Ef­fi­ciency quest shrinks Wal­mart store size

China Daily (Hong Kong) - - BUSINESS - By WANG ZHUOQIONG wangzhuo­qiong@ chi­nadaily.com.cn

Wal­mart China is get­ting smaller in terms of store size to im­prove its ef­fi­ciency and en­hance con­ve­nience for shop­pers.

The world-lead­ing re­tailer opened its first “com­pact hy­per­mar­ket” in Wuhan, cap­i­tal of Hubei prov­ince in Cen­tral China, on Thurs­day.

The store is 40 per­cent smaller than a nor­mal Wal­mart hy­per­mar­ket that spans 10,000 square me­ters and sells 22,000 to 25,000 prod­ucts.

The new store, with a floor space of about 5,000 square me­ters, of­fers 15,000 prod­ucts. There are fewer lar­ge­sized home appliances such as tele­vi­sions, re­frig­er­a­tors and air con­di­tion­ers. But smaller home appliances such as hair dry­ers con­tinue to be sold as usual.

Xiong Lu, gen­eral manger of Hubei re­gion op­er­a­tions of Wal­mart China, said cost-cuts are not the rea­son be­hind smaller stores. “The small for­mat will im­prove con­ve­nience in shop­ping.”

Two check­out isles re­served for con­sumers who buy up to five items have greatly re­duced wait­ing time. A self- check­out is planned by the year-end, he said.

The Wuhan store tar­gets younger con­sumers aged be­tween 20 and 30. Food prod­ucts take up at least half of the shelf space.

More com­pact Wal­mart stores in first-tier ci­ties such as Shang­hai, pro­vin­cial cap­i­tals like Kun­ming and emerg­ing ci­ties such as Huizhou in Guang­dong prov­ince in South China are in the pipe­line.

These will be among the 30 to 40 stores that Wal­mart plans to open in China this year.

The “smaller is bet­ter” con­cept is also be­ing ap­plied to Wal­mart’s high-end mem­ber­ship stores.

Wal­mart an­nounced on July 26 that Sam’s Club will also ex­pand in China with smaller and more nim­ble stores.

The Club is ex­pected to reach 40 out­lets by the end of 2020 and is in­vest­ing 100 mil­lion yuan ($14.7 mil­lion) on high-value mer­chan­dize with bet­ter prices.

At present, Sam’s Club has 16 stores in 13 ci­ties in China, which are vis­ited by nearly 1.8 mil­lion mem­bers.

Sam’s Club will also re­duce the ar­eas “be­hind the stores” by set­ting up ef­fi­cient logistics and sup­ply chains in the

up­com­ing three or four stores.

But this strat­egy will not be adopted at most of the newly opened out­lets in China. Fresh food shelves will get larger size and less-fre­quented mer­chan­dizes will be given less shelf space.

“The com­pact store will make us more ef­fi­cient. We can save more on costs. Even­tu­ally, the sav­ings will be in­vested in mem­ber­ship val­ues,” said An­drew Miles, pres­i­dent of Sam’s Club China. “Do­ing busi­ness in China means we have to pay more at­ten­tion to cost struc­tures in order to stand out.”

Ja­son Yu, gen­eral man­ager of Kan­tar Word­panel China, said: “Smaller hy­per­mar­kets force re­tail­ers to fo­cus on es­sen­tial cat­e­gories and mer­chan­dise to satisfy core needs of shop­pers who are now grad­u­ally mov­ing their weekly gro­cery shop­ping on­line.”

He ques­tioned whether the new meth­ods would ac­tu­ally bring young con­sumers back. But it can def­i­nitely im­prove op­er­a­tional ef­fi­ciency and cut down space de­voted to nonessen­tial cat­e­gories, so it will likely drive profit.

will be opened by Wal­mart to cater to its Sam’s Club brand in China by the end of 2020.

MIAO JIAN / FOR CHINA DAILY

Shop­pers at a Wal­mart su­per­mar­ket in Wuhan, Hubei prov­ince.

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