American retailer Walmart will slow down expansion in China after admitting that being flexible does not always yield profits.
The world’s retail giant, with annual sales of more than US$440 billion, opened multi-level and odd-shaped stores in China which made it hard for customers to navigate around. Hence, it will trim the sizes of the stores it planned to open in the Chinese market.
“These big box retailers are recognising from their current operations in developed markets that perhaps the hypermarket isn’t a forever format,” said Natalie Berg, research director at Planet Retail.
Walmart also plans to slow down in Brazil after losing money attributed to difficulty in drawing customers to its consistent every day low price strategy which is opposite to the custom of Brazilians who are more attracted to supermarket’s mark-downs and mark-ups. The company also struggled to keep control of its operating costs in Brazil.
Meanwhile, store openings in Mexico will be delayed after Walmart has been subjected to a tougher approvals process after allegations that it had bribed authorities to secure store permits about six years ago.
“Our goal is to achieve profitability and returns that are more balanced and to do that, we must improve operational and sales productivity in some of our emerging markets,” said CEO Mike Duke.
Walmart’s operating income rose slightly in China while it reported a slight loss in Brazil. International sales rose 7.2 per cent for the quarter ended July, lower than the 10.9 increase in the previous quarter.
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