Walmart China is expanding rapidly despite a severe slowdown in consumer spending, with its Sam’s Club membership warehouses and ultra-fast delivery services driving growth under chief executive Christina Zhu.
The retailer’s Chinese operation generated $24.6 billion in sales in its latest financial year, up 19.3%. Growth accelerated to 20.7% in the most recent quarter, compared with 5.9% for Walmart worldwide.
China accounts for only 3% of Walmart’s global business, but the performance is notable as consumer-goods retail sales rose by just 1.1% in the first eight months of the year. Sales increased by only 0.4% year on year in August, amid high unemployment and a property crisis.
Sam’s Club drives Walmart China growth
Sam’s Club, Walmart’s paid-membership warehouse business, has become the main engine of its expansion in China. The number of clubs rose from 15 in 2016 to 67 in May, with the division estimated to generate about 70% of Walmart’s Chinese revenue.
Membership reached 10.7 million in June. A basic membership costs at least 260 yuan a year.
Zhu said the business was aimed at “upper-middle-class families in Chinese cities” and that Sam’s Club saw itself not simply as a retailer, but as “the buying agents for members”.
The warehouses combine large, American-style stores with products tailored to local tastes. Shelves in the Shenzhen Qianhai branch are stacked with bulk purchases including mooncakes and abalone gift boxes for the Mid-Autumn Festival.
The clubs have also become destinations for shoppers from Hong Kong. Visitors cross the border to buy products including roast chicken, toilet paper and large bottles of laundry detergent, while travel operators have arranged shopping trips to Shenzhen’s Sam’s Club and rival Costco.
Customers in Shenzhen can reportedly wait for more than an hour to enter during major holiday periods such as Chinese New Year.
Analysts have credited Sam’s Club’s combination of relatively low prices and a premium, carefully selected range with helping Walmart retain its appeal in China. The company has also maintained its emphasis on food safety and quality control while adapting its marketing, supply chain and portion sizes to the local market.
Walmart China shifts to digital delivery
Walmart’s recovery followed a restructuring that began in 2016, when it started closing weaker stores and prioritising Sam’s Club and online services. The company now earns more revenue in China than it did in 2019, when its presence in the country was at its largest.
Much of that turnaround has taken place since Zhu became president and chief executive of Walmart China in May 2020. She was the first woman and the first native Chinese person to hold the position.
Her central priority has been to make the Chinese operation digital-first. Stores operate as fulfilment centres, while Sam’s Club forms part of a network of so-called cloud warehouses designed to deliver groceries to customers who do not live near a branch.
Orders can arrive within 30 minutes in some parts of China. Walmart’s former chief executive Doug McMillon said last year that 80% of orders in the country were delivered within an hour.
Zhu said Chinese shoppers had become among the most demanding in the world after gaining access to an unusually wide range of choices. She contrasted the local expectation of an eight-minute walk to a shop with the longer journeys customers in western markets might accept.
Walmart entered China in 1996 with a Supercenter and a Sam’s Club in Shenzhen. Its continued growth contrasts with the difficulties faced by other foreign brands, including Starbucks and Nike, as domestic rivals such as Luckin Coffee and Anta Sports gain ground.
“I only have one boss, and my boss is the Chinese customer,” Zhu said, adapting Walmart founder Sam Walton’s well-known maxim.
