U.S. retail chain Walmart (WMT) is hoping cheap croissants and private-label detergents will help them clean up with struggling Chinese shoppers.
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According to a report in Bloomberg, Walmart and rivals in China including Wumart and Alibaba (BABA) Group’s Freshippo are streamlining their hypermarkets and focusing on budget goods and prices.
German Tactics
That means less of the name-branded goods on the shelves and more of their own private label lines aiming to win over consumers with lower prices. Indeed, some analysts state that Walmart is mirroring the tactics of German discounters Aldi and Lidl, including low-priced bakery goods.
However, China’s economic issues, mainly stemming from a too hot property market, the tariff hits from the U.S. and deflation, have left Chinese consumers with little taste for spending.
According to the China Chain Store & Franchise Association, sales at China’s top 100 operators were flat last year, while store counts fell nearly 10%.
“Chinese consumers are becoming more sensitive to prices as they expect to earn less in the slowing economy,” said Jason Yu, Shanghai-based managing director of CTR Market Research. “The growing urge for value-for-money offers huge demand for discounters.”
International Growth
Walmart opened its fourth “community store” in Shenzhen in September, targeting middle-class shoppers with “trusted quality” and “heart-racing prices”. Smaller than hypermarkets, the outlets feature simpler layouts and shelves stocked heavily with its Marketside brand, from cream puffs to grape juice for 9.99 yuan (S$1.80).
Wumart operator Wumei Holdings has launched budget markets in Beijing. Freshippo has 300 stores under discount chain Chaohesuan NB, where store brands make up 60% of sales, and plans to step up its expansion.
China is an important market for Walmart as it continues to grow international revenues. Walmart International is aiming to reach $200 billion in sales by 2028, up from around $120 billion at present.
Earlier this year Walmart said that in China, 50% of sales are online, supported by urban delivery models and dark fulfillment centers.
Is WMT a Good Stock to Buy Now?
On TipRanks, WMT has a Strong Buy consensus based on 29 Buy ratings. Its highest price target is $129. WMT stock’s consensus price target is $114.89, implying a 10.81% upside.
