Recently, Greg Foran, President and CEO of Walmart China visited Walmart Qinghe store in Beijing and stated that in the past 18 months, Walmart has made great strides in reducing merchandising and operation costs, selecting suppliers on a nationwide and even worldwide scale, centralizing merchandise, reducing product prices, and offering Special Worry-Free products which guarantee competitive prices for more than six months. By delivering more products to stores through Walmart’s seven distribution centers and seven fresh distribution centers, Walmart is able to improve efficiency, guarantee quality and control prices. Walmart also applied its world-class inventory management system, which effectively controls costs and results in further reduced prices. “We hope that in the next year, Walmart China will become the price leader of the retail industry,” he said.
Regarding imported products, Greg Foran believes that as Chinese customer demand for imported goods increases, Walmart will continue to add imported products to its shelves. By leveraging its global sourcing system, Walmart is able to introduce quality imported products at relatively low prices. Using Walmart Qinghe store as an example, its display floor of imported products increased by around 50% over the last year while sales in this section nearly doubled. Many products such as cocoa dusted truffles from Belgium, pistachios from the US and wines from various countries around the world are directly imported by Walmart. 907 g direct imported from the US and Walmart exclusive pistachios sell at 99.8 yuan; a number of wines from France and Africa are marked from 29.8 yuan to 58 yuan per bottle; and a certain wine directly imported from France is 38 yuan per bottle and 99 yuan per set of three.
According to Greg Foran, “Our merchandising team is adding new imported products every week. A year from now, Walmart will add another 400 to 500 imported products.” He estimates that after a year, sales of imported food products at Walmart Hypermarkets will double, and sales of directly imported products at Sam’s Clubs, which have performed exceptionally well, can grow more than five times.
Greg Foran said that Qinghe, which is located outside Beijing’s fifth ring road, is a good example of new commercial centers and business areas in Beijing. He said that the area is showing great promise for purchasing power and emerging market demand. The three new stores and three remodeled stores opened this month as well as the seven new stores that will soon open by the end of this year are all located in similar types of emerging areas in the city. Walmart is recognizing emerging business areas and great purchasing power in cities both big and small across China. Over the last two years, with greater attention paid to price and quality, Walmart has built up a new image of quality and price for its new stores in such emerging business areas.
Although the disposable income of Chinese customers continues to increase, customers are still most concerned about food safety and authenticity, price and availability. At the Walmart Qinghe store, Greg Foran demonstrated several excellent products with competitive prices to journalists. As a result of Walmart’s centralized merchandising, control of operational costs and scientific management of suppliers, these Worry-Free Price products are approximately 20% cheaper than similar competitor offerings. For example, 10 kg of Fuyuanpei rice is sold at 44.8 yuan/bag, which means the price is equal to 2.24 yuan/jin (Chinese unit, 0.5 KG). While this is cheaper than bulk price, the quality is still excellent. This great price and quality has been warmly welcomed by customers across the country. During the first month of sales, Fuyuanpei rice sold over 30,000 bags across the country and over 1 million bags in total since March.
Greg Foran emphasized that this price is not a short-term sales promotion, but a Worry-Free Price that will last for more than six months. He said the reason why Walmart can provide products at such low prices is due to the consolidation of merchandising resources. “We chose quality suppliers in Northern China and purchased the products through centralized merchandising. We shipped the products to Walmart distribution centers and then delivered them directly to the stores.” Since June, Walmart has been selecting categories that closely relate to the daily needs of customers in its hypermarkets and provides such products at Special “Worry-Free Prices” every month. The maximum price cut has exceeded 30%. Currently, products in ten categories are provided at such prices, and have resulted in spectacular sales performance.
This price leadership is also demonstrated at Sam’s Club, Walmart’s membership-only retail warehouse clubs. The price of an imported Blueair air purifier 303 in Sam’s Club is sold at a price almost 10% lower than a well-known online retailer. At the beginning of November, Yizhuang Sam’s Club posted a record of over 100 air purifiers of Blueair brand sold in one day. The price of 1.36kg pistachios is only 189 yuan and 1.816kg Butter Cookies is 128 yuan, while two bottles of directly imported Australian wine are sold at only 120 yuan. Quality imported products at low prices have consistently shown strong advantages at Walmart Hypermarkets and Sam’s Clubs.
Enriching its own brand product line is also a key initiative for Walmart to strengthen price leadership. By leveraging the company’s scale and merchandising power, Walmart partners with trustworthy suppliers to make sure that the quality of its own brand products matches other brands while maintaining 30 to 40% lower prices. This has won the trust of customers. Walmart’s own brands include such labels as Great Value, Main Stay and Simple Basic, covering more than 1,800 items. Greg Foran hopes that the number of Walmart’s own brand items can grow by 100% over the next year.
Fresh products are key for brick-and-mortar retailers in attracting customers. This is also a category that Greg Foran considers the most important for success. Price Point products such as Kiwi fruit at 1 yuan/each, pomegranate fruit at 2 yuan/each and pear at 3 yuan/each, Great Deal sales promotion of clearance fruits and vegetables and low-price vegetables are all initiatives that Walmart adopts to improve its price position in fresh products. In addition, over the past months, Walmart’s merchandising team conducted careful review and selection of its pork suppliers, and reduced the total from over 300 suppliers to about 120. By doing so, this helps guarantee quality and reduce prices.
Greg Foran cares about more than just prices, but also the safety and quality of fresh foods. At the fruit processing room in the backroom of Qinghe store, journalists saw orderly stacked boxes of fruits and vegetables with multi-colored labels to show the product’s receiving date, which helps associates to follow principles such as “first in first out” and “every day delivery” when replenishing the shelves and to ensure the freshness of each product.