Click to read the original article for details. On June 18, while people were immersed in e-commerce promotions, Walmart (WMT.US) closed two stores in Hangzhou and Ningbo, marking at least the 14th hypermarket closure in China in the first half of this year. The wave of closures of traditional hypermarkets continues. On June 18, while people were immersed in e-commerce promotions, Walmart (WMT.US) closed two stores in Hangzhou and Ningbo. In the first half of this year, Walmart has closed at least 14 hypermarkets nationwide. The frequent closures are closely related to the continuous decline in performance. In fiscal year 2019, Walmart's total revenue increased by 2.8% year-on-year, but consolidated net profit decreased by 31.8% year-on-year. The significant decline in profit is largely attributed to the rapid development of e-commerce in recent years. Walmart is also responding to changes in the market environment by cooperating with e-commerce giants and launching Sam's Club stores. In addition to the impact of e-commerce and changes in consumption habits, industry insiders told the China Times that most foreign-funded hypermarkets entered China in the 1990s and are now at the stage of deciding whether to renew leases. Rent levels will increase significantly, so to avoid losses, they have to close stores. Lease expirations trigger store closures While the new retail trend is hot, traditional retail giant Walmart frequently announces store closures. It is understood that the closed Walmart store in Dongxin, Hangzhou, opened in 2007 and has been in operation for 12 years. In addition to the Walmart hypermarkets in Hangzhou and Ningbo, the other closed stores cover more than ten cities in Shandong, Jiangxi, Zhejiang, and Guangdong. These include Shenzhen, Nanjing, Tangshan, Qingdao, Haining, and Lishui. According to Walmart China's official website, Walmart currently operates more than 400 stores in over 180 cities across the country. In recent years, Walmart's store closure trend has intensified. According to statistics from Lianshang.com, Walmart closed 5 stores in China in 2012, 13 in 2013, 17 in 2014, 1 in 2015, 13 in 2016, 24 in 2017, and 21 in 2018. As of June 2019, Walmart has closed 59 hypermarkets in the past three years. Regarding the reasons for Walmart's recent store closures, an official Walmart staff member responded to the China Times that the main reason for the concentrated closures is the expiration of leases. In the retail industry, it is normal to close stores; it is a common occurrence. Stores that perform well will expand; if leases expire or the location is not suitable for operation, the store will definitely close. This is a normal business behavior. The closure of foreign-funded hypermarkets has become a trend. Hu Chuncai, general manager of Shanghai Shangyi Consulting, told reporters: "Foreign-funded hypermarkets entered China after the 1990s, signing 15-20 year contracts. Many contracts have now expired. If renewed, rents will increase exponentially or even several times. Since profits were not high to begin with, if rents increase, losses will be severe, so companies have no choice but to close stores." While closing stores, Walmart is also planning to open new stores and cooperate with e-commerce platforms to open Walmart flagship stores. In February this year, Walmart China's Q4 2019 report showed that Walmart will open 300 new stores outside the United States, mainly in China and Mexico. In the financial report, Walmart stated that Walmart (China) has established a strategic partnership with Tencent, including the use of WeChat Pay. At the same time, it will increase investment in the JD Daojia platform and build new warehouses to accelerate e-commerce business. Walmart China said it plans to have 300 Walmart stores on JD Daojia by the end of 2019. The 2019 financial report shows that total revenue for fiscal year 2019 was $514.4 billion, a year-on-year increase of 2.8%. Consolidated net profit was $7.179 billion, a year-on-year decrease of 31.8%. Among them, Walmart International's net sales in the fourth quarter were $32.3 billion, a year-on-year decrease of 2.3%; Walmart U.S. net sales were $90.5 billion, a year-on-year increase of 4.6%. It can be seen that except for the U.S., Walmart's overseas performance is not ideal. Some media reported that Walmart's store sales in the Chinese market decreased by 0.2% compared with the same period last year. The reporter asked Walmart official staff for confirmation, and the other party said: "The financial report does not disclose the performance of individual countries or regions; we do not publish such information." Retail model changes With changes in consumption concepts, consumer demand has become more diversified, and community stores have begun to rise. Retail giants such as Walmart and Carrefour are gradually shifting from the 'large and comprehensive' business model to the 'small and beautiful' model, with convenience stores and fresh food experience stores appearing. Walmart has started plans for compact stores, adding new Sam's Club stores, Huixuan supermarkets, new-generation stores, and cloud warehouses. It is understood that compared with Walmart's main hypermarkets of over 10,000 square meters, compact stores are about 50% smaller and emphasize food service and services. According to Walmart's Q4 2019 financial report, Sam's Club net sales in the fourth quarter were $14.9 billion, compared with $15.479 billion in the same period last year, a year-on-year decrease of 3.7%. At the same time, Walmart China has stated that Sam's Club sales grew by 8% in 2018. In that year, four new Sam's stores were opened. In 2018, Walmart China's e-commerce gross merchandise volume increased by nearly 150% compared with 2017. Fresh food sales in physical stores accounted for nearly a quarter of total sales. In fact, not only Walmart, but many Chinese and foreign hypermarkets are undergoing community-oriented transformation. Public information shows that Carrefour has launched easy convenience stores, featuring fresh and imported goods, and setting up customer rest areas; Yonghui Superstores plans to open 150 new stores in 2019, including the new format 'Mini stores', and has already opened 93 Mini stores in the first quarter; Renrenle plans to open 20 stores, mainly including new formats such as Le super, Le life, and Le fresh; Lotus has plans to launch a new store brand focusing on food products and is exploring new models with professional areas in stores. "Overall, the market competitiveness of hypermarkets is generally declining. They are being besieged by e-commerce, community supermarkets, and new retail, such as PUPU Supermarket and Dingdong Maicai, which sell fresh fruits and vegetables at low prices. This has led to a clear long-term trend of declining sales for traditional hypermarkets," said Hu Chuncai. According to statistics from the 'China Retail Industry Market Outlook and Investment Strategy Planning Analysis Report' released by Qianzhan Industry Research Institute, by the end of 2018, the total retail sales of consumer goods nationwide reached 38.0987 trillion yuan, an increase of 9.0% over the same period. It is predicted that in 2019, the total retail sales of consumer goods nationwide will reach 41.76 trillion yuan, and by 2023, it will exceed 60 trillion yuan. The consumer retail market still has strong potential. Source: China Times (ID: chinatimes)