Walmart shut down a 15-year-old store in Beijing last week. The supermarket chain is experiencing business shrinkage at a time when online grocery operations are gaining popularity across the country.
Walmart didn’t state the reason behind the store’s shuttering, but it has closed 80 locations in the past four years, according to a report by Sina Finance. Walmart’s financial reports indicate its business in China has been declining in the past two years; it ranked fourth place by revenue among the country’s top 100 supermarket chains. This is the lowest ranking achieved by Walmart since its entry into the China market.
A former China CEO of Walmart, Wenyuan Chen, said in a speech last year that as more people shift to online grocery shopping during the pandemic, brick-and-mortar stores will inevitably lose customers.
Walmart is not the only conglomerate that is reeling from the pain. According to research by the China Chain Store and Franchise Association, other top supermarket chains like Yonghui Superstores and Carrefour are also closing their brick-and-mortar locations.
Online grocery shopping startups started testing the water over ten years ago and became a real market hit in 2020. Throughout the pandemic, many Chinese families have chosen to do their grocery shopping online using community group-buying apps, which often present lower prices and speedy delivery service. An industry report from iResearch estimates that China’s fresh food e-commerce market reached RMB 458.5 billion (USD 70.8 billion) in 2020, an increase of 64% from 2019.
Nearly half of China’s grocery shopping will be done online by 2025 and the online grocery market is projected to reach RMB 7 trillion (USD 1.08 trillion) in five years, Pinduoduo said in a post quoting an estimate by Goldman Sachs.
Two online grocers, MissFresh and Dingdong Maicai, went public in New York in late June. Despite lackluster performance on the stock market, both companies are showing signs of growth in China.
With more choices available to customers, households are more likely to divert their spending toward online grocery services, independent consultant Yuezhong Bao told KrASIA. “Traditional supermarkets must also start their own doorstep delivery business or group-buying to meet the needs of customers.”