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Wal-Mart brand survives rocky start, dazzles China

By Tyler Marshall
Los Angeles Times

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

Like a growing number of middle-class Chinese consumers, the real-estate agent is drawn by the dazzling array of goods offered under one roof. Lau, 30, buys most of her produce at a Wal-Mart Supercenter near the Hong Kong border, occasionally venturing upstairs to browse through the 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 1,200 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 percent 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 also have 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 in China 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.

Business is robust. A Wal-Mart's Sam's Club membership store 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 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. Wal-Mart also is mass-marketing Chinese products that previously were 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, only 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 became caught up in China's vast central bureaucracy.

Before long, though, 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 under way to expand into Shanghai, with a target date of 2005 for opening the first store, according to company officials.

Joe Hatfield, president of Wal-Mart's Asian retail operation, sees only more growth.

"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.

Copyright © 2003 The Seattle Times Company