Wal-Mart tests food format in China

Drug Store News, April 29, 2002 by Mike Troy

SHENZHEN, CHINA -- Wal-Mart can successfully operate Neighborhood Market stores in the wide open spaces of Arkansas, Oklahoma and Texas, but will this format work in a major city in the world's most densely populated market? Since there's only one way to find out, Wal-Mart opened its first Neighborhood Market store earlier this year in Shenzhen, China, even though, domestically, it only operates 31 units in three states.

Although the Chinese store bears the markings of a Neighborhood Market, those familiar with the domestic version of the format would find the differences striking. For starters, the Shenzhen store is underground. Wal-Mart operates large underground and multilevel stores in other densely populated areas of China and Korea, so it was no problem to shoehorn the Neighborhood Market into the basement of the Kerry Center office building in the Luohu business district about a block from Wal-Mart's Chinese headquarters.

From the street, the only visible markings that a Wal-Mart store is near-by are two green signs, roughly 5 feet tall and 10 feet wide, with Neighborhood Market" written in white letters in English, as well as corresponding markings in Chinese. These signs are affixed to the top of glass enclosures positioned over escalators that provide entry and exit points to the surface.

At 28,000 square feet, the first Chinese store is smaller than the 31 Neighborhood Markets in the United States, which are typically 40,000 square feet. It is set up to accommodate the higher customer traffic and smaller transaction sizes.

If the concept proves successful, it would provide Wal-Mart another vehicle to reach a vast Chinese market where expansion has recently begun accelerating. Wal-Mart opened eight stores in China last year and ended the year with 15 supercenters, three Sam's Clubs and one Neighborhood Market. Seven of the 19 units operating in China are located in the Thenzhen area where Wal-Mart opened its first two stores in August 1996.

Wal-Mart International chief executive officer John Menzer recently stated that Wal-Mart now feels "comfortable about growing much faster in China."