Walmart is doubling down in China despite an economic slowdown.
The Arkansas-based retailer announced Thursday that it plans to open 500 new stores in China over the next five to seven years. That would more than double Walmart’s (WMT) footprint in China, which is expected to become the world’s biggest grocery market by 2023.
The expansion comes as China’s huge economy is cooling. The country is grappling with slumping growth and a prolonged trade war with the United States. China’s GDP growth dropped last quarter to its lowest level in nearly three decades, and Beijing has been rolling out stimulus measures to jump start the economy.
Chinese consumers, however, are still spending, and that’s been good news for Walmart.
The company’s China sales grew 6.3% last quarter compared to the same period last year, much higher than its 2.5% growth worldwide.
Earlier this year, Walmart announced that it plans to plow more than a billion dollars into its China business as it faces growing competition from local rivals and online retailers.
The company indicated on Thursday that groceries and online shopping are key drivers of its China expansion. It also said it will remodel more than 200 stores in China over the next few years, adding features such as self-service cash registers where customers can pay using facial recognition.
Walmart is leveraging “multi-format strategies to bring customers freshness, value and convenience,” James Ku, a senior vice president with Walmart China, said in a statement on Thursday.
“We will continue to collaborate with partners and policymakers in China to accelerate our expansion,” he added.
Walmart sold its Chinese e-commerce site, known as Yihaodian, to JD.com in 2016. JD.com, China’s second largest e-commerce player after Alibaba (BABA), now hosts Walmart’s groceries and other various products on its own online shopping platform. And more than 100 of Walmart’s roughly 400 stores in China double as warehouses for JD.
The tie-up with JD and a further expansion into China puts Walmart in a stronger position to tap into the country’s growing appetite for fresh groceries and fend off competitors, including Alibaba.
Alibaba launched grocery store Fresh Hippo in 2016, also known as Hema. Shoppers have to download Hema’s app and link it to an account on Alibaba-affiliated digital payment platform Alipay. They can shop in person and pay for goods at the cashless checkout counters, or they can shop online and get fresh groceries delivered.
Hema fulfills more than half of its orders online, according to a 2018 report from Bain & Company.
Research company IGD Asia said earlier this year that China will overtake the United States to become the world’s largest grocery market by 2023, with online sales alone more than quadrupling to $205 billion.
Online grocery shopping in China is driven by the country’s rapidly growing middle class, high smartphone usage and strong internet connectivity.
Walmart entered China more than 20 years ago. As of January this year, the company had 443 stores in the country, including its main Walmart brand and its membership-only subsidiary Sam’s Club.