Walmart’s China revival strategy
Retailer teams up with Chinese company for deliveries by drone
Walmart Stores has hit the reset button on its China strategy in dramatic fashion.
The world’s largest retailer is making an ambitious push into e-commerce in China and aims to deliver goods from its stores around the world to Chinese consumers within hours. Shoppers in select remote villages could even see their Walmart products being delivered by drones as part of a pilot project by its Chinese partner, JD.com.
After unsuccessful efforts to scale up its own e-commerce network, Walmart launched several new initiatives this week through a tie-up with JD.com — China’s second-largest e-commerce website, with almost 200 million active users. With this partnership, Walmart said it will now be able to deliver its goods, ranging from American vitamins to Japanese hand cream, to more than 90 per cent of China’s 1.4 billion consumers.
“There isn’t another country in the world that represents the kind of retail growth opportunity that China does, given the growth rate of the market itself and the consumer demand here,” chief executive officer Doug McMillon, said in an interview in Beijing. “We see opportunities to partner together to provide goods to our customers, to leverage our supply chain and their digital capabilities.”
Walmart has a lot riding on its new online strategy aimed at getting a bigger slice of the world’s biggest e-commerce market. The retailer this month forecast that earnings will be flat the next two years while it invests in e-commerce. As it looks to China to fuel growth, cracking the Chinese online game will be more important than ever.
“It’s easier to jump on the back of JD.com,” said Chan Wai-Chan, a senior partner at Oliver Wyman’s Asia Pacific consumer practice.
“They need to do something online to stop e-commerce from taking away their business. This is Walmart’s solution.”
McMillon, who took over the top role in 2014, said the initiatives will keep the company’s China operations on track to contribute a quarter of its global retail growth in the next five years. That’s despite sluggish sales at Walmart’s retail stores in China while shoppers there increasingly turn to online websites for convenience. The strategy also gives it access to new Chinese consumers in smaller cities where Walmart doesn’t operate stores.
To reach customers, Walmart is relying on JD.com and its extensive logistics and delivery network. JD.com founder and CEO Richard Liu said the company wants to build a fullyautomated delivery infrastructure that includes automated warehouses and distribution centers, self-driving delivery cars and drones.
The company is already delivering products to a limited number of remote villages in southern China by drones.