Economy

Walmart Plans To Replicate U.S. Small-Town Strategy In China

The American retailer already has a presence in China, but its aim now is to develop shopping malls in smaller Chinese cities, where its community supermarkets can serve as anchors.

Shanghai's Walmart Superstore
Shanghai's Walmart Superstore
Tang Xiangyang

BEIJING — Walmart is about to make a move in China again. The American retail giant is envisioning developing commercial real estate, though the number and choice of sites have yet to be determined.

Walmart's aiming at small community shopping centers in the so-called third- and forth-tier cities. It’s a strategy much different from the Inter Ikea Centre Group or the Wanda Group’s large shopping malls whose parking lots often accommodate thousands of cars. It means that Walmart China, with its supermarkets, its “Sam’s Club” members-only warehouse, and its “No. 1” online shopping site, is developing a new strategy in China. “Walmart is a well-accepted brand at the local government level,” says Chen Liping, director of the Institute of Business Administration at the Capital Normal University. “It’s not to be denied that it has some chance of being successful.”

Whereas Walmart is renowned in China for its first-tier city supermarkets, what it does best at home in the United States are the small-scale community-based stores. The fact that Walmart’s recent location scouts have chosen several less well-known cities in Guangdong Province obviously demonstrates that the company intends to copy its successful experience at home by obtaining low-price land or leases to achieve low-cost expansion.

Walmart’s development move is a smart strategy, says Wang Rong, vice president of Roland Berger Strategy Consultants’ Greater China office. Because the anchors at these shopping centers will be the Walmart supermarkets and Sam’s Club membership warehouses, this Walmart won’t face much difficulty in recruiting businesses.

Apart from luring retailers as well as food and beverage stores, Walmart supermarkets and Sam’s Clubs will no doubt bring considerable shoppers to these malls. Though Walmart has not published its Chinese market data, the American giant’s global reach has expanded significantly over the past decade, according to a stock analysis startup called Trefis. All but its newly opened Suzhou store are profitable. In terms of sales, Walmart’s first Chinese warehouse store in Shenzhen, which opened in 1996, became the company’s global top shop a few years ago. “Sam’s Clubs have strong shopping mall properties,” says Chen Liping.

In Beijing — Photo: Fruitnet.com

In fact, relying on anchor stores to stimulate the flow of people is not a strategy unique to Walmart. For instance, housewares store Ikea will be among four anchor stores when the Inter Ikea Centre Group opens several shopping malls in three Chinese cities — including Beijing — between 2014 and 2015. The three others will be the French supermarket Auchan, Suning Appliance, and Jinyi Cinema, one of China’s top five theater firms.

The challenges

Despite the outside world’s optimism about Walmart’s move, the company, in clear contrast to the Inter Ikea Centre Group, has been very discreet about its expansion. “We are very cautious about this project. We have yet to reveal more information,” its officials say.

This circumspection is no doubt driven by not-very-optimistic market conditions. As many as 150 shopping centers have been opened or are opening this year in major cites such as Beijing, Shanghai and Guangzhou, according to a July report from Jones Lang LaSalle, a real estate services and investment management company. Meanwhile, a report by the market research firm Ipsos covering the same period showed that there were already 2,897 shopping centers across China at the end of 2012.

As a matter of fact, for the first half of 2013 China’s commercial real estate investment amounted to over 500 billion RMB ($82 billion), a 26% increase over the same period the year before. This rate far surpasses China’s growth in GDP. Intense competition among these centers is inevitable.

Another potential problem is that e-commerce is challenging conventional malls. As another Ipsos survey showed, nearly half of respondents said that they’d increasingly shop online whereas only 11% said that they’d be visiting shopping malls more frequently.

As a retailing giant that has nearly 400 stores and 17 years of existence in China, Walmart certainly isn’t unaware of the grim situation that China’s shopping centers are facing. That it chooses to attack the small-scale community projects in the smaller cities is precisely because it aims to succeed by differentiating itself. In its plan, the mall surfaces, the number of tenants and shop types are all to be matched to the size of the local community.

Nevertheless, even Chen Liping, who is relatively optimistic about Walmart’s ambition, says that because of China’s rapidly aging population, shopping malls are also prematurely aging in China. The primary consumers visiting foreign retailers such as Walmart and Carrefour are entering middle to old age while these malls fail to find favor with the younger generations. “The post-1980s and post-1990s generation prefer shopping online or at the local shops which better understand their psychology,” Chen says.

The remarks that foreign retailers are being defeated by Chinese own marks are not without foundation. The already-mentioned recent take-over of Chai Tai Lotus shops by Wumart and the mergers of Tesco and China Resources Enterprise show this. Tesco which once owned 139 stores and which has been in China over 9 years now holds only a 20% share in the joint venture and is effectively quitting this market.

So far, AEON Group, the Japanese retailing and financial services firm is the most successful foreign retailer in China’s commercial real estate market. The Aeon Malls use a low-price strategy, refined membership management, good services and has won a good reputation.

In Chen Liping’s opinion, Walmart’s brand efficiency is relatively stronger. Its 1.1 million Sam’s Club members’ data can also provide some help to the shopping mall project. However, whether or not Walmart will be able to sell “quality and inexpensive” goods remains the most critical point for success of these centers.

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Geopolitics

How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

Laura Valentina Cortés Sierra

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.


But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Juthatip Sirikan speaks in front of democracy monument.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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