Does WAL-MART Bet That Community Stores Can Go Upstream?

In recent years, foreign retail businesses have been forced to adjust their business strategy in China because of their cold experience in China. Some choose to "go out of nowhere", while others choose to shake hands with local retailers. However, WAL-MART, a "struggling army", has chosen to bet on the community format and expand its trend.

According to relevant media, a few days ago, Gu Jianzhang, senior vice president of WAL-MART real estate development in China, announced at the 2019 WAL-MART China developer conference that in the next 5-7 years, WAL-MART China plans to open 500 new stores and cloud warehouses in China, including WAL-MART Shopping Plaza (hypermarket), Sam member store and WAL-MART community store. Meanwhile, in the next 3 years, WAL-MART China will also upgrade and upgrade 200 existing stores.

According to WAL-MART's official Chinese information, it currently has more than 400 stores in the Chinese market, but this is the result of WAL-MART China's 23 years in HUAFA exhibition. That is to say, the goal of opening 500 new stores in 5 years is undoubtedly a rapid rush for WAL-MART China.

However, the fast opening shop plan does not mean expanding the existing store formats. According to Gu Jianzhang, 500 new stores in the plan are mainly small formats, mainly WAL-MART community stores and cloud storage (pre storage) for distribution.

And in view of the new store development mode, WAL-MART will choose to join hands with real estate developers and do not plan to purchase the property themselves. Gu Jianzhang said: "99.5% of our stores in China are working with developers to open stores in the form of shopping malls. In site selection, we are not the same for every city and every business district, nor do we exclude a community store near Sam's member store.

The reason why WAL-MART China has such a high profile and overweight community format is mainly because the community store has made a brilliant performance this year. According to the data previously disclosed by WAL-MART China, WAL-MART community store's operating performance in the third quarter of 2019 has increased by more than 20% compared to the first quarter in terms of sales volume and passenger flow. Especially in O2O business performance, WAL-MART community store's O2O sales account for more than 30%.

Besides, WAL-MART is also accelerating the transformation of the hypermarket format. As early as 2017, Chen Wenyuan, President and CEO of WAL-MART China, once said that the development of compact stores has become one of the latest development strategies of WAL-MART in China.

According to Gu Jian Zhang's description, the upgrading direction of a large number of upgraded stores is "friendly, interactive and intelligent". Specifically, it will increase the introduction of face recognition payment function of self-service cash register, intelligent interactive screen, Sam kitchen, etc., and will also expand the scale of fresh food and develop its own brand. It is reported that WAL-MART's third quarter financial report shows that, driven by the growth of fresh and full channel sales, sales of Sam's member stores reached two digits.

But opportunities and challenges always exist. Because of the weakness of shopping centers and shopping malls, the major enterprises began to make articles on channels and commodities transformation. Supermarkets, convenience stores, community stores and other small businesses have entered a high-speed expansion stage. At present, not only Yonghui, Huarun Wanjia and other enterprises, and even the "new species" such as "box horse" are speeding up the exploration of small format and community type.

In addition to facing fierce competition, WAL-MART must pay great attention to the market scale development and supply chain system in the development of community stores. If the supply chain system, logistics and distribution can not keep up with the development of the store, it is difficult to support the development of the store, so the layout of WAL-MART's cloud storage is very critical. However, the investment in hardware and intelligence of cloud storage is not bad, and enterprises need to pay attention to balanced development.

All in all, despite the fact that WAL-MART China has achieved more than five years of good sales in the third quarter, the transformation of retail format is not easy. Especially in the context of frequent foreign retail sales, WAL-MART is still playing a big gamble on the promotion of community stores.