Wal-Mart Having Trouble with Chinese Market
Wal-Mart known for its low prices is struggling in the marker where in consumers say that price is not one of the drivers when deciding what to buy. Now Wal-Mart is changing their approach by closing some big box stores which never caught the attention with local residents, instead these stores have focused on private labeled imports and products, plus placing a stamp on quality and safety.
Wal-Mart decision to close some stores since they got too engrossed with expansion and now the stores are focusing on maintaining quality first. Grabbing the Chinese market is crucial for Wal-Mart’s ambition to reach the top spot on being the number one retailing store in China and as for the moment the store ranks third after Sun Art Retail Group Ltd along with State backed enterprises. Wal-Mart International has contributed a third of their net sales and is now suffering from aggressive expansion and Doug McMillion its new CEO who leads the international unit is now concerned.
Wal-Mart as forecasted last Thursday a lower full year profit that some analysts have already been expected for the 2015 fiscal year. Its international net sales for the fourth quarter has decreased 0.4 percent and the November to January income has also fell 45 percent as the company was hit by store closures in Brazil and in parts of China and terminated agreements in India.
Actions were initiated in Brazil, Mexico and China to further improve the company’s operating performance and considered it as its priority for the 2015 fiscal year. Also Wal-Mart is looking into having private labeled product make up a fifth of their China sales within the next ten years. Normally private labels are priced 10 to 40 percent lower than local brands and profit margins are high for retailers.
Furthermore Chinese consumers are now searching for foreign brands due to its reliability and quality, but these consumers are seeing mixed messages from Wal-Mart as the company is using a concept of selling products at everyday low prices, and these Consumers are thinking that this concept as being cheap and unsafe.