SHENZHEN, China - Zhong Guoyan sifted through piles of fish at a Walmart in Shenzhen, one of China's largest cities. She studied the fins, to make sure they were bright red and firm. She peered at the eyeballs -- were they bulging?
"When I come here, I have a look," she said. "If it's good, then I will buy it. If it's only cheap, I won't buy it."
In American Walmarts, customers don't get to fondle their fish. But America is not China, as the world's biggest retailer has learned. If the Arkansas-based company wants to win over foreign consumers, it has to shed some of its American ways, and cater to very different customs and conventions that are fast changing.
Zhong eventually tossed a couple of fish into a plastic bag -- a small victory in Walmart's struggle to build an international empire.
The stakes are high: The company can't count on much growth in the U.S. -- it's facing challenges at home with intense competition from Amazon.com and dollar stores -- so the retailer is depending more on its operations overseas.
China is the ultimate prize. The Chinese grocery market, already the world's largest at $1.1 trillion a year, is expected to grow to $1.5 trillion in sales in just the next four years, says IGD, a global consumer products research firm.
"China remains a strategic market for our future," Doug McMillon, CEO of Wal-Mart Stores Inc. (WMT) recently told investors.
Getting the food business right is critical for Walmart. Shoppers buy groceries more often than anything else. If Walmart can get them in the door to buy food regularly, perhaps they will visit more frequently for items like pajamas and coffee makers -- and eventually become loyal online customers, too.
The company has taken some lumps trying to cross borders in food retailing. Overall international sales growth dropped 9.4 percent last year largely because of the strong dollar. And while Walmart's overseas business had a strong start to this year, it faces long-term challenges. Walmart gave up in Germany and South Korea in 2006. It's closing stores in Brazil.
Overseas, Walmart lacks the scale to squeeze local suppliers on price as it does in the U.S. It also faces nimble competitors. And it has struggled to duplicate its bedrock strategy of constant bargains.
But Walmart has learned over the years from its missteps, discovering that it needs to adapt to local ways and that patience pays off.
In Mexico, Canada and Japan, it's won shoppers over time. In Chile, it launched a corporate culture campaign and worked closely with suppliers to coax them into its way of doing business.
"Walmart," says Bryan Roberts of the London retail consultancy TCC Global, "is a very determined organization."
Winning over picky consumers
In the unruly Chinese market, some competitors cut corners, mislabeling products or even selling tainted foods. The risks have made Chinese consumers unusually wary.
Sean Clarke, CEO of Walmart China, based in Shenzhen, previously worked in Britain, Japan, Germany, and Canada. China, he says, "is easily the most challenging market to operate ... There is a huge level of distrust."
Walmart had a difficult time promoting "everyday low prices" -- promising the lowest prices on a basket of goods every time consumers shop.
Some rivals poached the "everyday low price" message, confusing customers. Walmart scrambled to find the right slogan. In 2012, it introduced "Worry Free" -- implying quality and reassuring shoppers who worry that deals will expire before they get to the store.
The company's message: Efficiency and good management, not cutting corners, make everyday low prices possible.
The message has sometimes been muddled. When Walmart came to China, it was slow to tailor its offerings to local tastes. Realizing its mistake, Walmart gave local managers more leeway to run their businesses.
But that approach backfired, leading to a series of food-safety violations. In one particularly embarrassing episode, Walmart had to recall donkey meat -- a delicacy in China -- after DNA testing showed it contained traces of fox meat.
In response, Walmart slashed nearly two-thirds of its 20,000 suppliers. Now, Walmart knows exactly where each product comes from. Walmart also took back some of the responsibilities from local managers and increased its investment in food safety. It introduced mobile testing labs that check for pesticides on vegetables and fruit and employed handheld devices to check temperatures of meat products.
Gaining control over suppliers, costs
In America, Walmart has the clout -- 25 percent of the U.S. grocery business -- to force suppliers to do things the Walmart way. That means cutting costs to the bone. In return, the suppliers enjoy steady demand from Walmart, so they don't have to spend so much on advertising or worry about paying extra costs to staff their factories to meet unexpected peaks in demand.
In China, things are tougher. Walmart accounts for just 2.3 percent of the grocery market. Ninety-five percent of all products Walmart sells in China are supplied by local companies.
The Chinese supply chain is also notoriously inefficient. For years, Walmart and other foreign companies didn't deal directly with their suppliers, working mostly instead through a labyrinth of middlemen.
Three years ago, Walmart decided to cut out the middlemen and route as many goods as possible through 20 of its own distribution centers.
By eliminating the go-betweens, Walmart could negotiate directly with suppliers and knock down costs -- often by 10 percent or more.
The change also gives Walmart more control over the quality of the food being sent to its stores and the efficiency with which it gets to them. Before the switch, only about 75 percent of orders would actually reach Walmart stores; now 95 percent do.
Walmart landed in China in 1996, a year behind Carrefour, opening two stores in Shenzhen-- a Walmart supercenter and a Sam's Club. They were the first foreign retailers to offer the big-box shopping experience, which offers everything from clothing to food. After investing in a Taiwanese-owned retail chain in 2007, Walmart became China's biggest super-sized store chain and expanded its lead for the next two years.
But local and regional competitors quickly closed the gap, sometimes undercutting Walmart prices because they have closer ties to local suppliers and can negotiate better deals.
Walmart insists its market share for the big-store sector has increased over the past three years. But Euromonitor says Walmart's market share has fallen to 9.6 percent (No. 3 in the market) after peaking at 11.6 percent in 2009.
Walmart last year announced plans to add 115 stores in China by 2017, bringing the store count to 530. It's concentrating in markets where it's already established, including its stronghold in the south. And it has given up on about 30 lackluster stores.
Meanwhile, Walmart faces another challenge in China, and it is not from other big box stores.
Across the globe, shoppers are increasingly buying online or at small stores. But in China, that trend is more dramatic. It has already overtaken the U.S. as the world's biggest online marketplace.