphere started to get dingy?.?.?.?They didn’t always have great upkeep of the floors, and so wealthier consumers stopped going.”

But luring discount shoppers has posed its own challenges. Rents in many prime retail areas are high, relative to the prices it can charge, and the company has had a difficult time matching deals at mom-and-pop shops. It all comes down to a disconnect in how the Chinese perceive Wal-Mart: To budget shoppers, it’s an expensive Western brand; to the wealthy, it’s a low-rent retailer to be avoided.

The contaminated-donkey-meat scandal has done nothing to help Wal-Mart with either type of shopper. (It’s not the chain’s first food-safety incident there.) Wal-Mart China’s CEO Greg Foran has apologized, and said the company will “increase investment in supplier management.” Foran also said that, within a year, the retailer will add another 500 imported products to its shelves to appease food safety concerns among Chinese shoppers.

In the end, retail consultant Rein suspects the impact of the incident will be small. Compared to local businesses hit by far more severe food violations, Wal-Mart China is still overwhelmingly safe. Donkey meat is not a major consumer item, and Sam’s Clubs continue to attract the upper classes looking for imported foods.

But Wal-Mart is still trying to find its niche. While opening new stores, it is closing dozens of underperforming stores and renovating 165 others. With these improvements, analysts say, Wal-Mart hopes to avoid the same fate it experienced when it had to pull out of Germany and South Korea because it couldn’t meet specific local demands. As long as it avoids more tainted-food scandals.

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Wal-Mart hitting a great wall in China

  1. As long as they dont get donkey meat in my fox.

    • You may joke, but I don’t know if I can enjoy a thick juicy donkey steak anymore. Just the thought that it may have yipped instead of brayed, sets my tummy a quiver.

  2. Classic. We will sell you billions of dollars of ‘crap’ but dont expect us to buy it. Hehe. Chinas 8th largest trading partner?

  3. This is what China is the Leader at -namely, copy, reverse-engineer, and then “flood”, and destroy any remaining competition
    I hope you “burn in hell” Wal-Mart = Outsourcing, treasonous corporations. I wish they would pull-out of Canada, everything Wal-Mart sells us though, is just cheap Made In China crap.
    But then again, maybe it’s because China doesn’t have the same Wal-Mart shopper that we have over here ?
    “…attention walmart shoppers…”

    • Actually 99% of western companies that try China fail. Walmart getting this far is the biggest western success story in China. Walmart will adapt.

      I will continue to shop Walmart when appropriate. Sure, they carry low end stuff but in a country that taxes minimum poverty wages and pays disabled less than 1/2 poverty level, we need cheap goods and some of Walmarts stuff is actually good. The coffee pot we have replaced an American union brand name that died in 13 months, one month out of warranty. We replaced it with a Walmart Chinese made, its still going 6 years later and cost 1/5th as much.

      But hey, many Canadians are too unproductive in a debt-tax inflated economy to compete any more.

      • Moot point.
        Wal-Mart survives because they are only allowed to sell Chinese-manufactured and build products, or sell Chinese grown-food to Chinese, in China.
        Sure, they can try to import American products into China, but good luck with that, because the Chinese Gov’t makes dam sure the “tax” that goes with it, won’t be “profitable” for Wall-Mart.

        Maybe the real Subject of this story should read:
        “China hitting the Great Wall of Mart”

  4. Wal-Mart is crap would never shop at that trash can and the same for target….bladerunner 6978 I agree with you walmart should just leave Canada…

    • I buy there. Some good values from around the world as Canada is too tax-debt inflated to be productive.

      No one can afford a government union made coffee pot for $2000 to keep poor productivity and excessive waste going, we loose too much in taxes as it is.

      • no I think Wal-Mart sells cheap junk….never will step foot in there…..I also support the workers they need more money and benefits for their families, walamrt has billions and wont help the people that keep their company going because with out them they are done….I don’t care about them and target both trash…..

  5. Wal-Mart’s garbage ,why don’t they pay their employees better and give them benefits for their families…..walamrt and target = garbage….

    • No skills, no education people need jobs too. My first part time job was in a local store not much unlike a small Walmart. Was $1.62. Our mother with 4 kids, delinquent dad raised us and with no extra money for stuff like bicycles, we worked for what we wanted.

      Now retired early as I knew the value of money and money for service better at 10 year of age than many today know at 30.

      If you want better pay, do like I did. Start getting a good job history and get to college and university, up your skills so you have more value to society. Persistence, self discipline with a realistic attitude you grow in life and do better…..

      Sure beats whining and waiting.

  6. hina, the most competative market in the world. Not much if any government protectionisms and tariffs to drive us coss to the people.

    Lobby money is a crime in China as it is viewed as corruption. So suppliers can lobby for protectionism to drive up costs like Canada.

    • That’s not a fair market comparison, since in a Government like China, they don’t need “lobbyists”, simply becuase that Gov’t is it’s own lobbyists.
      We (Canada) can never compete against zero-regulations, and almost zero-corporate tax, …, like China, that’s a given, but that is also pathetic -hence the slave-labour “window-jumpers” from Apple’s manufacturing/assembly plants in China.

    • I agree with you about the idea that lobbying should be illegal.
      But China has lobbying. It is called corruption (bribes) and all the party officials do it. Is that the way you would like to see Canada go?

      That is how the system works. As long as you are powerful you can be as corrupt as you want. but when you lose your power they will come after you. Just like drug lords.

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