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Walmart upbeat after China success

/ 05:47 PM December 04, 2018

Consumers shop at a Walmart supermarket in Nanjing, Jiangsu province. [Photo provided to China Daily]

BEIJING  – Robust third-quarter sales growth in China and some key markets is making US retail giant Walmart Inc upbeat about full-year earnings prospects.

Investments in e-commerce and a home delivery system for groceries are further boosting its confidence.

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Third-quarter revenues in China rose 4.3 per cent year-on-year, driven by strong sales of fresh food, it said, without disclosing absolute figures.

Particularly, Sam’s Club, Walmart’s high-end membership stores in China, saw a good performance during Mid-Autumn Festival in September.

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Walmart’s global revenues in the third quarter reached $124.9 billion, up 1.4 per cent year-on-year.

In 2017, its total revenue worldwide was $485.9 billion, up 3.1 per cent year-on-year, yielding gains of $14.5 billion, which will return to shareholders through dividends.

Walmart has more than 400 stores in over 180 Chinese cities. The retailer said it plans to open 30 to 40 more new stores every year, and it will build more intelligent stores that utilise advanced technologies.

The world’s largest retailer has been trying to reinvent its supermarket chain to enable it to compete in the changing and competitive retail and e-commerce sectors.

During the third quarter, Walmart China launched three new joint initiatives with JD, an online marketplace in China. In addition, Walmart announced a $50 million strategic investment in New Dada, China’s largest local on-demand logistics and grocery O2O (online-to-offline) e-commerce platform.

The two-hour delivery service is available via JD to consumers within a 3 kilometres radius of more than 40 Walmart stores in Guangzhou, Shenzhen, Beijing and Shanghai. The service is expected to expand to more Walmart stores in Chengdu, Wuhan and other cities, the company said.

“We recently announced we own roughly 10 per cent of JD’s shares. Through the alliance with JD, we hope to further strengthen the partnership with JD,” said Doug McMillon, president and CEO of Walmart.

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McMillon said China is an important source of global retail growth, and Walmart is grabbing the opportunity by accelerating the company’s omnichannel sales capabilities.

With improving sales and increased footfalls at its stores, Walmart said the investment in e-commerce, home grocery delivery and curbside pickup, have been key to keeping the store competitive.

Meanwhile, the US-China trade tensions with steep tariffs on $250 billion worth of Chinese goods is something the firm “will manage through”, regardless of what happens, said Walmart Chief Financial Officer Brett Biggs.

He said the prospect of US tariffs increasing in January to 25 per cent is “not positive”, since prices will go up, and Walmart would prefer to see a resolution. But he noted that consumers are expected to continue to be in “good shape” going into the holiday shopping season.

Walmart became the world’s largest retailer in 1990. In 1996, the traditional retailer established its own e-commerce website. In 2010, it launched a third-party e-commerce shopping platform. By April this year, the platform had about 18,000 sellers, according to global consultancy KPMG.

“In the past five years, Walmart has been buying global e-commerce platforms and delivery platform enterprises, and pushing forward the coordinated growth of its retail sales and services. It has activated the global layout of retail services,” said Mao Jian, partner of IT advisory of digital and customer practice at KPMG China.

In 2015, Walmart started to wholly own online grocery store Yhd in China. The combination of local advantage of Yhd and Walmart’s global procurement resources, retail stores and supply chain has helped it to record more growth in China.

“Now, the competition between retailers has shifted to the ability to satisfy immediate demand of consumers. Traditional retailers are continuing their transformation to develop digital sales channels, and express delivery services have empowered traditional retailers,” Mao said.

In the future, online and offline sales will further fuse together, and quality service is highly important to retailers, KPMG said in its November report on the retail industry.

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