Retail gant Wal-Mart Stores, Inc. (NYSE: WMT) opens stores in more small Chinese cities.
It saw four stores in the market, spreading in Fuzhou, Fujian Province, Zhuhai, Guangdong Province, Puer, Yunan Province, and Huizhou, Guangdong Province, run into formal operation on September 26. Greg Foran, president and CEO of it for the China region, said in an interview that it would launch a re-layout in the market, fueling expansion in first- and second-tier cities and entering more third- and fourth-tier cities as well as some small towns.
It has become a trend for traditional retailers in the market to expand to third- and fourth-tier cities in a bid to ease pressure from operation and look for new profit drivers and the four stores the US firm opened in the market yesterday were located in a third- or a fourth-tier city, each. A top executive with a top Chinese retailer even forecasted that a shuffle would take place in the third- and fourth-tier Chinese retail market in the near future, with the profit to be shared by more large-sized retailers.
According to financial results the US firm released for the fiscal year 2013, the operating revenue from the US market inched up by 2.6 percent from a year ago to USD 74.66 billion and that from the international market rose 6.9 percent from a year earlier to USD 37.94 billion. Greg Foran reiterated that despite of rising industrial pressure and fiercer industrial competition, it was confident of the market.
Wal-Mart China disclosed that it planned to open new stores in province-level administrative regions including Shanghai, Hebei, Henan, Hubei, Hunan, Sichuan, Jiangxi, Shanxi, Guangdong, Guangxi, Fujian, Yunnan, and Liaoning over the coming three months and the increment was expected to hit about 30 ones this year. In the meantime, it would shut down and upgrade some stores.
People in the know disclosed that it planned to invest about CNY 500 million in upgrading 50 stores across the market and last year, it upgraded 31 ones there.
Guo Zengli, director with Mallchina.com, pointed out that it had become a major expansion way for retailers in the market to stretch out reach to small cities and in such cities, both the rental and the labor cost was relatively low. In addition, the pressure from competition was not high. Retail markets in such cities were always seized by some small regional brands and once those large-sized ones entered, they would see market share drop largely and be squeezed out sooner or later.