Walmart Failed Project in China

Walmart Failed Project in China

Student’s Name


Instructor’s Name


Walmart Failed Project in China


Walmart is among the most valuable brands that prides itself for being the world’s largest retail business model offering both discount departments as well as warehouse stores (Statista Research Department, 2021). Walmart exists in three different divisions, that is: the Sam’s club, Walmart International and Walmart U.S; Sam’s club operates as members only retailer, Walmart International focuses on its international stores, whereas the US division concentrates on its home operations. Despite Walmart’s successful global strategy, the brand has failed in its attempt to push its corporate strategy in the Chinese market. The research analysis will aim to: describe Walmart’s attempt to penetrate the Chinese market; evaluate the losses incurred by this move; examination of the concrete reasons of why Walmart was unsuccessful in its bid; and development of alternative solutions or recommendations for Walmart’s China strategy.

Walmart’s Entry in the Chinese Market

As part of its global expansion strategy, Walmart decide to establish footing in the Chinese market by opening more than four hundred stores – of which 26 are Sam’s club, in more than one hundred and eighty cities in China. To accelerate its expansion in the Chinese market, Walmart utilized the acquisition strategy to acquire a Trust-mart, which is a hypermarket chain based in Taiwan, at 1 billion USD investment (Mun and Yazdanifard, 2012). The investment marked significant effort for Walmart in its attempt to widen its coverage across all market regions in China. To become even more recognizable, Walmart colluded with, an E-commerce site that provided competitive leverage in terms of engaging with Chinese consumers and also identifying and meeting their varying needs.

Figure 1: Number of Walmart stores in China 2016-2020

(Source: Adapted by Daxue Consulting from

During its penetration in the Chinese market, Walmart found it necessary to maintain strategies similarly used in its other global locations. Since China is generally a more tech-oriented economy, Walmart and Sam’s club invested in advanced technologies meant for retailing as well as curbing competitive pressures. To keep its prices low, Walmart opted to source for its products locally in China. According to (Xu et al., 2014), out of all the goods which Walmart China deals in, ninety five percent of them are sourced locally from suppliers within China. Due to rise in concern over corporate responsibility, Walmart China made attempts to launch a unique green flagship store which operated at forty percent less in terms of energy consumption (Rosenbloom, 2008). On top of this, Walmart boldly established its first Chinese e-tailer business model in 2012 -this was a major push for the brand in getting its name recognized by most consumers as well as increased its popularity (Hunt et al., 2018). As shown in figure 2 below, by 2018, the e-commerce market in China grew exponentially between 2012 and 2013 and has declined since, yet the total transaction value have gone up every year since 2011. Another strategy deployed by Walmart in China is focusing on low tier consumers; according to (Chuang et al., 2011), Walmart’s strategy in China included expansion in both second as well as third-tier cities. Nevertheless, Walmart’s entry to China would soon become a challenging experience; (Watch and Vail, 2015) explains that even though Walmart had ambitious growth plans in China, its progress since after 2015 has stalled crippling around 400 stores across the country.

Figure 2: China Online Shopping Market 2011-2018

Source: (China Internet Watch/iResearch, 2019)

Losses Incurred by Walmart China

Initially, Walmart had clear strategies to expand their reign in almost every region China. However, its copy and paste method borrowed from its other market dominions seemed to become a self-inflicted barrier to growth. According to Bose and Rose (2014), Walmart China had forecasted a very low full year report for the 2015 fiscal year; more than that, Walmart’s international net sales reported in the fourth quarter declined by 0.4 percent to stand at 37.67 billion USD – again, Walmart’s operating income had declined by 45.8 percent which led to closure in most of its operation in China and its other large markets such as Brazil.

Figure 3: Chinese B2C market Share by percentage

Source: Seeking Alpha (2021)

According to Bose and Rose (2014), things got tougher for Walmart China as market share continued to drop over time; its hypermarket segment for instance declined to 10.4 in 2015 from 11.3 percent recorded in 2008. Walmart eventually got surpassed by its closest competitor, Sun Art Retail, which became the industry leader; the decline by Walmart China soon followed with closure of over 29 stores in China to minimize operational costs. Foran, the head of Walmart’s international division said that Walmart was trying to refocus on what’s more important; which is strengthening the brand’s foundation, deciding on which stores to let go off, and becoming wiser in terms of knowing where to open shop (Bose and Rose, 2014).

Reason Why Walmart Failed to Capture the Chinese Market

The above analysis showing Walmart International’s sales decline is proof that Walmart is not only struggling in its home market but also in the China market. Despite its successful entry into China, Walmart has not attained any significant momentum in terms of establishing its brand in the second largest economy in the world (Forbes, 2014). Forbes (2014) further explains that even after operating in the Chinese market for over 18 years, Walmart was only able to fully run a total of 405 stores. The main challenge for Walmart was its inability to understand the unique attributes of the Chinese consumers. According to (Chuang et al., 2011), the Chinese consumers unlike any other were less sensitive to pricing as a strategy.

Chinese Consumer Behavior

One of the reasons why Walmart’s project in China failed is because the brand also failed to observe what Chinese customers prefer. Forbes (2014) explains that as the second largest economy, China is indeed a lucrative region for western businesses who can tap into China’s large population size – mainly comprising of middle-class boomers as well as increasing levels of disposable income. Walmart was among the few companies to take advantage of this economic growth; however, it was also among the few companies that failed to resonate the Chinese consumer behavior hence could not expand beyond their reach. To get a better understanding of how consumer behavior and perception impacted Walmart’s presence in China, Forbes (2014) highlights that despite being in the second largest economy, revenue from Walmart China division amounted to only 2 percent of its overall revenues. Chinese customers see beyond price when entering the buying decision; they are only interested in authentic and top-quality products.

Imitation of Walmart’s Business Model

Before entry into the Chinese market, Walmart was prepared to apply competitive strategies that outdo both local and other international corporations in the industry. One of the fiercest rivals for Walmart in this case is Sun Art Retail group. According to Forbes (2014), Sun Art Retail group is a native brand that connected better with locals than Walmart – their ability to comprehend what local consumers prefer, as well as their successful imitation of Walmart’s business model increased the brand’s competitive leverage making it the leading retail brand in the Chinese market. (Yoon and Suh, 2021) further explains that Sun Art Retail group managed to surpass Walmart by offering local consumers a Chinese feel and street look incorporated with fresh sea delicacies set up in table tops as well as noodle stands.

Walmart’s unfavorable Macroeconomic Environment

Walmart has had some initial success in entering the China market even though the progress was slow and somewhat uneven. Walmart’s macroeconomic environment is another aspect that weighed down heavily on this retailer brand. According to (Huang and JIA, 2015), despite the rapid increase in China’s economy in the past decade, the growth rate soon declined significantly since the beginning of 2012 – GDP fell below 7.7 percent, a historical decline since 1989 which stood at 9.3 percent; the World Bank also estimates that China’s GDP will continue to decelerate in the coming years thus affecting consumer’s purchasing power and retail sales. More than that (Huang and JIA, 2015) also explains that severe government policy to reduce public expenditure also affected Walmart’s net sales and its ability to expand.

Growth of Ecommerce in China

The other reason why Walmart failed in its attempt to dominate the Chinese market is the growing rate of ecommerce. According to Rein (2011), Walmart was among the hardest hit brands given the forty percent increase in ecommerce activity. As more native companies like Dang Dang and Mecoxlane emerged in the ecommerce world, the market share in the retail market continues to shrink, therefore intensifying competition as brands try to outdo each other’s strategic response to competition (Rein, 2011). Furthermore, changing consumer demands as well as operating costs further reshaped the retail field hence Walmart should turn the company direction towards addressing these issues or end up as a casualty of a fast-rising economy as well as industry. Figure 4 below shows the retail e-commerce sales and growth between the United States and China 2008-2016. China has performed well compared to the U.S. in every year except 2011 and 2012, a factor that was influenced by the macroenvironment.

Figure 4: Why Walmart did poorly in China

Source: Kabango and Asa (2015)

Recommendations for Walmart

The crucial factor in Walmart’s failure to pick-up in the Chinese market is the lack of understanding of consumer perceptions. The recommendable thing to do for Walmart is to boost its productivity as opposed to focusing on lowest price strategy. Therefore, Walmart should slow down on its expansion plans and instead invest more in enhancing its foundation in the Chinese market by reducing operating costs and enhancing store sales growth. To achieve this, Walmart must shutdown all its underperforming stores and focus on more lucrative market regions – despite a drop in sales for some time, if Walmart successfully sets up new shops in lucrative market regions, the lost sales can be recovered fast and offset the previous loss. Beyond store location, another thing Walmart needs to do is re-adjust its size to a smaller box format, as well as apply differentiation strategy in its product lines. Failure to observe these solutions could land Walmart in an inevitable downfall in the Chinese market.

The inability of Walmart to comprehend the aspects of the Chinese market and how it is different from other markets in the US and elsewhere in the world led to failure. The consequences were that Walmart developed uninformed strategic decisions that bore no fruits despite having a superior business model that worked in other regions. More than that, its closest rivals had begun imitating Walmart’s business model but while carefully integrating local preferences to boost customer appeal; this is how such companies like Sun Art Retail group managed to steal away some of Walmart’s market share. Some of the real reasons why Walmart failed in its bid to capture the market in China include: shrewd Chinese consumer behavior, imitation of Walmart’s business model by close rivals in China, challenges emerging from Walmart’s macroeconomic environment, and the rapid growth of ecommerce in China. From this, it is recommended that Walmart takes time to study the Chinese market, to review key consumer insights, to evaluate the demographics, and to localize its strategy to fit with the needs of the Chinese market as opposed to a global market strategy.

The macroeconomic environment where Walmart operated in was another aspect that contributed to the company’s failure. Specifically, the activities of the Chinese government regarding fiscal and monetary policies were unfavorable to Walmart. The macroenvironment affected the ability of Walmart in its decision-making capacity, investments, borrowing, and spending. It is recommended that Walmart creates a response strategy to the macro environment in a way that will allow the firm to avoid a reactionary approach but rather anticipate what will change and how it will affect the organization. While Walmart cannot control the macro environment, it has the capacity to implement internal changes that will respond to the changes emanating from the external environment and be in a position to formulate a plan that will create competitive advantage. In the case of Walmart in China, the company did not have a strategy to respond to the external environment, leading to failure to adjust to an economy that was heavily regulated by the government.

Another reason for failure of Walmart was the growth of e-commerce market in China, something that Walmart was unprepared for. Domestic companies including Dang Dang and Mecoxlane emerged in the ecommerce world, further shrinking the market share in the retail market, therefore intensifying competition and pushing foreign brands like Walmart into a reduced market share. To deal with this issue, it is recommended that Walmart partners with a Chinese company, one that has particularly mastered the Chinese e-commerce market, in order to penetrate a very competitive sector of the e-commerce and retail business. A partnership is recommended with an e-commerce company because it would help Walmart to bridge the gap in knowledge and expertise and provide access to the wider markets that the partner firm has already concurred. It would also provide a new perspective to further address the issue of how Walmart misinterpreted the Chinese consumer market and open up more opportunities.


Walmart is an important brand in the retail industry as it acts as a leader both at local and international scopes. As part of the global expansion strategy, Walmart made attempts to penetrate the Chinese retail market using same strategies applied everywhere else. The success of Walmart’s entry in China was short-lived as various factors came into play causing a barrier to progress. These aspects include: changing consumer perceptions, imitation by rivals, challenges in the macroeconomic environment and the competitive pressure arising from the rapidly growing ecommerce in China. Walmart needs to shift its strategic direction and focus on improving the brand’s image by aligning its activities to match with consumer expectations and preferences or else suffer from extreme market share loss to rising competitors who better relate with the Chinese market.


Chuang, M. L., Donegan, J. J., Ganon, M. W., & Wei, K. (2011). Walmart and Carrefour experiences in China: resolving the structural paradox. Cross Cultural Management: An International Journal. Consulting (2021). Daxue-Consulting-Walmart-In-China-Number-Of-Walmart-Stores-In-China. Available at

Forbes. (2014). Why Wal-Mart Never Picked Up In China?. Forbes. Retrieved 23 October 2021, from

Huang, J., & JIA, Y. (2015). Wal-Mart development in Chinese market: problem and countermeasures-nased on the enterprise culture and ethics. International Business and Management, 10(2), 11-15., I., Watts, A., & Bryant, S. K. (2018). Walmart’s international expansion: Successes and miscalculations. Journal of Business Strategy., L. Y., & Yazdanifard, R. (2012). Walmart success in Mexico, Canada and China: global expansion, strategies, entry modes, threats and opportunities. Bose, A. (2014). Wal-Mart’s China syndrome a symptom of international woes. Reuters. Retrieved 23 October 2021, from

Rein. (2011). Why Wal-Mart is Losing Market Share in China. CNBC. Retrieved 23 October 2021, from

Rosenbloom, S. (2008). Wal-Mart to toughen standards. The New York Times, B1. (2021). Topic: Walmart. Statista. Retrieved 23 October 2021, from

Watch, C. L., & Vail, B. (2015). In China, Walmart Is Unionized, But Workers Have No Power on the Job., L. X., Xu, Q., & Liu, X. (2014). Wal-Mart and Carrefour’s Supply Chain Management Strategies in China. International Journal of Business and Management, 9(7), 155., J., & Suh, M. G. (2021). The key elements of strategic leadership capabilities to the latecomer firm: the case of RT Mart’s success in the Chinese retail industry. Asia Pacific Business Review, 27(1), 29-52.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *