Can Wal-Mart corner China's e-retail market?

Michael Robinson, shopper marketing director at Momentum, says YES

“This is a tricky question because Wal-Mart doesn’t need an online retail channel to succeed in China. In fact, save Alibaba’s B2B sales, online retail is still miles away from being a sales driver in China. So the real question is, what do they intend to do with it?

Wal-Mart’s success in China can be over-generalised down to having the right product at the right price in the right economic geographies. Those are questions of supply chain, GDP targeting and expansion, irrespective of physical or digital storefront. So the issue of success isn’t so much a question of how much revenue they will generate online as it is one of “Does it compromise their business model to pursue this channel?” And the answer to that is no.

Of course the assumed goals are to encourage more frequent ‘trips’ for existing shoppers and to make it easier and quicker for consumers and small businesses to make purchases. But more importantly, it allows them to geo-penetrate regions without opening up more physical storefronts. Between 2006 and 2010, Wal-Mart quadrupled its outlets and saw revenue per location drop significantly.”

Jessica Lo, MD at China Market Research Group, says NO

“As Chinese consumers continue to shop and evolve in their shopping habits, Wal-Mart and other retailers need to understand the major retailing trends taking place. My firm expects retail sales to grow 16 to 18 per cent this year, driven by three consumer segments, namely women, consumers under the age of 35 and consumers in third and fourth tier cities.

E-commerce, on the other hand, will grow 30 per cent each year for the next five years as consumers increasingly enjoy the convenience of shopping online.  What is critical is that retailers need to create trust in their online stores.  Many consumers are worried about buying fake or expired goods online, especially on smaller stores on Taobao and eBay.

Wal-Mart could do well online by being that trusted brand.

That said, I don’t believe that online sales will account for a large percentage of revenue for Wal-Mart in China anytime soon.  Consumers still like to shop in store to learn about products.”

Carl Preller, MD at Glendinning Kantar Retail China, says YES

“This is a business that, through its significant store network, strong supplier relationships and global buying power will be able to build an offer that matters to Chinese online shoppers.

As a retailer in China, Wal-Mart has both a strong understanding of its ‘Basket & Trolley Shopper’ and the categories they need to win in. It is here for the retail long-haul and we would expect it to be one of the last ones standing when the retail landscape finally moves from landgrab to consolidation.

It has the patience and muscle to win the bricks and mortar retail battle but how will this play out in the dot.com retail war?

Dot.com retail success means building a similar deep understanding of who their online shoppers are, what they are looking for and having the ability to build a value proposition that delivers against this. This is not a small task in a market as big and diverse as China and there will undoubtedly be some missteps along the way – corporate patience and the willingness to learn from success and failure are going to be paramount in winning the war for the online shopper in China.”

Emma Zhang, senior analyst at iResearch Group, says NO

“I believe that Wal-Mart will have difficulty succeeding in China in the short run. Firstly, Wal-Mart will face the problem of localisation and will go through a period of adapting to the market.

There are already some successful local e-commerce players like Taobao of Alibaba (which have been in the market for seven or eight years), 360 Buy, Dang Dang, and Juyu (the local e-commerce company that Amazon.cn has acquired) with a wide variety of good value product offerings already.

If a foreign e-commerce player wants to compete in China, they face a staff talent problem, as well as getting familiar to the needs and buying habits of Chinese netizens.

Secondly, in the hypermarket and supermarket category, the market share of Carrefour is much bigger than Wal-Mart. In Beijing, Carrefour is a household brand that has more retail presence than Wal-Mart. Online e-commerce users tend to be in the 19 to 35-year-old demographic, where as in traditional retail, the consumers are older and may just go to stores to buy in small quantity. How would Wal-Mart convince them to go online instead?”

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This article was originally published in the 22 April 2010 issue of Media.