- Author: gokuabuela
- Translator: Ranting
Recently, domestic media reported that Wal-Mart will sell its 130 stores in China at a price of 3 billion US dollars and about 19.5 billion yuan, and it will withdraw from the Chinese market. This is the last foreign-branded supermarket in Communist China, after Carrefour and Metro. According to media analysis, the main reasons are: the development of domestic e-commerce, the hypermarket model has not adapted to the needs of the market, and the price of Wal-Mart is too high, so it is unsustainable, and it has to withdraw.
As is always the case with the national media, they only tell you the results, but not the right reasons.
As a supermarket, selling the necessities of people’s lives, it competes with the ability to fine-tune management, from product procurement, payment cycle, to shelves, placement, maintenance of goods (such as shelf life before replacement, at any time to place the goods that are messed up by customers) promotions, sales model and so on. As a mature international hypermarket, a very mature management system has long been in place. And pricing, depending on how a company positions itself to its customers and competitors, is not an issue for established companies.
Let’s look at the national reports on what Wal-Mart is doing
“In October 2016, Walmart increased its stake in Jingdong from 5.9 percent to 10.8 percent and made a $50 million strategic investment in Neo Dada, a new company formed by the merger of Jingdong Home and the crowdsourced logistics platform Dada. “
“Moving an online store on Jingdong and selling membership cards on it can help it attract a group of consumers who cannot be covered offline temporarily.”
“67% of its new stores were opened in third- and fourth-tier cities in its domestic expansion trajectory in the first half of 2016. Unexpectedly, the hypermarket format has sales in upper-tier cities (including Beijing, Shanghai, Guangzhou, Shenzhen and other provincial capitals). It was down 0.6% year-on-year, but its sales increased by 3.1% in lower-tier cities including prefecture-level cities, county-level cities, and counties.”
“By investing more in e-commerce, expanding businesses with growth potential, finding space in lower tier markets, and continuing to do the same job as a retailer with an emphasis on food safety and employee welfare, Walmart, as a traditional retailer, is indeed doing what it can in an ever-narrowing space.”
These show that Wal-Mart is not losing money in the country to the point of being unsustainable.
Let’s look at Walmart’s moves abroad, Walmart’s global 2016 revenue of $480 billion is 40 times that of Alibaba in the same period. Wal-Mart vigorously develops its e-commerce platform, with the goal directed at Amazon, striving to become the world’s top e-commerce platform. Not only does it self-operate on the platform, Wal-Mart has also opened up third-party sellers. In 2020, it’s a big deal for Chinese cross-border e-commerce sellers to try to get into Walmart. The market share of Wal-Mart’s e-commerce platform will also increase by leaps and bounds in 2020.
Carrefour, at least in Spain, has an e-commerce platform.
For these international supermarkets, if they want to take root in the Chinese market, it is not difficult to transform e-commerce, what do they lack? Is there a lack of ideas? Lack of capital? Lack of talent?
It’s not that you can’t, it’s that you don’t want to stay in the Chinese market anymore. Why?
The CCP’s foreign exchange controls make it impossible for foreign businessmen to take it out even if they make money, and can only use it in the Communist China. The purpose of investment is profit, but domestic profits cannot be taken out. What is the difference between that and losses? The globalization strategy of multinational companies is not helpful.
The domestic market rules of the Communist Party of China are that bad money drives out good money, and everything is about subtle rules. Domestic enterprises have no limits, sell counterfeit and shoddy products, use substandard products as good ones, disregard copyright, compete viciously, ignore employees’ rights and interests, squeeze employees without limits, and even collude with government and business to use triad tactics against competitors, etc. And there is no way for foreign companies with strict management system and legal awareness to do this. Instead of being in the same stream, it will be considered that “localization strategy is not enough to make foreign companies unsustainable”.
The global trend to destroy the CCP has become unstoppable, and the decoupling of the Communist China’s economy from the world is imminent. The first point of a company’s investment is to look at the local political trends and economic prospects. In such a situation, it is too risky to continue investing in the Communist China, which is already tantamount to suicide.
There is a saying in the investment world that when all the people go for the same thing, it’s called wind direction.
Today’s Communist China, with foreign investment withdrawing and the economy facing decoupling and collapse, is where the wind is blowing. How should you handle yourself?