Walmart’s China Strategy: Slow Growth, Fast Delivery

Global sales are a huge priority for Walmart, but of its largest non-U.S. markets, the world’s largest retailer struggles with China the most.

For its most recent quarter, for example, Walmart’s top five non-U.S. markets (those with more than $10 billion in annual sales: Mexico, China, the U.K., Brazil and Canada) all reported a rise in comparable-store sales for the quarter, except China, according to The Wall Street Journal. Walmart has a plan to try and fix that.

This plan has a particular urgent element to it, as Alibaba is pushing hard for its expected IPO in the U.S. next month. That has forced Walmart to expand its Chinese online operations faster than it would have otherwise liked.

Still, China’s massive economy and huge population means that Walmart doesn’t have to hold the number one marketshare position to do quite well—at least not immediately. “We’ve taken a long-term view of China,” Walmart global E-Commerce chief Neil Ashe told the Journal. “It’s an awfully big market—it doesn’t have to be number one to be a good business.”

Walmart’s China operation is majority-controlled (54 percent) by the retailer, but not owned outright, an approach Walmart favors when local markets are significantly different than the U.S. It’s called Yihaodian (“meaning Number One Store”) and it has focused on boosting the number of items it sells, accelerating its supply chain and pushing mobile. Yihaodian was founded—and is today run—by executives who learned the market by managing supply chains for Dell and Amazon.

The company has made delivery speed a key differentiator. “The company’s biggest strength is that it has figured out how to deliver fragile goods like bananas and mangoes to customers’ homes within hours by using a network of about 20 fulfillment centers and hundreds of delivery stations across the country,” the Journal reported. “Yihaodian now turns over its entire inventory in 18 days, down from 50 days when the company first started. Speed is everything, (Yihaodian executive Yu Gang) said. “In the U.S., people accept delivery in five to seven days. In China, customers are spoiled. Same-day or next-day delivery is a must.”