Walmart and China’s Trustmart
China WILL Buy (much of) Trustmart
The following article, translated out of Modern Weekly, asks whether or not Walmart’s planned acquisition of Trustmart in China will go through or not this time around. My guess is yes, Walmart will buy Trustmart, and use it to expand, in extraordinarily rapid fashion, throughout much of China. Why wouldn’t they? (although the Chinese government might step in and block Walmart’s way) What do you think?
Is Walmart’s Trustmart Ambition in China for Real?
Walmart’s bid for Trustmart in China has once again been announced. Will this flower fail to bloom yet again?
Does Walmart really want to buy Trustmart in China?? Recently, foreign media sources have been spreading this nugget of news: Walmart is on the verge of spending $1 Billion to acquire China’s chain supermarket Trustmart. If the acquisition is successful, in one fell swoop Walmart will become the largest mass retail merchandiser in China.
But Walmart and Trustmart have both declined to comment on this issue in recent days.
100 New Stores for Walmart in China
If the news is true, Walmart stands to take over more than 100 stores and 30,000 workers in 20 different provinces and cities throughout China. Walmart can also get rid of its “ten year itch” in China — entering Guangzhou! In the ten years since Walmart has entered the Chinese market, it has developed 66 stores, including stores in the South-West and South of China, but Walmart has thus far failed to penetrate the strongest retail market in Southern China, Guangzhou. It is important to keep in mind that Trustmart has 13 stores in Guangzhou, China, while Walmart’s largest competitor, Carrefour, only has five stores in Guangzhou.
Walmart Losing in Other Countries
From Wallmart’s perspective, carrying through with this acquisition in China seems like a necessary step. After all, it can be said that Walmart’s path in other countries this year has been chock full of painful thistles and thorns. In May, Walmart withdrew from the Korean market. In July, Walmart sold its 85 stores in Germany because of fierce competition, strong unions, and serious labor restrictions. Walmart is also fighting tooth and nail to hold its place in Japan.
Its stumbling in other countries has made the Chinese market of critical importance to Walmart’s overseas expansion. The Chinese economy has maintained a growth rate of more than 10% annually for many years, and the super-mart retail industry in China has grown at a 15% annual rate over the past several years.
The Chinese Middle Class Likes Walmart
The takeoff of the Chinese economy has caused the middle class in China to rapidly expand. With its increasing income, the Chinese middle class likes to buy household and consumer products from well-known foreign brands like Walmart, Carrefour, and Ikea. “China is the only country in which Walmart has replicated its American Model of success.” Analyst Bill Dreher predicts that by 2010, Walmart will have already built more than 400 stores in China.
Currently, the retail industry arrangement of China does not resemble that of other countries such as America – there is no clear leader — none has emerged up to this point. This is one of the reasons for fierce competition between foreign giants such as Walmart & Carrefour and local Chinese players like Hualun & Shanghai’s Bailian. They all want to become the leader of the Chinese retail market.
So whatever the result of the rumored merger between Walmart and China’s Trustmart, the competition has only just begun to heat up in China’s retail market