All Walmart stores in China will start an extensive sales promotion from tomorrow, Feb. 4, and the company has announced further discounts to be offered this year, reported Beijing Business Today. Some experts believe the retail giant's low-price strategy will prove a shock to small and medium-sized supermarkets, potentially even causing a power shift in the retail industry.
After the spring festival holiday promotion, tomorrow's large-scale discounts will operate in 117 Walmart stores in 64 Chinese cities. Most product prices will see discounts of 20 percent, with some going as far as 54 percent. "We are going to keep on pushing our sales promotions this year," said a Walmart officer.
Walmart is not the only supermarket to operate a sales promotion strategy in China. France's Carrefour and China's Wumart have also indicated that big discounts are still available although the spring festival holiday has finished. Analysts believe these giant' behavior is producing a chain reaction.
An unidentified retailer revealed that suppliers are willing to give lower purchasing prices to large supermarkets because of large order volumes. And for the big chains, zero profit margins on some goods -known as "loss leaders" in the west- need not mean losing money overall, as more customers are attracted into the store who boost revenues through the additional products they buy.
However, all of the large retail stores' advantages are the small and medium supermarkets' weaknesses. "Small and medium stores face a serious situation. Discounting means lost profits, keeping existing prices means lost customers. A power shift in the industry seems unavoidable," said the unidentified retailer.
(China.org.cn by Wu Huanshu, February 3, 2009)