The Asian reporter. (Portland, Or.) 1991-current, June 20, 2016, Page Page 4, Image 4

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    ASIA / PACIFIC
Page 4 n THE ASIAN REPORTER
June 20, 2016
Wal-Mart seeks overseas success by going native in China
By Anne D’Innocenzio
and Paul Wiseman
AP Business Writers
S
HENZHEN, China — Zhong
Guoyan sifted through piles of fish
at a Wal-Mart in Shenzhen, one of
China’s largest cities. She studied the fins,
to make sure they were bright red and
firm. She peered at the eyeballs — were
they bulging?
“When I come here, I have a look,” she
said. “If it’s good, then I will buy it. If it’s
only cheap, I won’t buy it.”
In American Wal-Marts, customers
don’t get to fondle their fish. But America
is not China, as the world’s biggest retailer
has learned. If the Arkansas-based com-
pany wants to win over foreign consumers,
it has to shed some of its American ways,
and cater to very different customs and
conventions that are fast changing.
Zhong eventually tossed a couple of fish
into a plastic bag — a small victory in
Wal-Mart’s struggle to build an interna-
tional empire.
The stakes are high: The company can’t
count on much growth in the U.S. — it’s
facing challenges at home with intense
competition from Amazon.com and dollar
stores — so the retailer is depending more
on its operations overseas.
China is the ultimate prize. The Chinese
grocery market, already the world’s
largest at $1.1 trillion per year, is expected
to grow to $1.5 trillion in sales in just the
next four years, says IGD, a global
consumer products research firm.
“China remains a strategic market for
our future,” Doug McMillon, CEO of Wal-
Mart Stores Inc., recently told investors.
Getting the food business right is critical
for Wal-Mart. Shoppers buy groceries
more often than anything else. If
Wal-Mart can get them in the door to buy
food regularly, perhaps they will visit more
frequently for items like pajamas and
coffee makers — and eventually become
loyal online customers, too.
The company has taken some lumps
trying to cross borders in food retailing.
Overall international sales growth
dropped 9.4 percent last year largely
because of the strong dollar. And while
Wal-Mart’s overseas business had a strong
start this year, it faces long-term
challenges. Wal-Mart gave up in Germany
and South Korea in 2006. It’s closing stores
in Brazil.
Overseas, Wal-Mart lacks the scale to
squeeze local suppliers on price as it does
in the U.S. It also faces nimble compet-
itors. And it has struggled to duplicate its
bedrock strategy of constant bargains.
But Wal-Mart has learned over the
years from its missteps, discovering that it
needs to adapt to local ways and that
patience pays off.
In Mexico, Canada, and Japan, it’s won
shoppers over time. In Chile, it launched a
corporate culture campaign and worked
closely with suppliers to coax them into its
way of doing business.
“Wal-Mart,” says Bryan Roberts of the
London retail consultancy TCC Global, “is
a very determined organization.”
Winning over picky consumers
In the unruly Chinese market, some
competitors cut corners, mislabelling
products or even selling tainted foods. The
risks have made Chinese consumers
unusually wary.
Sean Clarke, CEO of Wal-Mart China,
based in Shenzhen, previously worked in
Britain, Japan, Germany, and Canada.
China, he says, “is easily the most
challenging market to operate ... There is a
huge level of distrust.”
Wal-Mart had a difficult time promoting
“everyday low prices” — promising the
lowest prices on a basket of goods every
time consumers shop.
Some rivals poached the “everyday low
price” message, confusing customers.
Wal-Mart scrambled to find the right
slogan. In 2012, it introduced “Worry Free”
— implying quality and reassuring
shoppers who worry that deals will expire
before they get to the store.
The company’s message: Efficiency and
good management, not cutting corners,
make everyday low prices possible.
The message has sometimes been
muddled. When Wal-Mart came to China,
it was slow to tailor its offerings to local
tastes. Realizing its mistake, Wal-Mart
gave local managers more leeway to run
their businesses.
But that approach backfired, leading to
a series of food-safety violations. In one
particularly
embarrassing
episode,
Wal-Mart had to recall donkey meat — a
delicacy in China — after DNA testing
showed it contained traces of fox meat.
In response, Wal-Mart slashed nearly
two-thirds of its 20,000 suppliers. Now,
Wal-Mart knows exactly where each prod-
uct comes from. Wal-Mart also took back
some of the responsibilities from local
managers and increased its investment in
food safety. It introduced mobile testing
labs that check for pesticides on vegetables
and fruit and employed handheld devices
to check temperatures of meat products.
Gaining control over suppliers, costs
In America, Wal-Mart has the clout —
25 percent of the U.S. grocery business —
to force suppliers to do things the
Wal-Mart way. That means cutting costs
to the bone. In return, the suppliers enjoy
steady demand from Wal-Mart, so they
don’t have to spend so much on advertising
or worry about paying extra costs to staff
their factories to meet unexpected peaks in
demand.
In China, things are tougher. Wal-Mart
accounts for just 2.3 percent of the grocery
market. Ninety-five percent of all products
Wal-Mart sells in China are supplied by
Same-sex kiss nixed from Les Miserables in Singapore
SINGAPORE (AP) — A kiss between two male
actors has been removed from a production of the
musical Les Miserables in Singapore following
complaints from the public.
Singapore’s Media Development Authority
(MDA) told the show’s organizer, Mediacorp
VizPro, that the “General” rating it had given the
show was based on a script that did not include
the same-sex kiss, local media reports said. The
show’s producers then decided to remove the
kiss.
“Under our classification code, such a scene
would fall under an ‘Advisory’ rating,” the MDA
said in a statement, according to The Straits
Times newspaper. “The applicant decided to
remove the scene so as to keep the ‘General’
rating for the rest of its run. MDA will take action
against this breach of licensing conditions.”
The head of Mediacorp VizPro International,
Moses Lye, said the scene was meant to be comic.
“On June 3, we took immediate action and
worked with the producers to adapt the scene,”
he was quoted as saying by Channel News Asia.
The authorities in Singapore are known to
enforce often stringent guidelines for public
performances. In February, Madonna was forced
to tone down her concert in the Southeast Asian
city state to conform to the MDA’s standards.
Les Miserables, based on Victor Hugo’s novel of
the same name, was originally staged in Paris in
1980. It later enjoyed a long run on Broadway
and has run continuously in London since 1985.
The show opened in Singapore in May and runs
through July 24.
COMPETING IN CHINA. A shopper uses a net
(top photo) to catch live fish on sale at a Wal-Mart in
Shenzhen, in southern China’s Guangdong province.
In American Wal-Marts, customers don’t get to fondle
their fish. But America is not China, as the world’s big-
gest retailer has learned. If the Arkansas-based com-
pany wants to win over foreign consumers, it has to
shed some of its American ways, and cater to very
different customs and conventions that are changing
fast. In the bottom photo, a worker prepares cooked
ducks for sale at the Wal-Mart in Shenzhen. (AP
Photos/Ng Han Guan)
local companies.
The Chinese supply chain is also
notoriously
inefficient.
For
years,
Wal-Mart and other foreign companies
didn’t deal directly with their suppliers,
working mostly instead through a
labyrinth of middlemen.
Three years ago, Wal-Mart decided to
cut out the middlemen and route as many
goods as possible through 20 of its own
distribution centers.
By eliminating the go-betweens,
Wal-Mart could negotiate directly with
suppliers and knock down costs — often by
10 percent or more.
The change also gives Wal-Mart more
control over the quality of the food being
sent to its stores and the efficiency with
which it gets to them. Before the switch,
only about 75 percent of orders would
actually reach Wal-Mart stores; now 95
percent do.
Fighting competitors
Wal-Mart landed in China in 1996, a
year behind Carrefour, opening two stores
in Shenzhen — a Wal-Mart supercenter
and a Sam’s Club. They were the first
foreign retailers to provide the big-box
shopping
experience,
which
offers
everything from clothing to food. After
investing in a Taiwanese-owned retail
chain in 2007, Wal-Mart became China’s
biggest super-sized store chain and
expanded its lead for the next two years.
But local and regional competitors
quickly closed the gap, sometimes
undercutting Wal-Mart prices because
they have closer ties to local suppliers and
can negotiate better deals.
Wal-Mart insists its market share for
the big-store sector has increased over the
past three years. But Euromonitor says
Wal-Mart’s market share has fallen to 9.6
percent (No. 3 in the market) after peaking
at 11.6 percent in 2009.
Wal-Mart last year announced plans to
add 115 stores in China by 2017, bringing
the store count to 530. It’s concentrating in
markets where it’s already established,
including its stronghold in the south. And
it has given up on about 30 lackluster
stores.
Meanwhile, Wal-Mart faces another
challenge in China, and it is not from other
big box stores.
Across the globe, shoppers are increas-
ingly buying online or at small stores. But
in China, that trend is more dramatic. It
has already overtaken the U.S. as the
world’s biggest online marketplace.
AP Business writer Paul Wiseman
reported from Washington, D.C.
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