Walmart Is Investing $1.2 Billion In China
(CNN) — Walmart is pouring more than a billion dollars into its China business as it faces growing competition from local rivals and online retailers.
The US retail giant plans to invest around 8 billion yuan ($1.2 billion) in distribution centers in China over the next two decades, it said in a statement sent to CNN Business.
Walmart is planning to spend the money to boost grocery deliveries.
“Walmart continues to increase investment in supply-chain logistics in order to … provide our Chinese customers with great fresh products, and improve our service,” Ryan McDaniel, senior vice president of supply chain for Walmart China, said in the statement.
Walmart has already invested 700 million yuan ($102 million) in building a distribution center for perishables in the south of China as it tries to cater to customers who are increasingly shopping online.
The Arkansas-based retailer, which has been in China since 1996, faces competition from local supermarkets and online rivals like Alibaba, which has grown its grocery business in recent years.
Walmart partnered with another big Chinese tech firm, JD.com, in 2016, and has also invested more than $300 million in a Chinese delivery firm Dada-JD Daojia.
Walmart has since grown its e-commerce operations in China and is testing smaller “smart supermarkets” that allow customers to use their smartphones as scanners that are then read at the checkout. It opened the first of these outlets in Shenzhen last year.
As of January this year, the company had 443 stores in China, including its main Walmart brand as well as its membership-only subsidiary Sam’s Club. The company’s China operations pulled in $10.7 billion in sales last year, less than one tenth of its international revenue.
“I think China is going to be a tremendous business opportunity,” Walmart CEO Doug McMillon said at an investor conference in June. “We continue to focus on being a strong regional business there.”
But China has also been a source of pain for the US retailer in recent months, largely due to the trade war with the United States.
Walmart has had to raise prices on several of its products because of US tariffs on Chinese goods. And last month, it was one of 600 companies that wrote to President Donald Trump warning him that the trade war would damage the US economy and urging him to withdraw the tariffs.
Trump said at the weekend that he would hold off introducing further tariffs on Chinese goods after agreeing with Chinese President Xi Jinping to resume talks on a trade deal.