Wal-Mart: Costco can't sway Chinese moms
Wal-Mart's rival in the U.S., Costco, is wading into China via e-commerce, but the world's largest retailer doesn't expect its growth on the mainland will be hampered.
"It'll be awhile before 50-year-old moms allow somebody else to pick her fresh [groceries]," Scott Price, Wal-Mart (NYSE:WMT - News)'s CEO for Asia, told CNBC, noting the company is continuing with its plan to open 110 new stores on the mainland by 2016.
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Costco Wholesale (NASDAQ:COST - News) announced last month that it would enter China via online giant Alibaba (NYSE:BABA - News)'s Tmall site, in an attempt to avoid the stumbles suffered by other international retailers, including Wal-Mart, in what has proved a difficult market for multi-nationals to crack.
Out of Wal-Mart's five largest markets, China was the only one where same-store sales, a key retail metric, fell in the second quarter compared with a year earlier.
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"Stores will still be a very important part of retail moving forward," Price said. The company currently has more than 400 stores and distribution centers in the country.
But Wal-Mart isn't ignoring the online shopping boom in China, which has become the world's largest e-commerce market.
"Our competitive advantage [is] at driving the intersection with physical and digital," Price said, noting the company has a majority stake in online retailer Yihaodian.
Wal-Mart's strategy is to offer options on whether consumers pick up items at stores or receive deliveries, he said, noting the company saw a near 30 percent growth in its China e-commerce business in the first half of the year.
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China's e-commerce market is something retailers have been rushing to tap, with e-tailing there growing at a 120 percent compound annual rate since 2003, according to a 2013 report from McKinsey.
Online shoppers in tier-four cities spent on average around 27 percent of their disposable income online, the report said.
"[E-tailing] actually seems to spur incremental consumption in China, especially in lower tier cities where there is pent-up demand for choice in merchandise that physical retail stores have not yet managed to deliver," McKinsey said.
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Wal-Mart is looking to tap that demand, with its 110 planned new stores aimed at lower-tier cities.
"If you were to look at traffic in our stores, in our growth of new stores especially in tier three and tier four cities, I think there's still quite a bit of underserved," Price said.
-By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1
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