Wal-Mart Stores Inc said it will open up to 110 new stores in China over the next three years and invest in its distribution centers and remodel existing stores.
"China is a key strategic market for Wal-Mart," President and CEO Mike Duke said during a press conference in Beijing on Thursday. "Our management team is committed to continued growth in large and smaller cities across China, and doing it in the right way."
Greg Foran, Wal-Mart China president and CEO, said the company's focus in China in the future will be investment and development, and he stressed that quality should take precedence over quantity as the company grows in China.
"We adapt to market changes by making adjustments and innovations, and we will modify our operations in China by upgrading the merchandise as well, especially in fresh food and grocery," he said. "We will improve operations and customers' experience, establish best-in-class food safety practices, and eliminate unnecessary costs in order to build an even stronger business."
Foran said the company many of the new stores will be in tier-three and tier-four cities, with expansion focused on supercenters and Sam's Clubs.
The retailer opened two Sam's Clubs in Hangzhou and Suzhou this year, bringing the total number in China to 10 and expects to open more in the next three years. Foran said that Sam's business model is ripe for the burgeoning middle-income, upper-income consumers.
The retailer aims to remodel about 45 stores this year, 55 next year and 65 during the following year. The remodeling is to improve store operations and customer in-store experience by optimizing the sales floor, improving parking and access, and increasing the energy efficiency of facilities.
Wal-Mart will also invest in more distribution centers as a long-term strategy and enhance its logistical network. By the end of next year, all stores will have access to ambient and chilled distribution networks, said Foran.
The company has closed stores that have not performed competitively, representing up to 9 percent of the company's total number of stores and 2 percent to 3 percent of total sales through next year.
Wal-Mart's push for retail openings occurs as retail value growth in China remained "vigorous" in 2012, despite slowing growth in a decelerating economy, according to market research from Euromonitor International. "The central government's emphasis on domestic demand to boost the economy through stimulus packages has been translated into dynamic retailing market movement," wrote the analysts.
In addition, rising disposable incomes and "the pursuit of better lifestyles among Chinese consumers are also expected to underpin" retailing's growth, the analysts said.
Wal-Mart also hopes to profit from China's burgeoning e-commerce landscape, where the retail giant is expected to record 32 percent annual growth between 2012 and 2015, according to Bain & Co.
"Customers are using technology more, and especially here in China," Duke, Wal-Mart's CEO, said. "We love customers to understand price, and the safety of the product they're purchasing. E-commerce is a great enabler allowing Walmart to grow globally."
