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01 JUN. 2009

Wal-Mart in China: The Importance of Localization

According to “North News”, an official Inner Mongolian newspaper, Wal-Mart China announced on 19th May that it will set up a model supermarket in Baotou, the biggest city in Inner Mongolia. This model supermarket, with a business area of 15,000 square meters, will be Wal-Mart’s largest retail store in Inner Mongolia Autonomous Region.

Overall, it seems Wal-Mart has been relatively successful in gaining market share in China. However, when they first entered the market they faced many challenges because they were reluctant to “go native”, or to localize their stores and products to suit the cultural context. In other words, Wal-Mart initially was not flexible enough and had difficulty adapting to the Chinese market.

The good news is that Wal-Mart has slowly begun to learn from their experience after operating in China for a decade. While the brand strategy they utilize in America is not directly applicable in China, a market of bargain-hunting shoppers definitely exists. It is essential for foreign companies to have a thorough understanding of the Chinese market in order to be successful when entering this market.

Wal Mart is now moving to localize their store design and product offering to better suit Chinese consumers. Wal-Mart is also involved in corporate social responsibility activities to enhance their brand image in China. According to their website, Wal Mart pledged more than RMB 20 million towards relief in the Sixhuan earthquake region. Chinese consumers are now starting to prefer companies who are socially and environmentally responsible.

Wal-Mart’s success in China will depend on how well they build their brand strategy based on their target market, and the extent to which they can become consumer-oriented. And of course, they must keep on delivering “Everyday low prices”, whether it’s in Inner Mongolia or Arkansas.

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