Wal-Mart holding no. 1th Store: Chinese-style breakout of foreign-owned electric dealers

The difference between the U.S. and China culture and policy barriers slowed down the pace of Wal-Mart localization, the real store in the recession is also conductive to its online business, in the face of the growing China's electricity market, the holding of Chinese-funded enterprises to ship to sea, into the Chinese society is a good breakthrough path.

Wal-Mart, the global retail giant, entered China in 1996, for the Special economic zones, international hub port, preferential policy, reform and opening up the forefront of multidimensional considerations, Wal-Mart to enter the mainland of China's first station in Shenzhen, opened in Shenzhen, the first Wal-Mart shopping Plaza and Sam member stores, this is a typical American model. Wal-Mart now has three kinds of businesses in Wal-Mart Supercenter, Sam's membership store and Wal-Mart community store. At that time, Wal-Mart's quietly entered the Chinese retail industry has caused no small shock, people have exclaimed "Wolf". However, after more than 10 years of development in China, the wolf does not seem to show enough wolf, both offline business and online business have encountered a Chinese dilemma, its performance in the Chinese market and the world's dominant position in the global retail market is very inconsistent. In the American-style Wal-Mart experience and the Chinese-style consumer culture game, Wal-Mart's goal of entering China as an emerging market becomes far away.

Wal-Mart has won the top of the world's top 500 companies, but in China, the ranks of the hundred strong companies are always on the back, behind the old rivals Carrefour. Wal-Mart is not acclimatized in China, its localized transformation is not smooth, online under the real business over the state of the industry behind Carrefour, and its line of electric business has also progressed slowly. In the US market, Wal-Mart, due to gross inertia, does not value online retailing, ceding most of its online market to Amazon. In China, Wal-Mart has also been experimenting with online shopping malls, but the effect is poor, thanks to the special sensitivities of its foreign investors, Wal-Mart's desire to obtain an independent filing for its business in China is hard to get, and China's policy restrictions on its mainland retail floor layout have slowed Wal-Mart's online pace.

Recently, the Ministry of Commerce approved the sale of Wal-Mart's additional holding No. 1th store with restrictive conditions, and Wal-Mart has reached 51.3% per cent of its 1th stores, gaining the right to operate the online direct business of shop 1th. By boat may be Wal-Mart's helpless and realistic choice, the localization of the slow combination of the mainland policy barriers, through the holding of a breakthrough or a good path. In fact, Wal-Mart's idea has a long history, but repeated negotiations, review postponed the process. Wal-Mart in the beginning of the Beijing-east, but because Liu resolutely do not let the holding power and forget, to the 1th store holding also experienced a long antitrust review to be completed.

Wal-Mart's China dilemma

Wal-Mart, a newcomer, was ambitious to create 100 billion of dollars in sales in China, but the reality was not. The restrictions on the number of stores in the policy, coupled with the strict and law-abiding social and cultural traditions of the United States, Wal-Mart's expansion in China is cautious and conservative, choosing to experiment in Shenzhen and then extend its tentacles to the hinterland. The shortage of stores also makes it difficult for Wal-Mart's efficient information logistics system to take advantage of scale and its cost is high. Compared with other foreign retail enterprises in China process, such as Carrefour, after the localization of construction, most of them into a large-scale expansion stage. Amazon has also gained explosive growth by acquiring excellence, leaving the online Wal-Mart behind. Wal-Mart's China bureau is caught in a double line and a dual dilemma.

Wal-Mart's store operations have been at a loss since its entry into China. In the expansion of the ground chain, Wal-Mart may have to pay a higher price than the international chain of retail companies such as Carrefour. Carrefour seems to know more about Chinese culture than Wal-Mart, and it is more congenial. Carrefour's stores have blossomed across the river when Wal-Mart is still keeping up with the usual American rules of the layout of the physical stores.

localization, integration into the local community is the transformation that every multinational enterprise must complete, but the localization of Wal-Mart in China is not successful enough. Wal-Mart wants to replicate its consistent business model and cultural philosophy in China, but it has failed repeatedly. There are differences between American and Chinese culture, the system can be rebuilt and culture can not be reproduced simply. Corporate culture is Wal-Mart management encountered many problems behind the crux, Wal-Mart in the process of local acclimatized. Its dominance in the US cannot be passed on in China, which has hampered Wal-Mart's distribution and profitability in China's offline physical stores, and has had a negative impact on its development in China.

The high cost of logistics is one of the reasons why Wal-Mart's localization is difficult. It is mainly due to Wal-Mart's leading efficient information logistics system is difficult to do their hands and feet, can not reflect the scale advantage. With its commercial satellite, Wal-Mart's information system can easily realize the global networking of information systems. Through this network, so that distribution centers, suppliers and each branch of each sales point can form online operations, in just a few hours can complete the distribution process, greatly improve the efficiency and accuracy of the business. However, because of policy restrictions, Wal-Mart's satellite communication system can not play a role in China, the trans-regional chain distribution is difficult to achieve, greatly affecting the implementation of Wal-Mart low price policy. In China, Wal-Mart in the distribution center around the concentration of shops can not be implemented, the use of distribution center of the scale effect to reduce the cost of the advantage has been unable to play out, but increased logistics costs.

In China, Wal-Mart has always been aware of the electronic business, and the development of new e-business has not improved. Relevant data show that Wal-Mart early because of the value of the online retail industry, the potential of the United States to cede a large share of the domestic market to the Amazon and other companies. In China, Wal-Mart has fallen behind this old enemy. In the product structure of Wal-Mart's online business, the single goods in each category are limited, far less plentiful than rivals Amazon, and Amazon's rise is due to satisfying consumer demand for personalized goods.

Wal-Mart is also aware of the importance of the electric business and the broad prospects of China's electricity market, and began the layout, but the slow smell and slow action so that Wal-Mart has been unable to find the force point. Wal-Mart has established Wal-Mart E-commerce China headquarters in Shanghai and is fully responsible for Wal-Mart's global e-commerce operations in the Chinese market, which is the second E-commerce headquarters in the world after the US market. Wal-Mart said that "vigorously develop e-commerce, in line with Wal-Mart in China to develop E-commerce strategy." Wal-Mart has also set up its own electric business operations team, but the team's management is mostly from Hong Kong, Taiwan and other areas, the mainland market is not familiar with the level, which also to some extent, restricting the Wal-Mart's online layout. Until late into the Warsaw Pact 15 years after November 19, 2010, Wal-Mart officially launched its own business-Shenzhen Sam shop online shopping test services. But the consumer has the opinion unceasingly to its service, if the delivery scope radiation surface is narrow, the webpage operation is more complex, the sending amount is higher, cannot the credit card only the cash payment and so on.

Policy, according to people familiar with the situation, Wal-Mart E-commerce team was founded, the original intention is to obtain an independent ICP qualification in China, in order to facilitate sales in the online platform. But it may be the background of foreign investment, and eventually Wal-Mart failed to get it.

Ship to sea to break the electricity business

Wal-Mart recognized that the electricity business will be a big market, but at this time again since the establishment of platform operation is late, and limited by the policy will also encounter a lot of trouble in the operation, under the balance, the acquisition or holding a Chinese-funded local electric dealers to go to sea to become a pragmatic choice. Wal-Mart initially chose Jingdong Mall, but Liu, chairman of the BoE board, ruled out the possibility of Wal-Mart acquiring a controlling stake, which was not in line with Wal-Mart's expected strategy. Wal-Mart then took a fancy to the 1th shop of the upstart. After a step-by-step capital operation, Wal-Mart has finally achieved the absolute control of the number 1th store. At the end of last month, Wal-Mart announced the completion of its acquisition of store 1th.

May 2010, China Ping An (601318, shares bar) to 80 million yuan to buy 1th stores 80% of the shares. In the first quarter of last year, Ping an wanted to sell a stake in shop No. 1th. The initial bidders were Tencent and Sequoia Capital, but there was no talk of a 1th-store valuation of about 2 billion yuan and no intention to cede control. But Wal-Mart accepted the price of peace, in May 2011, Ping An 20% of the stake sold to Wal-Mart 65 million. The high price behind the rise of Wal-Mart is the mood of the electric business and the value of Store No. 1th.

Wal-Mart submitted its declaration to the Ministry of Commerce in mid-December last year to increase the percentage of its stake in shop 1th, but it was approved after a 9-month review. Wal-Mart's wholly-owned subsidiary, GEC2PTE.LTD, acquired a 33.6% per cent stake in the parent company of No. 1th, which increased its shareholding from 17.7% to 51.3% prior to the acquisition, and officially became a controlling shareholder, and Wal-Mart gained control of its online direct business at Shop No. 1th. Niu.

Wal-Mart's restructuring of store 1th was immediately followed by the handover of two senior executive officers at the VP level. Dai Qing was appointed as Vice President of human resources at No. 1th Store, Dai has been a senior official of the human resources of Taobao, Unilever and L ' Oreal, Song Jinwen as vice president of finance, and song Zeng as the chief financial officer of Kimberly. The two people from the Wal-Mart Electric Corps team, has a wealth of industry background.

Guo Dongdong, the former finance vice president of Store No. 1th, was also vice president of food and beverage, and Liang Yong, vice president of human resources at Shop 1th, was Gairen as vice president of business ethics.

Analysys International Electric business analyst Shou sent that the adjustment is the company's horizontal support departments, almost do not touch the specific line of business changes, which is more reasonable. Usually the acquirer will need its core team to enter after the equity control, thus more clearly control the acquired enterprise in the aspect of finance, and comb the enterprise structure again.

He's Hill stone shop 1th.

1th Shop By the Dell former executives in just and Liu Junling two people jointly founded, on July 11, 2008 officially online, creating a Chinese E-commerce industry "online supermarket" precedent. For Wal-Mart, store number 1th is a good choice. In the early days, store 1th was mainly selling groceries and food, and this is Wal-Mart's main business, Wal-Mart is more familiar with the operation of a quick, easy to do; the two founders of shop 1th have had overseas experiences, both of whom have served in the same United States multinational company Dell, and are well versed in American culture, This is good for both interpersonal communication and business interaction, it is easy to produce synergy; Shop No. 1th set up time is not long, the goods involved in food and beverage, beauty care, kitchen cleaning, maternal and infant toys, electrical appliances, home, nutrition and health care, such as 13 major categories, with more than 180,000 kinds of goods, On line at the beginning of the 24 million registered users, the results are not so good, known as the "Electric Trader Dark Horse." In 2011, the turnover of store 1th continued to grow rapidly for 4 consecutive quarters, according to the data disclosed by store 1th, which showed its q2/q3/q4 quarter-on-quarter growth of 336%, 609% and 268%, and the annual turnover reached 2.72 billion yuan. Shop No. 1th becomes China's largest online supermarket, with thousands of suppliers, hundreds of brand partners, including online direct sales and value-added telecom business.

Shop 1th has many advantages in online business, which is an important factor in attracting Wal-Mart. In warehousing and logistics, No. 1th Store has Beijing, Shanghai, Guangzhou, Wuhan, Chengdu, five storage centers, at present, 1th shop orders have been covered nationwide (except Hong Kong and Macao), 1th stores to create their own distribution center, as at the end of December 2011 with more than 34 major cities of the autonomous distribution, In the future nationwide will also build hundreds of distribution stations; In the integrated supply chain, its large procurement team, from supplier certification to ensure product quality, supplier management, at present, shop 1th has thousands of high-quality supplier resources, covering many domestic and foreign high-quality brand manufacturers, Can be the scale effect of the benefits of tangible feedback to the hands of consumers.

Can Wal-Mart borrow stones to attack jade

Successful holding No. 1th store is only the beginning, how to use it to pry China's electricity market is the key. Wal-Mart's positioning is the world's leading multi-channel retailer, that is, to achieve the line under the take-all, Wal-Mart's business scale and profit maximization.

Wal-Mart's China electric Dealer's short board is to be mended by Shop No. 1th. Wal-Mart's "1th" shop, is clearly bullish on China's continued blowout of the electric business prospects. Through the 1th store, Wal-Mart hopes to make up for the weak line business, the integration line under the Chinese strategy increasingly clear. It is reported that Wal-Mart China's sales in the international business accounted for nearly 10% of the proportion, increased e-commerce channels are considered to be Wal-Mart's business growth in China's important breakthrough point. "We are excited about this investment," said Eduardo Castro-wright, vice chairman of Wal-Mart department store, global E-commerce business and global sourcing chief. China's online shopping scale has grown rapidly in recent years, and will be close to the U.S. online market in the next few years. By investing in store 1th, we will continue to engage in this important e-commerce market and work towards the goal of becoming the world's leading multi-channel retailer.

The takeover, which was driven directly by Wal-Mart's global headquarters, said the acquisition would help it catch up with Amazon in the electricity business. In China, Wal-Mart believes it is a little late to start a proprietary-power-buying strategy, but by acquiring the right mature company, it can shorten the gap and catch the shortcut. At present, the two teams have been docking, in the future, the two sides will be in the supply chain, warehousing, logistics and private brand merchandise and other aspects of cooperation.

Gege in an interview admits: "Shop 1th will still operate independently, the future will be timing independent listing." This shows that Wal-Mart will continue to use the current management of Shop No. 1th to manage the new company, Wal-Mart's capital injection in the short term for shop 1th management team, development strategy will not have an impact. This approach is sensible, after all, the 1th store's operating team to understand the Chinese market, but also conducive to maintaining the continuity of corporate culture.

Wal-Mart, however, also faces operational risks. Store No. 1th has not yet fully established the viability, the integration of the 1th store still has a large number of variables. Although the turnover of store 1th has been faster and bigger, it has not been able to achieve financial losses and official profits. Since China's Ping An stakes in the No. 1th store, store 1th for the peace of the business is too dependent, peace of internal procurement even once accounted for 1th shop business volume of 70%, coupled with "Ping ' an" points platform and 1th stores docking to the flow, the number 1th shop is actually doped with water. Even if there is such a lot of resource tilt, shop 1th is still not profitable, and now the sharp decline in peace is adding a dash of uncertainty. How to use the 1th shop based on the electricity business market is Wal-Mart must consider the issue.

Borrow Force No. 1th Shop break through, how to avoid weaknesses, complementary advantages, line online under the linkage force, testing the wisdom of Wal-Mart.