Walmart Leverages Central Buying and Launches CNY Street with Quality Products and High Value
Winning CNY market with high value, exclusive items, and local CNY products
【Jan 14, 2016, Shenzhen】 As Chinese New Year approaches and festive atmosphere builds up, businesses across the country are greeting the most important sales season of the year. Some customers may have noticed that Walmart has already set up its CNY Street with unprecedented high-valued products, branded Chinese liquor at 80 to 90% discount, more exclusive items and new items from famous suppliers than previous years, and a broad assortment of CNY products, which shows Walmart’s position as a leading retailer and the advantages of central buying. Walmart hopes to demonstrate the CNY goods that the merchandising team carefully selects through festive display and to provide customers with thoughtful services so that they could enjoy better and worry-free products and services and the convenience of one-stop shopping at Walmart when they shop for the Year of the Monkey.
Walmart acts early to win CNY market opportunities through high value, exclusive items and local CNY products.
High value comes from larger volume direct buying
Walmart has been working with renowned suppliers on direct buying without the middleman in recent years. It not only guarantees product quality but also reduces merchandising cost through increased direct buying volume, which lowers retail prices and benefit customers. Walmart started to negotiate with suppliers based on previous sales data and trend analysis to select quality suppliers who have good business reputation more than six months before the Chinese New Year of the Monkey. In the meantime, Walmart leverages its large number of sales and strong supply chain to directly purchase popular quality and high-valued CNY goods from suppliers to save customers the trouble of comparing prices and quality.
For example, candy and cookies are always very popular during Chinese New Year. Walmart works with foreign manufacturers to directly import Danish Castle butter cookie (454 g) and sell at only 29.8/box. The manufacturer also uses a red tin package according to Walmart’s request to echo with the CNY atmosphere. Comparing with the market, this item is almost 10% less expensive. Walmart’s private brand products are welcomed by smart customers because of high quality and value. This season, Walmart also introduced several Great Value items as special offers, including jujubes from Hetian, Xinjiang. Its original price was 29.8/bag. Walmart increased sourcing volume and now offers this item at 29.8 for 2 bags to benefit customers. These special offers are selling well subject to availability.
The large discount offers of liquor are also typical examples of the benefits of central buying. Based on market analysis, Walmart started working with several major liquor suppliers in China in recent years and directly purchases large quantities of products of renowned liquor brands such as Maotai, Wuliangye, Luzhou, and Xifeng to lower price. Meanwhile, the retailer also works on in-store promotion and display to encourage reasonable consumption and avoid unnecessary packaging. Not only individual customers are encouraged to buy whole cases of Chinese liquor, some medium and small-sized businesses and wholesalers are also buying in bulk because of the low price. Take the 52% Guizhou Yuanjiang produced by Maotai Group as an example. Its original price was RMB 1,180/bottle. But its price is only RMB 198/bottle uring Chinese New Year, about 98.3% off. Another example is the 52% Fuguiwannian liquor produced by Xifeng. It original price was RMB 680. But the price at Walmart is only RMB 168. To pass the pricing benefits to more customers, Walmart offers liquor from various renowned liquor manufacturers at multiple price ranges from RMB 39.8/bottle to 198/bottle. Walmart expects these price point liquor products to see more than 50% of sales increase during CNY.
Walmart exclusive items or new items come from strategic cooperation with suppliers
During Chinese New Year, Walmart works with strategic suppliers to introduce Walmart exclusive items or new items with new packages according to customers’ habits and offer them at better prices. For example, Oreo 400 g cookie box in festival package only sells at RMB 29.8/box. The price of Danisa 790 g cookie box with Kopiko coffee is only RMB 78/box. And a case of 6 cans of imported phase 3 Wyeth Illuma baby formula (900g) only sells at RMB 1,998. Other Walmart exclusive items include WantWant milk gift box, Hsufuchi caramel treats at 9.9/bag, small-bottled Minute Maid juice, and Haidilao hot pot soup base. And new items include Mengniu Weilaixing milk, low-sugar Yakult, Sanquan children’s dumplings and so on.
As one of the largest buyers in the world, Walmart has strong bargaining power. Its Global Sourcing offices across the world help Walmart to deal with manufacturers everywhere without the middleman to further lower merchandising cost so that customers in China also enjoy quality imported products at low prices. Take fruit as an example. To ensure freshness and enhance pricing advantages, Walmart increased direct import of quality fruit around the world. Compared with 2014, Walmart’s container volume of directly imported fruit increased 10 times in 2015. Chilean cherries at only RMB 79.6/kg are selling very well, and so are the American red delicious apples selling at only RMB 17.96/kg, more than 10% lower than market. What’s more, these are not short-term promotional prices but long-term stable prices. Noticing the trend of giving healthy products as gifts, Walmart offers new fruit gift boxes of a combination of different quality fruit at various prices this CNY. Red wine is another example. In 2015, sales of Walmart’s red wine direct imports grew over 60% compared with 2014. Wine from Sutter Home, an American household brand, sells only at RMB 58/bottle. Exclusive items in China such as Grace Shiraz and 2 bottle sof Francois Fouche red wine in wooden gift box also only sell at RMB 58 and 128. Walmart expects to see a 35% growth of red wine direct imports this CNY over last year.
Abroad assortment of national CNY goods
Chinese New Year is a traditional festival, and CNY goods from across the country are a must on every family’s shopping list during the holiday season. To save customers the trouble of looking for these CNY goods everywhere, Walmart works with traditional brands in the country to introduce local CNY goods into its stores in different regions. These products include 8 pieces of traditional Beijing pastry from Daoxiangcun, fried dough twist from Guifaxiang in Tianjin, five-spiced beans from Shanghai Chenghuangmiao, and Huangshanghuang Cantonese-style sausages from Guangzhou.
About Walmart China
Walmart entered the Chinese market and opened its first Supercenter and Sam’s Club in Shenzhen in 1996. Walmart’s global merchandising office was set up in Shenzhen in 2002. Currently, Walmart operates two main formats in China including Supercenters and Sam’s Clubs. We have donated funds and in-kind support worth over RMB77 million to local charities and welfare organizations since entering the China market. Walmart China won awards including The Best Employer, Satisfactory Chain Retailers selected by Suppliers, and Community Service Ambassador. For more information, please visit http://www.walmartchina.com.