China Strategies: Walmart and Starbucks

After building an empire on cheap imports from China, Walmart is trying to attract the country’s new rich with low prices online, as economic slowdown dampens conspicuous consumption. From Marcus Wohlsen at Wired:

Walmart faces challenges in the Chinese market that simply don’t apply in the U.S., where the Bentonville, Arkansas-based chain enjoys almost mythological status as the invincible low-price slayer of all competition, including mom-and-pop small businesses. In China, European and domestic retailers vie competitively with Walmart for the coveted Chinese consumer’s yuan. Walmart’s image took a hit when authorities in the city of Chongqing shut down several Walmart stores and detained dozens of employees over allegations the stores mislabeled conventional pork as organic. Foreign companies must also navigate a government bureaucracy that exists in part to keep non-Chinese businesses from gaining too much control over domestic markets.

But with its takeover of Yihaodian, an established Chinese online retailer of groceries and other everyday items, Walmart gains instant access to an established brand already well-known among China’s hundreds of millions of online shoppers. This access comes at a time when the number of Chinese consumers both shopping online and seeking bargains is spiraling upward. The vast ranks of China’s new middle class have spent the past few years displaying a nouveau riche disregard for price in pursuit of conspicuous consumption. But during the current slowdown, Chinese shoppers have quickly developed a taste for discounts. And if Walmart knows anything, it’s how to market lower prices.

Starbucks, against the odds, has already taken root in China’s major commercial districts. Helen Wang at Forbes examines how Starbucks cracked the country’s long-standing tea culture, and how other Western companies might learn from it:

If there is one company that should have failed in China, it would be Starbucks. China has thousands of years of history drinking tea and a strong culture associated with it. No one could have guessed that Chinese would ever drink coffee instead of tea.

Starbucks literally created that demand. Now you can find a Starbucks almost on every major street of the coastal cities in China. Even my 90-year old father in China began to tell me how he drank coffee after meals, rather than tea, to help his digestion. Starbucks has revolutionized how Chinese view and drink coffee.

For more on western companies’ China strategies, see ‘Cheese-Makers Chase Huge New Market in China‘ and ‘Behind in Quantity, McDonald’s Touts Quality‘, via CDT.


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