Can Walmart overcome Chinese etail challenges?

Walmart plans to launch an ecommerce operation in the world’s most populous nation. With more than 380 million internet users - more than the entire US population - China represents a massive opportunity for the world’s largest retailer. However, growth will not come easy and Walmart must be able to adapt its strategy to succeed.

The world’s largest retailer’s move into China is part of a broader move to increase its etail operations around the globe. It has a strong online presence in the US and UK at present, and also runs transactional websites in Brazil, Mexico, Chile and Japan.

Earlier this year, the retailer launched Global.com, a new business unit designed to leverage scale and drive efficiencies while increasing Walmart’s online presence in both markets where it has stores and in ones it does not. China is just the beginning.

In China, Walmart is already a leading retailer with more than 280 stores and a strong presence in the south. Its move into etail should help solidify its ranking among the top 10 retailers, and also help differentiate it against other foreign-owned rivals such as Tesco and Carrefour, which have yet to embark on a fully fledged ecommerce offering.

However, Walmart will face a number of hurdles in the Chinese market - the most notable of which is logistics. Online retailing, grocery in particular, is an efficient and viable option for retailers based in a densely populated market, which is why the model has fared so well in the UK.

This will certainly be a challenge in China due to the vastness of the country and underdeveloped infrastructure, especially in rural areas. Walmart may even consider making deliveries by bicycle in urban areas - a tactic used by Amazon among others.

Although it is becoming more commonplace, credit card usage is still relatively low in China compared with other countries.

A lack of trust in payment solutions is therefore a hindrance, as is the fact that general consumer preference is to see and feel the goods before buying them, obviously quite tricky to do online.

This lack of trust is augmented by the fear of buying fake goods online. It’s also important Walmart adapts its website, given that the even the smallest details such as colours and numbers can take on different meanings to Chinese consumers.

On top of cultural differences Walmart will face stiff competition from pure-play etailers. The sector is dominated by Taobao, which holds a market share of over 80%.

Natalie Berg, research director, Planet Retail. For more information contact us on:

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