Continuing with my theme of Walmart articles I recently found a piece by Bloomberg Technology detailing Wal-Mart’s intent to become a major player in China. China, according to CEO Doug McMillon, is unlike any other country “given the growth rate of the market itself and the consumer demand [there].”
Walmart has about 420 physical stores in China already, but it’s being challenged by large e-commerce companies like Alibaba. In order to boost competitiveness in e-commerce, Wal-Mart plans to promise something that the other online retailers cannot, super-fast delivery. In order to come through on this promise to consumers Wal-Mart has partnered with an existing e-commerce competitor, JD.com.
The move to partner with JD.com holds a few specific advantages for Wal-Mart logistics. They are:
- Take advantage of JD.com’s existing, proven digital capabilities when delivering to Chinese customers
- The ability to focus more on Wal-Mart’s own already strong supply chain instead of reaching customers
- Utilize JD.com warehouses in areas where Wal-Mart does not have stores for delivery
- Additionally, the ability to stock imported products that Chinese consumers prefer, from the US, Japan, and Korea
The term “last-mile” is mentioned frequently in the context of Chinese e-commerce. It’s a term that refers to the cost establishing the necessary infrastructure to reach remote areas, and continue to serve them. Wal-Mart will skirt the potentially massive investment that would have been required to deliver to villages by again making use of JD.com’s established network, a network that it hopes to be fully automated in the near future.
As we learned in class, the process of choosing warehouse locations and configuring delivery routes is timely and deeply involved. Making use of proven, existing networks while paying a fee may make more sense for some companies before they jump fully into a new market. This article proves again that in a sector with constantly thinning profit margins like large scale e-commerce, placating the customer is paramount. As McMillon notes, “What we’re seeing is that customers want it all: They want to save money, they want to save time, they want to have access to the merchandise they’re looking for.” For this reason, Wal-Mart believes a 2-hour delivery promise is its golden ticket to carving out market share in China.
- Article: https://www.bloomberg.com/news/articles/2016-10-20/wal-mart-s-china-revival-strategy-calls-in-jd-com-and-its-drones
- Video: http://bloom.bg/2dQ7stc