Wal Mart, which has been in China for 26 years, has a new direction of development: as more and more middle-class consumers in cities begin to make careful calculations, the retail giant believes that its private brand, which is positioned to give consideration to both good quality and high cost performance, may usher in unprecedented development opportunities.
“In the epidemic era, after many changes and uncertainties, consumer preferences have shown some interesting trends.” Chen Jia, chief purchasing officer of Wal Mart China hypermarket, told the snack generation, “the most important thing is that they tend to be more rational. They pursue good quality while giving consideration to high cost performance. Especially at present, the macro environment is challenged, and more and more customers will use less money to ensure the quality of life.”
Source: Wal Mart China
To this end, Wal Mart has taken action recently.
Yesterday, in online communication with snack generation, Chen Jia said that Wal Mart’s own brand “Huiyi” had recently completed the upgrade, and discussed in detail the idea of this upgrade, as well as the product development, cost, pricing and other strategies behind it. Next, we might as well pay attention to the latest move of this retail giant to bet on its own brand under the trend of “smart consumption”.
Grand upgrade in China
At present, in the Chinese market, Wal Mart has three private brands, “great value”, “marketside” and “George”, covering packaged food, fresh food and household clothing. Among them, Huiyi mainly covers packaged food, daily necessities and frozen fresh food. It was born in the United States in 1993 and introduced into the Chinese market in 2006. In terms of price, it is usually about 10%-30% cheaper than similar products of mainstream brands.
Talking about this upgrade, Chen Jia said that first of all, on the packages that can be seen at a glance, Huiyi products have enlarged the classic logo “sunflower” pattern of Wal Mart to highlight its own brand attribute prominently, “so that customers can quickly find it in front of the shelf or on the mobile phone screen”; And they all intuitively display the content product map. In addition, Huiyi has also changed its “painting style”, such as adding simple hand-painted patterns to the packaging, and selecting Morandi color matching that conforms to the current aesthetics.
Some of Huiyi’s upgraded products
More importantly, Huiyi has upgraded its selection, quality and cost performance.
“With the launch of the new packaging, our first batch of more than 40 new products have improved in taste, quality and cost performance.” Chen Jia said to the snack generation that for the existing commodities, the process and formula of many classic Huiyi products have been further optimized, such as the oil reduction of soda biscuits. In addition, after upgrading, some existing commodities, including Huiyi’s northeast rice and edible oil series, have a greater price advantage due to better cost.
Source: Wal Mart China
She explained that rice is a heavy cargo, and the transportation cost has a great impact on the cost. “Through the optimization of logistics links, we have reduced the number of links from the origin to the store through the distribution center. It only takes 10 days for each rice shelling process to reach the store. Therefore, we have given full play to the advantages of Wal Mart’s national supply chain, realized efficiency savings, and can be more than 20% cheaper than the main stream of ordinary rice in the market.”
As for edible oil, she said that since Huiyi locked the raw materials and production capacity in advance with upstream manufacturers according to the annual purchase volume, “there was also a 10% savings in benchmarking the mainstream brand peanut oil”.
At the same time, based on the retailer’s consumer insight, Huiyi also launched many new featured products. For example, the snack generation has noticed that Huiyi recently launched new products such as Cherry Blossom White Peach Bubbles & cashew nuts with rattan pepper flavor, braised eel with cattail, black whole wheat buckwheat noodles, stone cakes, all of which have unusual or even “exclusive” differentiated selling points in the market.
Huiyi’s new product Cherry Blossom White Peach bubble cashew
“The Cherry Blossom White Peach bubble cashew uses the popular taste of wanghong, and through the bubble coating technology in Japan, it has the feeling of bubble water in the taste. This formula was exclusively developed by Huiyi. Once the new product was launched, it was sought after by young consumers.” Said Chen Jia.
It is reported that the stone cake is made by using the intangible cultural heritage technology inherited by Shanxi for a century. “The formula is very healthy. The wheat flour is fermented by yeast and baking soda, added with eggs, baked on special stones, and simply flavored with oil and salt.” She said that through the cooperation with Wal Mart, this local supplier in Shanxi has improved the standards of product packaging and production specifications, and with the help of Wal Mart’s supply chain and store network, this local specialty snack has moved from the region to the country. “The response (Sales) is very good.”
The brand-new product launched by Huiyi this time is braised eel
These new products are not priced high. Chen Jia, for example, said that the braised eel in Pu is made of the whole eel and packaged into three separate bags, which is convenient to eat according to the quantity. “You can eat delicious eel rice for 2-3 minutes simply by cooking at 1/3 of the price in a Japanese restaurant.”.
Scale and efficiency
This is also the latest landing measure of Wal Mart China to promote transformation and upgrading.
Xiaoshidai introduced that since 2020, Wal Mart China has launched its overall core strategy, focusing on three directions: differentiated commodity power, improving end-to-end efficiency, and omni channel experience. At the same time, focus on improving the support of two core competencies: digital upgrading; Talent / organization / culture.
“On the basis of ensuring quality and building differentiated commodity power, we need to provide customers with competitive prices and a long-term sustainable price advantage, that is, what we call ‘everyday low price’ (EDLP). This is the bottom management feature we have always adhered to and the focus of our upgrading and transformation.” Chen Jia said.
She said that it is easy to provide low prices in the short term, but the difficulty is to maintain price competitiveness continuously. “Only by achieving the highest efficiency can we achieve low prices every day. This internal skill can not be established in a day or two.”.
Zhuxiaojing, President and CEO of Wal Mart China, has also said on many occasions that Wal Mart has long pursued the principle of EDLP (low price every day) and achieved low price every day through EDLC (low cost every day). “Therefore, we try our best to reduce sales promotion and let consumers intuitively feel the price advantage of Wal Mart. We only ask for profits from our own efficiency, so as to make profits to customers.” She said.
So, how does Huiyi achieve the “ultimate cost performance” for a long time?
Although it is not easy to do, it is not difficult to understand when it is said – in the final analysis, the biggest secret lies in scale and efficiency. “To a large extent, this is due to the scale advantage of Wal Mart’s nationwide centralized purchase. It also requires us to constantly save efficiency in end-to-end operations.” Chen Jia tells xiaoshidai.
She said that Huiyi covers a wide range of categories. Not every category is suitable for private brands. Huiyi is looking for categories that can achieve large-scale procurement and thus have cost advantages.
“Huiyi’s products are usually those with the most daily needs and consumption of customers, and we can bring obvious cost advantages through our own brands. The output potential of individual products is also the focus of our selection, because only a certain purchase volume and turnover rate can achieve better cost advantages and supply chain efficiency.” She said.
Retail is not only economies of scale, but also efficiency economies. Efficiency comes from product design, production collaboration, logistics supply chain, last mile service and other links. “When selecting upstream manufacturers and partners, we will remove some intermediate links and purchase directly from the factory.” Chen Jia gave an example.
“The best times”
At present, it seems to be a good move for Wal Mart China to bet heavily on its own brand.
When inflation is high or consumers are more careful about spending, they tend to choose retailers’ own brand goods with good quality but no additional “brand aura” – in the experience of this global retail giant, this is a consumption phenomenon that has been verified by facts.
For example, this is the case in the current American market. Xiaoshidai noticed that at the first quarter performance meeting of fy2023 held recently, Wal Mart global executives have repeatedly mentioned that consumers have shifted from brands to private brands, which has also become a hot topic for analysts. “Consumers are feeling inflationary pressure, as evidenced by the increase in the penetration rate of private brands of groceries.” Brett Biggs, global CFO of Wal Mart, said.
“We do see some changes, including cooked food, lunch meat, bacon, dairy products and other categories. We see that customers are changing from brands to private brands.” John furner, President of Wal Mart USA, said in reply to analysts, “we need to do more to control costs to ensure that we can provide customers with huge retail value.”
At the same time, it is very important and interesting to note that while meeting the “quality & parity” needs of consumers, retailers not only do not “suffer losses”, but private brands are a business with higher profit margin for them.
Compared with the European and American markets, at present, the proportion of private brands in the sales of retailers in China is generally not high. However, in recent years, as major retail and e-commerce platforms have launched and expanded their own brand businesses, including jd.com, Netease, HEMA fresh, Sam, etc., Chinese consumers are more familiar with this kind of goods.
As far as Wal Mart China is concerned, it has been trying to further enhance its core competitiveness by developing its own brand and improving the differentiation of goods and services.
Now, Chen Jia even believes that as customers’ consumption becomes more rational and mature, and retailers’ overall investment in private brands increases, “the development of private brands in China’s retail market is entering the best era.”
When talking about the future planning of Huiyi, she revealed yesterday that with the increasing demand for “home cooking”, she is very optimistic about the prospect of prefabricated dishes, “we will consider making efforts in prefabricated dishes in the next step”.
“Our founder, Mr. samwalton, said: ‘we value every dollar. We want to prove our value to customers, which means that in addition to high-quality goods and services, we must also help them save money.’ in Wal Mart China, we will continue to improve differentiated commodity power, build excellent supply chain capabilities, improve end-to-end efficiency, and constantly optimize the omni channel experience to achieve A commitment to ‘spend less and live better’ for customers. ” Said zhuxiaojing.