Brand marketing in emerging markets – China/Walmart

Since the fall of Lehman Brothers, there has often been talk about the fact that the retail industry has slowed.  However, despite this, the top company in 2010 for both the Fortune US 500 and Global is Walmart.  Although well known for its acquisition of Seiyu, Walmart is actually unfamiliar in Japan. 
The US recession helped boost the discount-specialist Walmart.  However, competitors have begun to do similar things and customers are apparently starting to leave Walmart.  In the slow US market, Walmart seems to be getting help from better conditions outside the country. 

There is an impression that Walmart has had some rough times outside of the US.  It pulled out of both Korea and Germany in 2006.   In Korea, it was sold to Shinseigae department store and in Germany to global competitor METRO Group. 
However, Walmart is doing well in Mexico, Canada, Brazil and China.  Over the past several years it has aimed at expanding business in Latin America and China. Same-store sales increased 10.6 percent in China, 7.6 percent in Brazil and 4.4 percent in Mexico, giving Walmart plenty to smile about.  

Why is Walmart doing so well particularly in China?  Before it became successful in China, Walmart didn’t just promote “buying American,” but put a lot of effort into localization.  An article written a while back by Gary Gereffi and Ryan Ong for the Harvard Asia Pacific Review said that in order to make sure items were “fresh” to the Chinese consumer, Walmart imported local fresh markets directly into their Walmart stores. 
For Chinese customers, “freshness” means being able to purchase freshly caught or picked items in a market, as opposed to a packaged item sold in a supermarket.  Over 95 percent of the items sold are supplied domestically in China.  Items produced in China are also imported into the US, which has created criticism over employment issues from the American public.  In addition, Walmart has made large donations to Chinese universities, as well as set up China’s first retail focused research facilities.

As its tagline, “Save Money. Live Better.”says, Walmart is famous for being a discount store.   In order to expand among and attract the middle-class Chinese consumers, Walmart is also putting efforts into making its stores feel “upscale.”  Although they don’t go as far as creating a “high-end” environment, they increase the quality of the displayed items.  This movement to focusing on the upmarket is something being talked about not only in China, but also in the US. 

Recently, Walmart has been increasing plans to open Sam’s Club stores in China.  The first store opened in 2002 in Shenzhen.  Currently there are 3 stores (Walmart China’s website says 3, the media says 4) and there are plans to open shops in Shanghai in December 2010 and Dalian in 2011.  Unlike with Japan or Korea, there seems to be more confidence in opening large size stores in China. 
According to Walmart China’s website, the number of stores including Sam’s Club has surpassed 189.  They site talks about the company’s contribution to China including giving employment opportunities to 50,000 people.  *Considering the employment problems in the US, it is something that can’t be helped even if criticized. 

Where does Walmart China go from here? Walmart is focusing not only on expansion, but also not forgetting to take actions to be “green” and eco-friendly.

From 2005 Walmart set some overall goals including the following:
1)     To be supplied 100 percent by renewable energy
2)     To create zero waste
3)     To sell products that sustain the world’s resources and environment
(Source: Walmart China Factsheet – Walmart China website)

Along with its top 200 suppliers, Walmart has made promises to make improvements in the energy efficiency of its factories.  Walmart has also promised to reduce its greenhouse gas emissions from its global supply chain by 20 million tons by the year 2015. 
Even in China, “green” activities are being promoted and there are goals to head toward building low-carbon supermarkets.  Although the content is a little unknown, there are promises to build new stores that use less energy and save more water.  Overall, by the year 2013 Walmart is aiming to reduce its greenhouse emissions by 20 percent of its 2005 levels.  By using LED lights and energy-saving refrigeration, there are apparently actual results.   

Besides these initiatives, Walmart has also created its Direct Farm Program and announced plans to sign contracts with 1 million farmers in China by the year 2011.  The same program is also being setup in Mexico and India. Green activities in a number of Walmart China stores are being promoted along with the Chinese government. 

Looking at Walmart China’s recent movements and trends, it seems as if the company is aiming to strengthen its global supply chain even further, however, as we touched upon in an earlier blog entry, it seems as if there is some relationship with the building of eco-cities. 

In 2008, Walmart revamped its logo design and changed its name from Wal-Mart to Walmart.   The day when “Walmart” becomes the pronoun for the next generation’s global supply chains and global retailing is likely not too far away.

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