Wal-Mart Stores Eyeing Acquisitions in China

October 4, 2013, 9:30 p.m. ET

Wal-Mart Stores Eyeing Acquisitions in China

Deal Could Include Another Foreign Player, Though Not Necessarily a U.S. or European Company, Executive Says


BEIJING—Wal-Mart Stores Inc. WMT -0.49% is eyeing acquisitions in China, a top regional executive said, a key market where rivals are building up and where the U.S. retailer has struggled to copy the success it has enjoyed in the U.S. The retailer, which has 398 stores across 118 cities in China, is looking for deals to build market share in cities where it isn’t already the No. 1 or No. 2 player, said Scott Price, chief executive of Wal-Mart’s Asia division. Mr. Price declined to disclose details on regions or potential companies it would acquire. He said a deal could include another foreign player, though not necessarily a U.S. or European company.“We want to grow in areas is in where we aren’t present today,” said Mr. Price, speaking from the Asia Pacific Economic Cooperation conference in Bali, Indonesia, on Saturday.

Wal-Mart faces stiff competition in China, with local rivals expanding rapidly and winning market share despite having fewer stories than the Bentonville, Ark., retailer. Wal-Mart is No. 2 in market share here, behind China-based Sun Art Retail GroupLtd., 6808.HK +0.52% a joint venture between Taiwanese conglomerate Ruentex Industries Ltd. 2915.TW -0.92% and France’s Groupe Auchan SA. Sun Art has 284 stores in China.

China Resources Enterprise Ltd., a Wal-Mart competitor that operates more than 4,100 retail outlets across China, recently expanded its store network, adding 131 stores, by forming a joint venture with U.K. retailer Tesco PLC.

Mr. Price said that such joint ventures wouldn’t fit into Wal-Mart’s game plan and that Wal-Mart isn’t looking for big, showy acquisitions that would immediately give it 100 new stores. “What I think ends up happening with consolidation of retailers, let’s say those who have been in the market for more than 10 years, is that they are all in the same cities,” he said. “So as a result, the efficiency of the investment is lower.”

In China, industry insiders say Wal-Mart is running into problems because its low-price business model isn’t catching on with Chinese consumers. U.S. consumers may think of Wal-Mart as the cheapest place to shop, but Chinese consumers—who bargain shop online and in mom-and-pop shops—don’t think so, said Shaun Rein, founder of Shanghai-based consulting company China Market Research Group.

Mr. Price said Wal-Mart is working to establish itself as the player with the lowest prices. The company checks a two-kilometer radius of every store to offer the lowest prices on 500 key items, Mr. Price said.

Wal-Mart said last year that it would open 100 stores by 2015 in China. The company has decelerated its pace of its investment in the world’s second-largest economy, where economic growth has slowed. Wal-Mart had in previous years been opening 50 to 60 stores annually in China.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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