Low Prices,Low product value,low wages high volume. Wal-Mart's China inventory to hit US$18b this year
By Jiang Jingjing (China Business Weekly)
Updated: 2004-11-29 15:21
The world's largest retailer, Wal-Mart Stores Inc, says its inventory of stock produced in China is expected to hit US$18 billion this year, keeping the annual growth rate of over 20 per cent consistent over two years.
The trend is expected to continue, company officials revealed.
"We expect our procurement stock from China to continue to grow at a similar rate in line with Wal-Mart's growth worldwide, if not faster," said Lee Scott, the president and CEO (chief executive officer) of Wal-Mart.
An unnamed company official also stated the firm will extend its procurement base from South China's Pearl River Delta to the North and East China in the coming few years.
A market rumour says the retailer has its eyes on a 340,000-square metre warehouse at a logistics garden of the Shanghai Waigaoqiao Bonded Area.
Scott covertly visited the site earlier this month, and hopes to own the whole warehouse to accommodate the firm's further expansion in China.
At present, Wal-Mart has quite limited warehouse resources in East China.
Xu Jun, Wal-Mart China's director of external affairs, ruled out the rumour, saying the CEO has never visited that or any other site for a warehouse.
Nevertheless, he said China is Wal-Mart's most important supplier in the world. The overseas procurement home office in Shenzhen, a city of South China's Guangdong Province, has played a key role in the firm's global purchasing business.
Wal-Mart shifted its overseas procurement centre from Hong Kong to Shenzhen in February 2002 to better serve the purchasing and exporting business.
"If Wal-Mart were an individual economy, it would rank as China's eighth-biggest trading partner, ahead of Russia, Australia and Canada," Xu said.
By the end of September, 2004, the top seven trading partners to the Chinese mainland are the European Union, the United States, Japan, Hong Kong, ASEAN (Association of Southeast Asian Nations), South Korea and China's Taiwan Province, state statistics from the Ministry of Commerce.
Last year, the firm bought US$15 billion products from China, half from direct purchasing, the other from the firm's suppliers in China.
More than 5,000 Chinese enterprises have established steady supply alliances with Wal-Mart.
Good quality and low price are the major attractions of the retailing giant.
Insiders point out Wal-Mart's imports from China have largely influenced the US trade deficit in China, which is expected to reach US$150 billion this year.
Xu declined to comment if the anti-dumpling measures of the US Department of Commerce have impacted the firm's procurement of textile commodities and household appliances in China, saying again that China is an important sourcing base for the firm.
So far, more than 70 per cent of the commodities sold in Wal-Mart are made in China.
Experts say Wal-Mart's plan of increasing its procurement from China has granted the firm a positive corporate reputation in the country.
"Buying more products in China means more job opportunities, which helps the firm win not only the government's hearts, but also the customers' appreciations," said Wang Yao, director of information department under the China General Chamber of Commerce.
In the United States, poor people find it possible to afford cheap "Made In China" products for their daily necessities, Wang said.
Wal-Mart, headquartered in Bentonville, Arkansas, entered China in 1996. It has opened 39 stores, including supercenters, "Sam's Clubs" and neighborhood markets in 15 cities around China, including Beijing, Harbin and Dalian.
It has recently announced the opening of its first store in Shanghai, slated for the middle of next year.
The firm has a total of 4,900 stores in 10 countries worldwide.
