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The latest news on Wal-Mart’s international expansion reveals plans to open Wal-Mart’s fourth Chinese Sam’s Club in the first half of 2009.  Yet the reality of the situation is that Wal-Mart has been trying to enter the Guangzhou market for over 12 years! According to the People’s Net, “That Wal-Mart has not been able to enter Guangzhou is definitely not a business insider’s secret.  When Wal-Mart initially planned for a store in Guangzhou, it had also promised to locate its headquarters in the city.  Wal-Mart ultimately set up headquarters in Shenzhen.”

Additionally, from the Nanfang Daily, “For the past few years, Wal-Mart’s expansion in China’s first tier cities has not been smooth.  For example, Wal-Mart has never entered Guangzhou [capital city of Guangdong province] and instead has spread to second and third tier cities such as Hunan Loudi, etc.”

And with Wal-Mart’s international sales falling more than 10% in December, we’re not holding our breath that a Sam’s Club will open in Guangzhou anytime soon.

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Some insights from the ”China Entrepreneur”:

Wal-Mart China’s chairman Chen Yaochang’s confirmed that in 2007 Wal-Mart opened 30 stores in China (50 were originally planned).  In 2008, only 15 stores have opened for business.
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“These past two years, Wal-Mart has really ran into many obstacles,” a business insider told the “China Entrepreneur”.  The number of Wal-Mart’s waiting to open for business in China are not few.  A Wal-Mart store in Quanzhou, Fujian is but one example. 
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In Fujian, Xiamen; Jiangxi, Jiujiang; Hunan, Yiyang; Shandong, Weifang; Hubei, Jingzhou, etc. there all exists similar circumstances of Wal-Mart stores waiting to open.  A Wal-Mart spokesperson confirmed this, but refused to supply exact details about how many Wal-Mart’s are unable to open on schedule.
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It seems that the greatest cause of Wal-Mart being unable to open stores is that Wal-Mart has been unable to gain the approval of the Department of Trade, as well as China’s domestic retail’s tenacious resistance.
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Department of trade specialist, professor Huang Guoxiong from Renmin University, said that in Xiamen, Wal-Mart’s two stores have not received the approval of the Department of Trade mainly because Xiamen’s retail business is 80% foreign investment.  This certainly needs the Department of Trade’s macro-control.  At the same time, the locations of these two stores do not match up with the business network’s plan.  One of the stores is only 200 meters away from Wal-Mart’s already opened store in the World Trade plaza.  The other store is only separated from Wal-Mart owned Trustmart by one block. 

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If you thought you missed your opportunity to purchase melamine tainted GeGeDa brand eggs, fear not!  The eggs, which had been previously removed from Wal-Mart’s shelves in China, are back on sale!  And that’s not all!  To promote sales, Wal-Mart is selling GeGeDa brand eggs for half off!  That’s one sure way to “save money” and “live [hopefully] better [with melamine related health problems]”.

Wal-Mart claims the eggs have been tested and do not contain melamine.  Cautious consumers, however, aren’t buying it.  “Didn’t they already pulls these from the shelves?” one customer queried?  “How can they still be selling these!” exclaimed another.  According to reports, Wal-Mart is the only store selling the eggs on discount.

It’s no wonder Wal-Mart ranks last among Chinese supermarkets for food safety.

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After dragging its feet for months, Wal-Mart has finally decided to make good on its promise to donate to the earthquake relief in Sichuan, China by actually donating something!  On October 26, Wal-Mart held a donation ceremony (pictured on the right) to donate 2,566,000RMB (about $375,000) worth of ambulances and medical supplies to 20 different organizations in several cities throughout Sichuan.  And never one to miss out on publicity, Wal-Mart has even tagged the ambulances with the Wal-Mart brand (pictured after the jump).

Since the 8.0 magnitude earthquake devastated Sichuan in May, Wal-Mart has been plagued by criticism for its relatively low donation to the earthquake relief and Wal-Mart’s failure to live up to said donations.  Wal-Mart China’s PR director, Jonathan Dong, has been working overtime defending the company’s image - even writing to Wal-Mart Watch, imploring us not to spread negative stories about Wal-Mart’s donation fiasco. Asked why Wal-Mart hadn’t fulfilled its donation pledge, Dong stated that spending money is difficult! Fortunately for Mr. Dong, it looks like this problem may finally be ending.

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According to Wal-Mart, Wal-Mart China’s sales growth is “very like 25, 30 plus percent a year”.  What Wal-Mart refuses to reveal, however, is how much 25 or 30 plus percent a year equals, in ‘like’ money or ‘like’ profit.  Wal-Mart also refuses to reveal “what portion of global sales come from its more than 100 stores in [China],” Reuters reports.

The truth of Wal-Mart’s circumstances may be more accurately summarized by reports out of China which note that within its 12 years in China, Wal-Mart has failed to become profitable.  And even according to data from China’s Department of Trade, Wal-Mart’s rank within the retail sector has plummeted from 17th in 2003 to an astonishingly low 30th in 2005.

The truth is that Wal-Mart is being crushed by ever increasing competition and much needed government regulation.  And even with such great buying power, Wal-Mart is losing influence with supplier factories who are raising their prices.

Unfortunately for Wal-Mart, China may end up being another South Korea, or worse, Japan.  Investors beware!

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Wal-Mart’s outlook in China has been looking grim - from rumors that the Chinese operation has been profitless for the last 12 years and that its “market share has retreated in defeat” to public outrage and employee protests.  An article from today’s People’s Net adds even more doubt to the retailers future in China:

An official from Haikou revealed at a press conference that Wal-Mart would be postponing its entrance into Haikou.  The reason is that Wal-Mart’s own investment plan has changed.  As for when Wal-Mart could enter Haikou, city officials said Wal-Mart is still making a great effort, but that currently Wal-Mart is unable to enter the market.

Wal-Mart unable to perform? Sounds familiar.

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Within two months of starting an intense campaign to get Wal-Mart China stores to sign collective contracts, the Chinese labor union has declared success.  All Wal-Mart store contracts include provisions on yearly wage and hour increase consultations in addition to including many, if not all, of the following provisions on: break time, holiday time, contract supervision, insurance, worker safety, women workers’ special rights and benefit protections, worker discipline, worker training, work quotas, etc.

Congratulations to the Wal-Mart China workers and their unions for negotiating and safeguarding their rights!

Wal-Mart China’s 108 Stores Sign Collective Contracts [Xinhua]

Wal-Mart’s 108 unionized stores in the China have all agreed to and signed collective contracts.  This historic breakthrough was the result of the legal push by China’s labor union to organize Wal-Mart.

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You might recall several posts we did regarding Wal-Mart’s donations to China’s earthquake relief efforts.  Those posts all cited numerous articles which detailed not only Wal-Mart’s meager donation pledges, but also that Wal-Mart had largely failed to follow through on their donations.  Worse, another story surfaced about how Wal-Mart would potentially profit off the earthquake victims by building stores in the earthquake region.

All these posts were a bit too much for Wal-Mart China’s director of public relations Jonathan Dong.  He even wrote us a strongly worded letter to express his dismay.  Unfortunately for Jonathan Dong, this story just won’t end.

According to a recent article from Beibu Gulf ASEAN Economic Web, Wal-Mart STILL has not met its donation targets!  Luckily, Jonathan has prepared a response:  “Spending money is hard.”

Public relations director Jonathan Dong (董玉国) explained “contributing money is easy; spending money is difficult. On May 23, Wal-Mart decided to give away an additional 17 million .  The company immediately looked for projects to aid, looking at subsidizing schools, orphanages, etc.  But Wal-Mart found out that many [companies] were financing the same projects.” At present time, Wal-Mart is in the process of seeking suitable projects to support.

Imagine that. 

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According to a recent article in Bloomberg, a series of babies have fallen ill with kidney stones across seven provinces in China - one has died.  It is suspected that melamine contaminated powdered milk manufactured by Sanlu Group is responsible.  The Chinese ministry of health stated that Sanlu has recalled the milk powder while the investigation proceeds. 

Bloomberg also notes that Wal-Mart Stores Inc. is said to be pulling Sanlu milk powder off its shelves, citing Wal-Mart China spokesman Dong Yuguo.  However, in a report from Ifeng Finance (China), Wal-Mart stores in Shanghai are still selling powdered milk “as usual”. 

Exacerbating this horrific situation, “contaminated baby formula may also have reached the U.S., according to the U.S. Food and Drug Administration, which warned consumers that illegally imported Chinese milk powder may contain melamine.”
China Says Sanlu Milk Likely Contaminated by Melamine [Bloomberg]

China’s health ministry said milk powder produced by Sanlu Group Co., 43 percent owned by Fonterra Cooperative Group Ltd., may have been tainted with the chemical melamine and could be linked to kidney stones in infants.

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According to Chinese media, Wal-Mart’s latest international failure might be Wal-Mart China - which, within its 12 years in China, has failed to become profitable.  One article notes that Wal-Mart’s “market share has retreated in defeat” and that Wal-Mart’s lofty sales goals are extremely “distant” figures.

Even according to data from China’s Department of Trade Wal-Mart’s rank within the retail sector has dropped from 17th in 2003 to 20th in 2004—and in 2005, Wal-Mart dropped again to an astonishingly low 30th.

To analysts, Wal-Mart China’s financial failures may be a significant factor in why Wal-Mart decided to abandon its Wal-Mart Asia headquarters in mainland China.  However, Wal-Mart Asia chairman and CEO Vicente Trius makes clear that China remains important to Wal-Mart’s global purchasing.  At the same time, though, Trius also states that locating the Asia headquarters in Hong Kong will preserve the “independent nature” of the Chinese operations—perhaps a hint that Wal-Mart wants to isolate the damage.

At any rate, it looks like Wal-Mart China has interesting times ahead of it.  See both articles below for more details.

No Opportunity for a Wal-Mart Asia Headquarters in Shenzhen [Finance and Economics]

Wal-Mart, who entered China 12 years ago and still has not made a profit, announced on September 3 that it will establish its Asia headquarters in Hong Kong.  Before this, it was widely spread that Shenzhen, Wal-Mart China’s headquarters and Wal-Mart Global Procurement Center, would be Wal-Mart Asia’s headquarters.

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