Wal-Mart Aims for Double-Digit Sales Growth in China

Strategic Insights -

Wal-Mart Stores Inc. hopes to narrow the gap with Carrefour and other retailers in China's vast market, posting double-digit sales growth this year. The company plans to double its outlets by the end of 2006, with 55 stores already planned for this year and 90 by the end of 2006. Wal-Mart's expansion in China accelerated after Beijing dropped a requirement that foreign firms find local partners.

Key Takeaways:

  • Wal-Mart aims for double-digit sales growth in China this year, outpacing its 10% revenue growth in 2005.
  • The company plans to double its outlets in China by the end of 2006, with 55 stores already planned for this year.
  • Wal-Mart's partner in eastern China is Beijing-backed conglomerate CITIC Pacific Co. Ltd., which owns 35% of the venture.
  • Carrefour, aiming to add 15 hypermarkets a year, lags Wal-Mart globally but leads in China, with local sales rising 20% to 16.2 billion yuan last year.
  • Wal-Mart buys $18 billion worth of goods from China annually, ranking it as China's sixth-largest export market.
  • The US retailer operates 22 stores in China, with plans to expand to every city in the next 5-10 years.
  • Wal-Mart's new Shanghai store, its 48th in the country, will help the company tap into the city's 23 million-strong population.

Statistics:

  • China's retail market is valued at $240 billion.
  • Wal-Mart's sales in China jumped 31% to 7.6 billion yuan ($940 million) in 2004.
  • Carrefour's local sales rose 20% to 16.2 billion yuan last year, while the number of its stores surged 51% to 62.
  • Wal-Mart expects to operate 55 stores in China by the end of this year, versus 43 at the end of last year, and 90 stores by the end of 2006.
  • Wal-Mart buys $18 billion worth of goods from China annually, with an estimated cost advantage over Carrefour due to its larger volumes.

Sources:

  • Reuters, "Wal-Mart hopes for double-digit sales growth in China", July 25.
  • Reuters, "China's retail market valued at $240 billion", no date.
  • WARC, "Wal-Mart's Chinese Partner is CITIC Pacific", no date.
  • Beijing Review, "China's export market ranked 6th largest in world", May 16.