Low prices might be Wal-Mart’s key marketing tool in the US, in China you lose as a foreign company from domestic competition if you try to beat them on prices, tells business analyst Shaun Rein in Reuters.
After entering China in 1996, Wal-Mart’s expansion gathered steam in 2007 when it bought a 35 percent stake in Taiwanese hypermarket chain Trust-Mart. It has 353 stores in the mainland.
Wal-Mart’s market share in hypermarkets was 11.2 percent in 2010, in second place after China’s Sun Art <6808.HK>, but spending for the expansion has weighed on its profitability.
Wal-Mart’s problem is that it is trying to compete with domestic chains on price, said Shaun Rein, managing director at Shanghai-based China Market Research Group.
“If your strategy is ‘cheaper than Chinese companies’, you are never going to win the market,” Rein said.
“But that is what Wal-Mart is trying to do. The strategy is all wrong since the very beginning, and that is why it has never been profitable here.”