When U.S. supermarket chain Walmart opened its first Chinese outlet in Shenzhen in 1996—five years before China joined the World Trade Organization—the retail landscape in the country looked vastly different. With no large-scale hypermarts, shoppers rose at dawn to snag the freshest produce at local wet markets.
Yet, in the last 30 years, China’s rising middle class and deep manufacturing capabilities has given rise to one of the world’s most dynamic, yet competitive, consumer markets. And the relentless domestic competition has proven to be a double-edged sword for retail companies: those which can’t adapt quickly are stamped out, while the most successful firms become hyper-efficient, agile and globally competitive. Walmart, for one, saw its China business grow by 20.7% last quarter. That’s faster than Walmart’s other global businesses (Walmart U.S. saw sales grow by 2.6%), and bucks a broader trend of sluggish retail sales within China.
“Customers everywhere want similar things—they want assortment, value, convenience and emotional experiences,” Christina Zhu, the president and CEO of Walmart China, said at the Fortune Leaders Forum in Macau on Sep 8. “But in China, there’s a whole different degree of intensity: Convenience might be defined elsewhere as receiving an online purchase in three days. Here, it’s [more like] 30 minutes.”
Walmart’s Chinese outfit has also been forced to shift its strategy over the years. With the rise of domestic e-commerce giants like Taobao and Pinduoduo, Zhu’s team has moved from solely operating brick-and-mortar stores, to building a strong omnichannel network. (Today, over 50% of Walmart China’s sales revenue hails from online purchases.)
“Coming from a traditional business, it took a lot of effort to try to transform the organization,” Zhu admitted. “I think we’ve passed that [hurdle] and are today a fully-fledged omnichannel company.” (Walmart still has a significant physical presence in China, operating nearly 300 Walmart Supercenters across more than 100 cities.)
Doubling down
Although many Western brands, including Starbucks and Lululemon, have struggled in China, Walmart continues to deepen its footprint, opening over ten stores across China in the last year. Zhu attributes the brand’s domestic success not to any particular localization strategy, but rather, her team’s dedication to meeting their customers’ shopping needs.
“I only have one boss, and my boss is the Chinese customer,” Zhu said. “We’re not here to propagate any particular [business] model, but rather to serve our customers. If you always go back to that starting point, then everything else becomes very easy.”
Aside from Walmart Supercenters, the brand’s premium members-only chain, Sam’s Club, has also been gaining popularity in China. Last week, the brand opened its sixth Sam’s Club outlet in Beijing, within the Fangshan district.
“We very clearly define who we serve,” explained Zhu, pointing to how items at their members-only stores are carefully chosen and curated. “Sam’s Club serves the upper middle class families in Chinese cities…so we don’t try to serve everyone with that format.” (Separately, Walmart China has also continued expanding its smaller community and neighborhood store format, opening new outlets in Shenzhen.)
Ultimately, Zhu says that the secret sauce to Walmart China’s success is its openness to change. “Certain things—like our values and purpose of helping customers to save money and live better—don’t change,” she concludes. “But everything else must change, because…technology and consumer behaviour will change.”
This story was originally featured on Fortune.com
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