Walmart Expansion

Welcome to China. With 13 Billion citizens, a double digit growth in PPP for 12 consecutive years. China no doubt will be one of the most attractive market to any Multinational Corporate especially Retail

One very handy and general conclusion is - China is a huge market. But the bi-polar wealth distribution which is still widening today - has torn the market into segments. Some of them are looking for low prices - in extreme cases some of them are so desperate the intrinsic value was even twisted - like the fake milk powder, fake rice, etc with a long list - to challenge the price. Another part of the market are so desperate for quality, partially driven by the fragile confidence on the self-regualtion of compliance in the market, partially driven by the hunger of high quality goods which are not common 20 years ago, some driven by the corruption earlier. E.g. LV, Gucci, Muji, recent incident of wiping out the milk powder supply in HK.

The EDLP strategy Walmart has adopted since they arrived China looks embarrassing as in general market expects MNC to be more quality assurance but not EDLP. they can find EDLP from wet markets and local markets as market compliance and conditions are less stringent

Lets try to put ourselves into their shoes by doing a simple trade off analysis. something has to be given up in order to trade for the new market segment.

Eco system - Low Price model needs high traffic, good conversion and Average Transaction value. China has the traffic but not likely the Conversion and ATV - which is more likely yo be favoured by a market with low Gini Index, A quality model seems to be more inline which is more favourable

Does this mean we can give up the Low Price Model - cannot decide yet as not enough info.

Lets look at the characteristics: Low price model focus on the Economy of Scale which relies on efficiency - indirectly linked to the infrastructure of the country. But Quality-wise, branding, marketing, word of mouth are more...