Walmart in China: it’s the boxes, stupid

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It ain’t about any (alleged) bribery. It’s about the boxes. That’s the word from Walmart, the big box retail behemoth, on why it’s slowing down new store openings in China, where it’s been struggling.

As allegations of bribery in Mexico hang over its annual meeting on Friday, a top Walmart executive said it was cooling expansion in China to make sure it could find plain old box-shaped stores, which shoppers like, and no geometrical oddities.

Doug McMillon, chief executive of Walmart International, said the retailer had too often made bad real estate choices by spreading stores over two or three floors, or putting them in places with so many pillars that they disrupted shoppers’ ability to move.

“We’ve been pressing forward for growth in China and in some places settled for suboptimal situations, and that’s the primary reason why we want to make sure that we’re going at the right pace,” he told journalists gathered ahead of the annual meeting.

He took care to point out that fewer new stores in China did not reflect the fall-out from Mexico, where the New York Times alleged it paid bribes to secure new store permits and then hushed up the practice more than six years ago.

Asked about the affect of that controversy, he said: “I’m not expecting any impact as it relates to new store growth. We’ll see. Only time will tell.”

When Walmart announced quarterly earnings this month, it said it would slow its store growth in China and instead focus on “the basics”. In that quarter, China was the only country where its sales grew slower than the overall market.

“We want to make a store that is easily accessible for the customer,” McMillon said. “Easy to get in and out, [where] they have sight lines where they can see how to shop that store, and that’s best done on a single-level rectangular box.”

(And this is not just a China thing. Customers everywhere want the same, he said, because it saves them time.)

In the past twelve months Walmart opened 37 new stores in China, taking its country total to 370. Walmart’s plans for new stores this year are still under review, but McMillon said the expansion would be slower than Walmart had previously expected.

He recounted how real estate deals from China – and everywhere else – needed to be approved at its headquarters in Bentonville, Arkansas, by a real estate committee that meets once a month.

“We joke with some of the markets that they need to reinvent the square or the rectangle,” he said. “Some of the shapes we see from them in terms of layouts … I don’t even know what those shapes are.”

Related reading:
Bribery in Mexico: what’s the big deal?, beyondbrics
Walmart ready for more M&A in China, beyondbrics
China growth paradox baffles Walmart, FT
Walmart presents irresistible target in China, FT
Walmart finds online ally in China, beyondbrics
Walmart slims down stores for China, FT

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