Walmart and Carrefour experiences in China: resolving the structural paradox

Abstract

PurposeThe purpose of this paper is to combine secondary sources and interviews with Chinese suppliers to explore the structural paradox faced by retail multinational firms in China as they balance the competing demands of standardization and localization. The authors describe the challenges faced by two retail giants, Walmart and Carrefour, as they attempt to replicate in China their lean retailing successes elsewhere in the world.Design/methodology/approachThis is a comparative study of Walmart's and Carrefour's ventures into the Chinese market, largely based on publicly available secondary sources, but also incorporating interviews with three Chinese nationals engaged in supplying these firms.FindingsWalmart and Carrefour have so far failed to extend their oligopolistic dominance to the Chinese market. Walmart has stressed its well‐known standardization of operations, whereas Carrefour has better adapted to the Chinese economic culture. Issues identified are: the formation of partnership alliances and their impact on store location choice; the effect of under‐developed infrastructure on distribution and logistics; the unique Chinese business culture – guanxi (using social capital to build business relationships) and its influence on supplier relationships; the variety of consumer behavior and its effect on procurement and sourcing; and an immature information technology environment which impedes information sharing between supply chain partners. While both firms have had some degree of success, neither has been able to match the combined growth of their larger Chinese competitors.Research limitations/implicationsThe authors are cautious in drawing normative conclusions or making predictions about the future. Both firms face significant obstacles as they challenge China's largest domestic retailers.Originality/valueMany multinational corporations are aware of the topology of the Chinese market, what they lack is an in‐depth understanding and the skills needed for effective operations. This paper discusses the effectiveness of the strategies adopted by two leading global retailers as they attempt to resolve the paradox presented by the competing demands for standardization and localization and includes information provided by three of Walmart's and Carrefour's local Chinese suppliers.