Another western retailer has realized it’s time to take the foot off the gas pedal in China.
Wal-Mart, the world’s biggest retailer, is to close about 25 stores in China as it moves to centralize its network of stores around cities where it already has a presence before moving into new regions.
The stores that will close have been chosen based on performance, which suggests that Wal-Mart, like a lot of western retailers, may have expanded too fast in China’s second-tier cities or other locations with lower average spend or higher costs.
The US firm said it will still be opening more stores than it closes, so the overall trend remains upwards . It plans to open around 100 stores to 2015, including 30 this year. Currently it has 398 in China.
Five years ago, retail analysts predicted that Wal-Mart would rapidly expand to have 1,000 or even 2,000 stores in China, but clearly those predictions now look unrealistic.
Wal-Mart executives said some of the stores to be closed were gained through a 2007 acquisition of Trust-Mart, a Taiwanese chain that operated more than 100 big-box stores in mainland China.
That acquisition was meant to mark a turning point in Wal-Mart’s China strategy as it sought to make up for lost ground against other western retailers in China. But Wal-Mart now admits that it struggled to incorporate some of the Trust-Mart stores into its own operations. See this earlier post.