The logistics cost of Walmart accounts for 1.3% in a sales revenue of 100 yuan, Kmart's is 8.75%, and Sears' is 5%. Through its private brands, direct procurement bases, and extremely low logistics costs, Walmart has formed a complete industrial chain. Walmart's current strategy is not about price-cutting competition in stores, but rather competition across the entire upstream, midstream, and downstream of the industrial chain. Therefore, the industries it eliminates are not China's retail industry, but all the intermediate links. Under the pattern of industrial chain competition, China's retail industry will face an unprecedented major reshuffle. Similar cases also include Goldman Sachs. In 2008, Goldman Sachs spent $300 million to fully acquire more than ten professional pig farms in Hunan and Fujian provinces. We also found that in 2004, Goldman Sachs had invested in Yurun Group, and in 2006, it acquired Shuanghui Group, China's largest meat food industry group, for 2 billion yuan, making a move at the terminal end of the industrial chain for pig farming.
Founded in 1962, Walmart has opened more than 7,800 stores in 16 countries around the world to date, becoming the world's largest chain retailer. In 1996, Walmart opened its first Walmart Supercenter and Sam's Club store in China. Thirteen years later today, Walmart has opened 146 stores in 89 cities across the country, surpassing Carrefour's 136 stores. It also owns 35% equity and 102 stores of Trust-Mart. In January alone this year, Walmart opened 17 stores, almost matching the total number of 20 stores opened throughout 2008, and most of these stores were located in second- and third-tier cities. Carrefour also announced plans to open 28 branches this year, exceeding the 22 from the previous year, with a large portion also being located in second- and third-tier cities.
What concerns me most is that Walmart is further acquiring the operating rights of our agricultural land through China's agricultural reforms. Behind the scenes, Walmart conducts capital operations, driving many agricultural companies under the name of Chinese agricultural companies to massively acquire the operating rights of high-quality farmland near urban areas. After acquisition, these lands are converted into intensive farming, making these farmers work for Walmart. Some people may think working for Walmart isn't bad, but according to statistics, out of Walmart's 1.3 million employees in the U.S., only 610,000 employees enjoy medical insurance support, accounting for just 49% of all U.S. employees, while overseas employees find it difficult to obtain such benefits.
What is alarming is that they are not just opening stores, but integrating the entire industrial chain. In 2006, their private brands accounted for 22.5%, in 2008 it was 10%, and by 2010, they plan to increase their private brands to 20%. The characteristic of private brands is that they are very cheap, often being 20% cheaper, and some can even be 40% cheaper. Apart from controlling its own brands downstream, Walmart also does well in the upstream part of the supply chain. Xingyuan Company established a direct procurement base in Wafangdian, Liaoning, for Walmart to convert green fruits into organic fruits, covering 5,000 mu (about 820 acres) of green fruits locally. By 2011, Walmart plans to involve 1 million farmers in China in this so-called "farm-to-supermarket" project. They have also clearly stated that they will establish a green supply chain covering all links from suppliers, distribution centers, to stores.
Walmart's three treasures: "Everyday Low Prices" behind the scenes
At a retail forum in June this year, one person said: In fact, Walmart's current acquisition moves in China are not as big as we imagined, and its acquisition pace is relatively slow, so I am relatively at ease. Another entrepreneur from Dalian said: I don't even consider Walmart as a competitor. Although Walmart has already entered Dalian and even opened near me, our performance is still very good, and we still maintain our market share through similar sales. Therefore, Walmart's entry will not have any impact on us.
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