Walmart Inc. will spend $1.2 billion over the next 10 to 20 years as it boosts its supply-chain logistics in China. The Bentonville retailer said in a news release it will build or upgrade more than 10 distribution centers in that time frame.
The company operates more than 20 warehouses in China, where it has about 430 stores in a variety of formats, including supercenters, Sam's Clubs and Neighborhood Markets. Also, although Walmart sold its unprofitable e-commerce business in China in 2016, it invested $50 million that year for a 12% stake in Chinese e-commerce giant JD.com to continue selling online.
Walmart is making the investment in logistics to support its omnichannel development and improve service, Ryan McDaniel, senior vice president of Walmart China Supply Chain, said in the release.
Earlier this year, Walmart opened a $101 million fresh-food warehouse in China that serves more than 100 stores. The South China Fresh Food Distribution Center can store and process more than 4,000 kinds of temperature-regulated, refrigerated or frozen foods simultaneously, the company said.
China is one of the four largest markets -- along with Mexico, Canada and the U.K. -- that comprise Walmart's international division, which had net sales of $32.3 billion in fiscal 2019. Walmart International does not break out sales figures by country. Net sales in China rose 1.4% in the first quarter this year, and same-store sales, considered a key indicator of a retailer's health, grew 0.4%.
Brett Biggs, Walmart's chief financial officer, said in an earnings presentation in February that net sales in China rose 1.4% in the first quarter this year, and same-store sales grew 0.4%. He said Sam's Club continues to perform well there, and sales of fresh foods "were good across all formats and channels." Overall, he said, "we're pleased with our omnichannel initiatives."
Much of Walmart's investment in China over the past few years has focused on increasing its online presence as it battles digital shopping mall Alibaba, which owns China's second-largest food delivery service and has a growing interest in groceries and household items.
Walmart and JD.com jointly invested $500 million last year in the app-enabled grocery delivery service Dada-JD Daojia. In November, Walmart said it was testing same-day grocery delivery through WeChat, a messaging app developed by another Walmart partner, social media firm Tencent Holdings. The delivery service performed so well, Biggs said in February, that it was expanded to nearly 300 stores.
Analysts say Walmart has found the strategy of doing business both in stores and online works well in many international markets, as it has in the U.S.
Business on 07/09/2019