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THE WAL-MART EFFECT

Selling Eel and Chicken Feet -- Plus M&Ms and Sony TVs

Wal-Mart is growing fast in China, where its stores are local attractions. The firm's overseas empire is changing buying habits in 10 nations.

November 25, 2003|Tyler Marshall | Times Staff Writer

SHENZHEN, China — Lau Man-ching has a new habit: Three times a week, she shops at Wal-Mart.

Like a growing number of middle-class Chinese consumers, the 30-year-old real estate agent is drawn by the dazzling array of goods offered under one roof. Lau buys most of her produce at a Wal-Mart Supercenter near the Hong Kong border, occasionally venturing upstairs to browse through the aisles of clothing, appliances and sporting goods.

The fact that sales and checkout clerks smile and try to help is a bonus. For China's long-suffering consumers, weaned on long lines and patient waits for shoddy merchandise, the change is almost revolutionary.

"It's fast, it's convenient and it's clean," Lau said. "And it's all right here."

After more than eight years of treading cautiously, Wal-Mart is pulling out the stops in China, one of the latest additions to a fast-growing overseas retail empire that includes more than 1,300 stores in 10 countries.

After stumbling badly in Germany, where it met fierce resistance from competitors and labor unions, Wal-Mart started doing its homework. In Britain, it purchased the ASDA department store chain, acquiring not only one of that country's largest retailers but also picking up the popular George fashion line that it is importing into the United States. Wal-Mart entered Japan's notoriously closed market by purchasing a 34% share of Seiyu, a troubled department store chain.

Along the way, Wal-Mart has not only introduced discount shopping but transformed buying habits. In Mexico, where Wal-Mart opened its first foreign outlet in 1991, the company's Walmex division accounts for more than half of all supermarket sales. Consumers used to getting their meat from neighborhood carnicerias are buying beef wrapped in plastic. They've also developed a taste for bagels.

In China, the spectacle of shoppers crowding to buy Max Factor beauty products, Johnson & Johnson lotion and Sony TV sets is a powerful sign of how consumer tastes are changing in the world's most populous country. Exotic foreign goods that would have been hard to come by a decade ago -- from potato chips to feminine hygiene products -- are brisk sellers today.

Many customers here treat Wal-Mart in much the same way an American might venture into Harrods in London. Families dress up and go there for the day. Young people visit on dates. The store is a must-see for out-of-town visitors.

One Shenzhen shopper said she'd brought her four grandchildren to Wal-Mart just to look around. "I don't have any plans to buy anything today," she said.

Still, business is robust. A Sam's Club membership store owned by Wal-Mart in Shenzhen set a single-day sales record for the company two years ago, taking in $1.7 million during the Chinese new year holidays.

Because of such volume, Wal-Mart is about to embark on an ambitious expansion in China, including its first outlets in the consumer strongholds of Beijing and Shanghai. The company, which employs 15,000 people in China, will have more than 30 stores open in the nation by year's end, up from 25 last year.

To American eyes, the selection offered at a Wal-Mart in Shenzhen is remarkably similar to that found in a U.S. store, but with an overlay of products catering to Chinese tastes. In the food section, white bread, U.S.-style birthday cakes, sliced pizza and breaded fried chicken are lined up next to eel, chicken feet, pork meat balls and frozen dim sum.

The store's pharmacy is divided in two: one area filled with Western brand-name medications such as Tylenol, the other with Chinese herbs and a stack of dried sea horses. (The Chinese boil them in soup for added energy.)

Wal-Mart executives claim chewing-gum sales per store are higher in China than in the U.S. "People say the Chinese don't like sweets," said Joe Hatfield, the president of Wal-Mart's Asian retail operation. "But we sure sell a lot of M&Ms."

It's not just Western goods that are new. Wal-Mart is mass-marketing Chinese products that were previously available only in isolated parts of the country. Suddenly, peanuts and coconut juice from Guangdong province in the south are available to Wal-Mart customers in western Yunnan province. Hams and mushrooms from rural Yunnan, along with oats from coastal Fujian province in the east, are on shelves in Shenzhen in the south.

Wal-Mart's start in China was rocky. It first failed to break into a highly competitive market in Hong Kong in the mid-1990s. Then, just a few months before opening its first two stores in mainland China in 1996, the company split with its Asia joint-venture partner, Thailand-based Charoen Pokphand Group.

Wal-Mart also proved less nimble than some of its competitors, including French retailer Carrefour Group, and got caught up in China's vast central bureaucracy.

But before long, Wal-Mart found its way out of the thicket.

It has won government approval to open three outlets in Beijing. One of those -- a Sam's Club warehouse store -- opened in July, with two others scheduled to open next year. Planning is also underway to expand into Shanghai, with a target date of 2005 for opening the first store, according to company officials.

Hatfield, who has lived in China for nine years, sees only more growth in the future.

"What this place is going to look like 10 to 20 years from now -- and what the consumer will be ready to buy -- is hard to even think about," Hatfield said. "There are 800 million farmers out there who've probably never even tasted a Coke."

*

Times Hong Kong bureau researcher Tammy Wong and staff writers Evelyn Iritani and Abigail Goldman contributed to this report.

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