Wednesday, May 18, 2005

Snake Eats Own Tail: Walmart in China


Oroborous is the World Snake that eats its own tail. And this tale today is about such a beast, Walmart. We well remember the tax cut we were given by Bush after the Supreme Court gave him the country. To quiet us all down, he began to ladle out bribes and before 9/11, the economy was stalling. When the tax cuts were ladled out, all the pundits and Bush told everyone to go shopping and prop up the economy. So everyone went on a shopping spree.

Now these same people are warning everyone to start saving even though interest rates are below the rate of inflation.

Back four years ago, Walmart ran a series of ads about spending the windfall tax cuts that began the great spiral into bankruptcy. The ads showed lawn furniture and lawn tractors. Things that are non added value items. They even had price cutting on these frivolous items to encourage sales. It worked.

Now Walmart is slowing down in America. Saturated markets coupled with the bane of all big box stores: eventually they degrade and become replicas of Soviet stores with scant good things and lots of dirt and disorder as the chair tries to create profits by cutting staff. Walmart has to expand or implode.

So they are expanding in China.
The world's largest retailer opened its 46th store in China on Wednesday, a tiny fraction of its more than 5,000 stores worldwide.

"Our goal is to open 12 to 15 units this year," John Menzer told reporters as crowds flooded the opening of the Beijing store.

Wal-Mart bought $18 billion worth of goods from China last year. If the company were a country, it would be China's sixth-largest trading partner.

But Menzer declined to say whether a possible change to China's yuan currency, which the United States says is undervalued and gives Chinese exports an unfair advantage, would impact its business. "I can't comment on government issues, I'm a retailer. We will continue to export from China. Pricing is only one part of the equation," he said.

Wal-Mart posted a 31 percent jump in its China sales last year to 7.6 billion yuan, with its number of stores rising 30 percent, China's Commerce Ministry has said.

Many Americans say, incredulously, "China will never hurt us, they need us". Obviously, Walmart is expanding into China because it is a huge market and will, in time, displace America. If only 20% of China can shop at Walmart this translates into the same number as Americans in this country. It is obvious that China will dwarf the American market in the long run.

In this see saw world, China is going up and we are going down.

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