Wal-Mart: Adapting to the Chinese market

I've written previously about some of the problems Wal-Mart is having in China. This article provides some reasons for sympathy. It focuses on logistics and distribution, but makes some interesting points that impact marketing.

One is that China still does not have many solidly-established national brands and that 90% of the market is held by local brands, a factor that will change no doubt, but is currently supported by requirements that many products be sourced locally through state-approved vendors.

The historical/political basis for this is particularly interesting, I think:

Of the factors leading to the current localized structure of the Chinese market, one is a definite holdover of the Maoist period when every village was designed to be self-sufficient. Moving goods from one city to another, as in an inter-store transfer or conventional regional distribution strategy, would require approval of local officials.

Recordkeeping is critical in an environment that focuses on local sourcing for local consumption. When Wal-Mart started in China, there were 21 documents for every purchase order. Every store had to write its own purchase orders by hand and issue checks. Now, many of the suppliers use Retail Link, the same online portal Wal-Mart's suppliers in the U.S. use to communicate electronically with the retailer. Things may be easing up a little, but the rules are still there, says Hatfield.