The world’s biggest discount retailer is readying to dominate the field in the world’s largest country.
The Wall Street Journal reported Tuesday that Wal-Mart Stores Inc., is bidding about $1 billion for a chain of 100 hypermarkets (supercenters) in China that would make it the country’s biggest food and department store network.
Wal-Mart is buying the markets from Trust-Mart, a Taiwanese company. The purchase will add 100 outlets, scattered around 20 provinces, to Wal-Mart’s existing 66 stores in China. The chain says its plans in China are to increase in size fivefold in the next five years.
The plan is not without irony. One of the criticisms leveled at Wal-Mart is that the company’s pursuit of low-cost goods is partly to blame for the loss of U.S. manufacturing jobs to China and other low-wage nations. In 2002, the $12 billion worth of Chinese goods Wal-Mart bought represented 10 percent of all U.S. imports from China.Despite the companies “Made in the U.S.A.” and “Buy American” campaigns, approximately 85 percent of its stores’ items are made overseas.
Because China’s unmatched economy is driving the “global economy,” everyone naturally wants to be there. Starbucks, which recently announced that its new long-term goal is to have 40,000 coffee stores worldwide, already has 250 stores in China, out of 12,000 worldwide. Starbucks chairman Howard Schultz said China may become the company’s largest market outside the U.S.
“We were stunned to see how Chinese customers are using Starbucks stores as an extension of their home or office. It’s partly because the stores are bigger than their apartments, and commutes are very long,” Schultz said.
Wal-Mart and Starbucks are two quintessential American companies, for the most part representing different consumers. Five years ago, Starbucks estimated the average income for a person visiting one of its U.S. locations for the first time was $92,000. Now, the company says the average income for first-time customers is $80,000.
A 2003 study found that 23 percent of Wal-Mart Supercenter customers live on incomes of less than $25,000 a year. More than 20 percent of Wal-Mart shoppers have no bank account, twice the national average. And while almost half of Wal-Mart customers are blue-collar workers and their families, 20 percent are unemployed or elderly.
Income inequality is a characteristic that China and the U.S. share. In fact, China’s wage gap is one of the biggest in the world, outpacing even the U.S. and Russia. It leaves one to wonder how high the global economy can climb, given the growing valley between the “haves” and “have nots.”
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