Wal-Mart: the High Cost of Low Price in China

Walmart’s EDLP Strategy: Chinese Consumer Preferences and the One-Child Policy Challenge

Walmart has been struggling to increase its performance in China. There are a few struggles for Walmart in China.

Walmart’s struggle with the Global Policy of Everyday Low Prices backfired. Everyday Low Price is Wal-Mart’s main strategy and trademark. Within this strategy, Wal-Mart will always sell its products at low prices. This strategy was also used in China to attract Chinese customers. However, this strategy did not work because Chinese customers preferred high-quality products rather than low prices.

They believe that low prices are usually low-quality products. One of the factors is that Chinese customers prefer high-quality products because of the government policy that Chinese people are required to have only one child, and parents can control the size of the population. So, they will try hard to get the best quality of goods and anything to their child. On the other hand, Walmart only focused on the EDLP strategy without considering the quality of its product.

Wal-Mart in China: The High Cost of Low Prices through Deceptive Pricing and Mismatched Consumer Expectations

The second struggle of Wal-Mart in China is deceptive pricing and false profit. Walmart has been accused by Chinese officials a few times because of advertising false discounts on its goods, and this led to price gouging and misleading consumers. NDRC (National et al. Commission) found that Walmart was cheating its customers by overcharging the price of the products in 2011. The same incident also happened in 2012 at a Walmart store located at Xudong Avenue in Wuhan. In this case, Walmart was fined 100,000 Yuan because of a discount hoax, in which they sold a new product, Blue Moon liquid soap, at a discount price, but actually, the discount price was higher than the price before the promotion, which was 48.8 Yuan after the promotion but the price before the promotion was 47.6 Yuan.

Misunderstanding Chinese consumers is also one of the struggles of Wal-Mart in China. Wal-Mart’s target was middle-class Chinese consumers, but they preferred high quality rather than low prices. China’s government’s one-child policy has a big impact on their citizen, and they want to give the best for their children with good quality products, even if they are expensive. Meanwhile, Wal-Mart’s global policy was EDLP, which is more significant about the price, not quality. On the other hand, Chinese consumers spend more time inspecting products to ensure their freshness and good quality. Other than that, Walmart stores were big with wide aisles, while Chinese citizens preferred small neighborhood stores to avoid long traveling and buy few items per visit. Thus, Wal-Mart’s big box store cannot lure Chinese consumers. 

References

1. Fishman, C. (2006). The Wal-Mart Effect: How the World’s Most Powerful Company Really Works–and How It’s Transforming the American Economy. Penguin.
2. Bianco, A. (2006). The Bully of Bentonville: How the High Cost of Everyday Low Prices is Hurting America. Currency.
3. Greenwald, R. (2005). Wal-Mart: The High Cost of Low Price. Brave New Films.
4. Chan, A. (2013). Walmart in China. Cornell University Press.

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