This is Walmart's largest single investment in the Chinese market. When the box horse, 7FRESH are caught in the bottleneck of the fresh market, Walmart in the market transition period can go through this fresh new retail path?
At a cost of 700 million yuan, taking three years, Walmart in China to establish the largest fresh cold chain warehouse - Dongguan fresh distribution center officially put into operation, which is not only Walmart's entry into China in 23 years the largest single investment, but also highlights Walmart's ambitions in cold chain logistics. "In the next ten years, Walmart plans to invest RMB 8 billion in China to upgrade its logistics supply chain for more than 10 new and upgraded logistics and distribution centers." Walmart China's senior vice president of supply chain, Ryan McDonald said, "Walmart is the pioneer of end-to-end supply chain, based on such a prospect we will do a great investment in the supply chain."
Prior to this, Walmart has 18 warehouses in China ****, and most of them are leased warehouses, but the third party's relatively fixed warehouse structure makes it difficult for Walmart to control the temperature according to their own ideas. The newly put into the Dongguan fresh food distribution center of the cold chain storage area than the past two leased warehouses (South China cold chain warehouse) expanded five times, the daily handling capacity of up to 165,000 boxes, covering more than 120 Walmart stores in South China (including Sam's Club stores). "Fresh food is one of Walmart's key focuses, cold chain is one of the company's key strategies, and our supply chain is designed to expand handling capacity to meet store opening plans." The choice of Dongguan, on the other hand, was to better radiate southern China, balance the supply chain, and provide better cost savings, McDonald explained.
But unlike SF and Xinxia Hui, which set up a joint venture to enter the cold chain industry and seek to provide integrated services for the industry, Walmart's cold chain logistics only serves its own stores and conducts planned purchases based on the density of the stores' coverage and the volume of their operations, ultimately realizing a full cold chain from the supply side to the retail side. "At present, China's cold chain logistics is still in a relatively elementary stage, and the B2B cold chain logistics has not appeared as an industry benchmark." Zhao Xiaomin, CEO of Guanxiao Enterprises and express delivery expert, confessed to China Entrepreneur that Walmart's layout of the cold chain has the potential to force the development of China's cold chain logistics, which in turn plays a certain role in guiding the development of cold chain logistics.
That said, with the rise of local Chinese retailers such as Yonghui and Boxmart, and a new batch of foreign retailers such as ALDI and Costco, will Walmart be able to come out on top of the new battlefield by virtue of its supply chain advantage? In the local enterprises are not doing well in the field of fresh food, Walmart and how to use fresh food to play differentiation?
Fighting in the red sea of fresh food
China's fresh food market has never been short of players. From the Ali system of box horse, RT-Mart, to the Tencent system of Yonghui, Daily Fresh and other Internet giants, none of them in the field of fresh food in the layout of the multi-format. However, due to the low degree of standardization of fresh food, higher attrition rate, although more entrants, nearly 90% of the enterprises into a loss-making state, in fact, only a few profitable.
Nevertheless, compared to other foreign-funded retail big brother, Walmart layout in the field of fresh food is not too late. 2017, Walmart will focus on the field of fresh food, investing nearly 300 million yuan for the upgrading and transformation of offline stores, while increasing the investment in the field of fresh food; and at that time, the box is relying on the advantage of Ali, in the design of the store, the consumer behavioral habits and other aspects of data analysis, hoping to run their own model of fresh food. Hope to run out of their own fresh food model; Yonghui is also repeatedly verified the feasibility of the front warehouse, and through the "Yonghui to home" to complete the layout of the warehouse and distribution.
Just for Walmart and other large supermarkets, fresh commodities gross profit is low, can not form a scale effect, and self-managed fresh means not only to establish a raw material procurement team, to the upper reaches of the supplier buyout, strict control of the amount of goods, but also to build their own cold-chain warehouse to ensure the quality of fresh food, the cost of consuming a huge amount of money, so that the majority of supermarkets shy away from.
So at this point, Walmart spent 700 million to establish the largest fresh food cold chain warehouse in China has become a bit "maverick". In Walmart's view, the domestic consumer demand for fresh food is growing, it is necessary to introduce more fresh food categories, while increasing the expansion of self-owned brands, "In the long run, the completion of the South China Fresh Food Distribution Center can not only support stores to do more fresh goods, expand the area of fresh food business, but also compress the upstream purchasing costs, while reducing the store's inventory. " Walmart said in response to "China Entrepreneur".
"The traditional shopping mall model used to be direct purchasing, but now it has become a chain of services, and Walmart also has to consider what to do with its own business in order to manage and serve the local service providers." Walmart (China) headquarters of the former marketing executive Zhuang Shuai explained, like Yonghui, box horse use the front warehouse, found a fresh cut, invested in lower costs in order to quickly expand the market.
But it is undeniable compared to the back of Tencent, Ali and other Internet giants Yonghui, box, Walmart is still in a weak position in the Internet technology. Today's Ali, Jingdong have established their own agricultural base, with the help of Internet technology to help agricultural enterprises to upgrade and transform, in order to obtain the supply chain resources of the origin. Although Walmart's supply chain capabilities far exceed the above players, but for traditional retail enterprises, whether it is the introduction of block chain traceability system, the introduction of the front warehouse, or the supply chain end of the upgrading and transformation, all with the help of third-party players, the threshold is not low.
Plus cloud warehouse business
When the box horse, Yonghui is still in the "supermarket + catering" innovative business to explore the development of new retail, Walmart did not follow the trend, but instead is to return to the store, quietly do the cloud warehouse (front warehouse). Although the front warehouse is not a new concept at that time, there are many front warehouse enterprises because of high wear and tear and have to transform or close the store, but Walmart still in May 2018, together with Jingdong to home, opened independent of the store "cloud warehouse" system, opened 1 hour delivery business.
However, unlike Boxmart's original intention of setting up a front warehouse is to divert online traffic through the offline, Walmart hopes to supplement its offline stores with a front warehouse in order to expand its service categories and meet the daily needs of users. "Front warehouses are our warehouses based on e-commerce business, and they are usually located in places where members are more concentrated." Walmart replied to China Entrepreneur, said that although most Sam's stores are not in the city center, but by putting some of the goods with high purchasing frequency into the front warehouse, users can place orders through the APP.
Although at present, there is nothing better than the front warehouse to solve the problems encountered in fresh commodities, the major retailers are also coincidentally layout of the front warehouse business, but on the one hand, the front warehouse diversion costs are higher, the richness of the goods is weaker, whether it can meet the user demand is still open to question; on the other hand, a wide range of layout of front warehouses, which invariably increase the operating cost of the enterprise, if the single volume is small, each single apportionment of fixed costs will be relatively high, easy to fall into the predicament of not being able to operate.
"Although the fulfillment cost of the front warehouse is not low, but when the density of orders increases, through the density of technology and layout, part of the cost of the fulfillment fee is transferred to the consumer side, it will gradually move towards profitability, and the future space is not small." Banyan Capital investment partner, former Walmart China CEO Chen Yaochang once told the media that the fresh food retail market is very large, but there is not yet a monopoly winner, if the upstream supply chain through the integration of fresh food, the future business opportunities.
Walmart's advantage is that the fee-based membership of Sam's Club can help it better find its niche. Walmart's front warehouse, for example, the area of 200 to 300 square meters, only about one-tenth of the traditional stores, and the main SKUs are only 800 to 1,000, but compared to the ordinary fresh food e-commerce 30 to 50 yuan of the customer unit price, the front warehouse of the customer unit price of more than 200 yuan, in the context of the same fixed costs of each order (such as the cost of distribution), the higher the price of the customer unit, the stronger the profitability.
For Box Office, even if the front warehouse business is done offline, the ultimate goal is to layout the line by attracting traffic, and offline is always its short board. Vice versa, for Walmart, relying on a strong supply chain system, to do the front warehouse is not difficult, the difficulty lies in the integration of the omni-channel, as well as coordination with the suppliers.
"The original supply chain system of the super slow settlement, there is a certain period of time, the big retailers dominate. And the new model will certainly break the original pattern of interests, Walmart and suppliers all need to re-grind." Retail expert Zhao Yang explained, Walmart's front warehouse want to do a good job, one is to comply with their own business logic, and second is to do a good job of fine-tuning the operation.
It is understood that Walmart's fresh food sales have accounted for nearly a quarter of the overall sales of hypermarkets and Sam's Club. Walmart has opened 20 cloud warehouses in Shenzhen, Shanghai, Beijing a ****, situated in the high concentration of members of the community warehouses, and the last three kilometers of the online fulfillment of the single business to be undertaken by Dada.
Walmart's ambition
Compared to Carrefour's slow adjustment, on June 23, 2019, Suning acquired 80% of Carrefour China's shares for 4.8 billion yuan, Walmart has not stopped the pace of change, whether it is to expand the layout of the multi-industry or to increase the supply chain, Walmart wants to make a big splash in the Chinese market in this retail change. "This is what makes Walmart most different from other foreign-funded retailers, they are always reflecting and always innovating." Zhuang Shuai told China Entrepreneur that although it does not necessarily run faster than domestic companies, it is never willing to be left behind.
From investing in 1 Store in 2011 to acquiring it in 2015, Walmart has been exploring breakthroughs in the online space. Until 2016, Walmart sold No. 1 store to Jingdong, and obtained a 5% stake in Jingdong, becoming its strategic shareholder, and then through several increases in its stake, so that it obtained more than 10% of the Jingdong Group.
This buy and sell, finally let Walmart find its own foothold online, Sam's member stores, global official flagship stores have been stationed in Jingdong, Walmart's total e-commerce turnover in 2018 compared to 2017 growth of nearly 150%.
"The online business is growing fast, and the offline stores are irreplaceable, what we want to do is to complement each other through different channels, so that the offline stores and e-commerce are well combined." Walmart replied to the "China Entrepreneur", explained that Sam Jingdong flagship store goods and Jingdong platform is completely different, Sam can be its complement to help Jingdong to achieve differentiation.
It is clear that Walmart's core is still based on offline retailing, creating new business models, whether it is to build cold chain warehouses, develop fresh food business, or do e-commerce, Walmart hopes to influence the overall change through new business models to adapt to the changing Chinese market. But Walmart, after all, belongs to the foreign-funded retail enterprises, even after more than 20 years in China, the situation of incompatibility still exists.
"Especially with farmers, people in small towns to communicate, many times it is a chicken and duck, no one can understand what the other is saying." Employees who have worked for Walmart said that this has slowed down Walmart to a large extent. On the other hand, due to the obvious localization characteristics of retailers, China's retailers dominate the geographical advantage, Wal-Mart even with a strong supply chain capabilities, it is difficult to expand.
So Walmart's strategy in recent years has been to make major adjustments in the format, constantly deploying the weight of hypermarkets and small stores. On the one hand, the frequent closure of the hypermarket business in China, while frantically opening stores. According to "China Entrepreneur" incomplete statistics, within three years, Walmart **** closed about 70 stores, but Sam's member stores, Huizhi supermarkets, a new generation of stores and other forms of business, but no less than the opening of stores, and the new stores from the area is obviously more compact, compared to Walmart's more than 10,000 square meters of hypermarkets, the area is compressed by nearly half, and more prominent food and beverage and community services. In Walmart's view, online and offline integration of omni-channel retail will be an irreversible trend, in addition to the development of new formats, Walmart is also actively exploring digitalization, learning new technologies.
Just today's retail battlefield, not only domestic gradually mature local enterprises, but also just entered the ALDI, Costco and other new generation of foreign-funded retailers, Walmart's changes and innovations can catch up with the market changes, not until the last minute, who does not know how the end game.
This article originated from China Entrepreneur Magazine
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