Walmart Inc. (NYSE: WMT) announced plans to invest more than a billion dollars into its China operations over the next two decades. Roughly 8 billion yuan ($1.2 billion) will be used to create new distribution centers in China. The plans call for Walmart to renovate or set up more than ten logistics centers in China over the next ten years.
Walmart has been operating in China since 1996. The company has had a good run there, but comparable sales growth at Walmart’s Chinese operations has slowed down in the past six months. It faces growing competition from local rivals and online retailers like Alibaba. The company’s China operations pulled in $10.7 billion in sales last year, less than one tenth of its international revenue.
Walmart is planning to spend the money to boost grocery deliveries as it tries to cater to customers who are increasingly shopping online. Walmart has already invested 700 million yuan ($102 million) in building a distribution center for perishables in the south of China. Still, the retail environment in China is very competitive, so if Walmart wants to see more growth, it’s going to have to reach more people.
Walmart operates a number of formats in China, including hypermarkets, Sam’s Clubs and Walmart supermarkets. The hypermarkets are smaller “smart supermarkets” that allow customers to use their smartphones as scanners that are then read at the checkout. It opened the first hypermarket in Shenzhen last year. As of January this year, the company had 443 retail units covering more than 180 cities in China.
China’s trade war with the United States has been painful for Walmart in recent months. U.S. tariffs on Chinese goods has forced Walmart to raise prices on several of its products. Further tariffs on Chinese goods may be introduced in the future if the two countries cannot agree on a trade deal.
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