Chapter 222: Investing in Walmart
"Two hundred thousand dollars?" Yang Wendong wasn't particularly concerned about the amount, but following standard business protocols, he couldn't agree on the spot. So he asked, "Is this for just this one store, or for all of your previous stores as well?"
"Of course it includes all of the previous stores," Sam Walton replied. "This store alone only required about $500,000 in total investment."
Yang Wendong asked again, "Are all sixteen of these stores rented?"
"Yes, all of them are leased," Sam Walton replied. "I know that owning the properties would make things easier in the long run, but that would consume too much capital. Right now, the most important thing is expanding the number and scale of our supermarkets, then figuring out how to reduce costs."
"Fair enough," Yang Wendong nodded. "I'm very willing to invest, but I'll need to thoroughly review Walmart's financials first."
Knowing the future was one thing, but investing in a company without even reviewing its finances would be completely unprofessional.
Sam Walton smiled and said, "Of course, I've already prepared the documents."
"Then let's wait until the financial review is done, and we can discuss the investment details afterward," Yang Wendong said.
"Sounds good," Walton agreed. "It's almost lunchtime—if you don't mind, I'd like to take everyone to a nearby diner. The nearest upscale restaurant is quite far from here."
"No problem, I'm easygoing," Yang Wendong said naturally. He didn't insist on eating at fancy restaurants; local spots often had the best food.
Walmart had grown by surrounding urban centers from the countryside. In its early days, due to financial constraints, Walton had opened stores in towns to avoid direct competition with big-city retailers.
Later, Sam Walton took Yang Wendong and the group to a nearby fried chicken place—just a modest joint named "John's Fried Chicken."
"This kind of chicken shop seems to be pretty common in America," Yang Wendong commented with a smile.
"Yeah, I love fried chicken," Sam Walton replied. "Eric, do you like it?"
"I do," Yang Wendong nodded. "We don't have many of these in Hong Kong yet."
Hong Kong's economic conditions at the time made it hard to support fried food operations. Oil was considered expensive. Only after the economy developed further did such establishments begin to appear.
In America, even fried chicken chains were relatively new. Brands like KFC had only just begun expanding. Of course, that was because the U.S. was an agricultural powerhouse.
...
After lunch, Walton led Yang Wendong to an office above the Walmart store.
As he poured coffee, Walton asked, "Eric, you came all the way from far-off Hong Kong—why are you interested in investing in America's retail sector?"
"You're aware of my company's products, right?" Yang Wendong responded.
"I am," Walton nodded. "Post-it notes, adhesive hooks, and rolling luggage. They're great products. We actually carry some of them in our store."
"My products rely on retail outlets like supermarkets and department stores for distribution," Yang Wendong explained. "That's why I want to invest in American retail."
Walton was puzzled. "But America's retail market is enormous—probably worth hundreds of billions. How could you possibly invest across it all?"
Yang Wendong replied, "I'm not trying to invest in the whole market. I've had my team researching American retail companies for two years now. I only plan to invest in the companies I really believe in."
"And why me?" Sam Walton asked, still curious.
Back then, Walton usually had to chase after banks or investors for funding. It was rare for capital to come looking for him. Especially not from Hong Kong.
Yang Wendong said, "Because of your philosophy. You focus on genuine discounts. I believe this model will help you grow rapidly. It aligns with my interests—both for product distribution and as an investment."
"Haha, thank you," Walton laughed. "Once I get funding, I'll expand as quickly as possible."
Yang Wendong nodded. He had full confidence in Walton's ability. Then he said, "Sam, there's one more thing I'd like your help with."
"Go ahead, name it," Walton said, maintaining a polite tone. Yang Wendong was the easiest-going investor he had ever met.
Yang Wendong said, "I want to open supermarkets in Hong Kong too. But I have no experience in this field. So I'd like to bring a few of your people to Hong Kong."
Starting a supermarket sounds easy. After all, many people dream of opening a little store.
But in reality, retail is one of the hardest industries in the world. Because anyone can do it, the competition is brutal. Only the strongest survive.
Currently, retail around the world was dominated by department stores and small general shops. Supermarkets had emerged, but they hadn't scaled because they struggled to reduce costs.
"You want to poach my staff to run your Hong Kong operation?" Walton asked in surprise.
"Yes," Yang Wendong admitted. "The reason I'm investing in you is because I believe in this industry."
"Are you worried I'll become your competitor someday?" Yang Wendong added with a smile.
"Not really," Walton shook his head. "Even if you opened a chain of stores in the U.S., as long as they weren't within three miles of mine, I wouldn't care. The market's just too big."
"I have no intention of operating in the U.S. myself," Yang Wendong replied. "It's enough to invest in companies like yours."
Even in the 21st century, when information flowed freely and logistics were streamlined, Asian companies entering the U.S. service sector still faced enormous challenges.
Retail giants from one country often struggled abroad. Localization was just too hard.
So in this field, Yang Wendong was more interested in investing. He would operate only within his own territory.
Sam Walton thought for a moment and said, "Eric, supermarkets might look similar, but in truth, each location is vastly different. Not just overseas—even within the U.S., business models vary by region."
"I understand," Yang Wendong said. "We'll adapt to Hong Kong's consumer preferences. But since your company has done well so far, you must have figured out a lot.
Hong Kong currently has nothing like this. I have no experience, so bringing a few of your staff over would help us avoid many initial problems."
Since there would be an investment relationship, Yang Wendong felt it was polite to be upfront about this request. It wasn't worth souring a partnership over a few personnel.
"That's no problem," Walton nodded. "But let's finalize our partnership first."
"Of course," Yang Wendong agreed. "Tomorrow, I'll have a third-party team come in to audit your financials. Once that's complete, we can discuss pricing and the equity stake. Sound good?"
"Alright," Sam Walton agreed. "If you want to recruit from my team, that's your right—but I do ask that you let me know who you're taking."
"Of course," Yang Wendong nodded.
The real reason Yang Wendong was interested in poaching from Walmart was simple: the supermarket industry in America wasn't yet large, and Walmart was already one of the bigger players.
The earliest employees who had followed Sam Walton likely had better insights into what made Walmart succeed than those from other random retailers. It was a strategic move.
Back at the hotel, Yang Wendong flipped through several recent U.S. newspapers while Bai Yushan brewed tea nearby.
"Have a sip," Bai Yushan said, handing him a steaming cup. "I've been studying tea ceremony lately."
"Good. A lot of Hong Kong elites enjoy tea," Yang Wendong said, taking a sip and nodding approvingly. "It tastes quite nice."
"I think you're just humoring me," Bai Yushan took a sip herself, clearly unimpressed by the flavor.
Yang Wendong chuckled. "Well, some things are said to be polite."
"Fine then," Bai Yushan smiled sweetly and set down her teacup. "Earlier at Walmart, I noticed something."
"Oh?" Yang Wendong looked at her. "Tell me."
"I saw that most of Walmart's customers arrived by car. The store's front lot had a lot of parking spaces and open space. That's just not something we can replicate in Hong Kong. Most people there don't own cars, and our malls don't have much parking space either."
"Very astute," Yang Wendong nodded. "Which is exactly why retail needs to adapt to its environment.
In America, the population density is low, gas is cheap, and the economy is strong—so most people drive. In Hong Kong, or in many Asian cities, it's the opposite. That's why people cluster together—to minimize transportation costs.
So for supermarkets, it's different. In America, suburban stores are ideal. In Hong Kong, you need to be in the city center."
"In the city? That fits you perfectly, since you already own so much property," Bai Yushan agreed with a nod.
Yang Wendong added, "And don't forget, I control China Motor Bus. Adjusting bus routes is no issue."
Through a round of targeted stock issuance, Yang Wendong had ended up controlling 49.9% of China Motor Bus, making him the de facto owner. No one could rival him, although he kept his promise to let the Wong family manage day-to-day operations.
"You've been planning for this all along?" Bai Yushan asked, surprised.
"More or less," Yang Wendong replied. "I knew early on that China Motor Bus would play a big role, especially for my service-based ventures."
"That makes sense," Bai Yushan nodded. "So now we just wait for the financial audit to finish?"
"Yeah. Won't take long—Walmart isn't that big yet," Yang Wendong replied.
In fact, if the audit revealed that the company was in poor shape, he'd be even happier. That would only improve his negotiating position.
Bai Yushan asked, "Have you considered investing in other supermarkets? Or is this your only pick?"
"I'll think about the others later," Yang Wendong said after a pause.
He knew the names of a few more promising chains, but he lacked detailed information on the founders or internal operations. He would have to wait for his U.S. team to do more digging and report back.
"By the way," Bai Yushan added, "I heard there's a circus in town tonight. Want to go see it?"
"Sure," Yang Wendong agreed.
Business matters were important—but enjoying life mattered too. After all, life only lasts some thirty thousand days.
...
Five Days Later
A joint audit conducted by a third-party firm and Changxing Industrial's international finance team was completed. They evaluated all fifteen of Walmart's existing stores.
Yang Wendong returned to Sam Walton's office and said, "Sam, I'm sure by now you've seen the audit reports. The financial analysts value your fifteen stores at only $700,000."
"I disagree," Sam Walton shook his head. "That's because of the recession last year—people have tightened their spending. But every recession ends."
Yang Wendong said, "True, but investments are based on present value, not future potential. When I buy stock, I pay today's price—not what it might be worth in ten years.
You may believe your company is worth $3 million down the line. But investors can't price it that way."
"You're right, Eric," Sam Walton conceded. "Still, I firmly believe Walmart is worth more. We just need to weather this storm."
"I like that confidence," Yang Wendong nodded. "So let me make you a counter-offer. At a $1 million valuation, I'll invest $150,000 for a 15% stake. What do you say?"
"Fifteen percent?" Sam Walton frowned. "I don't need that much capital."
Yang Wendong shook his head. "Actually, you do. You've got fifteen stores, but fourteen of them are tiny. You only have one proper Walmart right now.
To lower costs through scale, you need more Walmart stores. That's the only way you'll make it big."
"Good point. But if that's the plan, $150,000 won't be enough," Sam Walton countered.
"I can lend you more," Yang Wendong said. "The exact amount is negotiable. $300,000–$400,000 wouldn't be a problem."
In the past two years, Changxing Industrial had built up significant U.S. exports, resulting in considerable foreign currency earnings. Rather than repatriating all of it to Hong Kong, Yang Wendong had kept it in offshore accounts for opportunities like this.
With foreknowledge of the future, investing in these "baby giants" could yield returns that far surpassed even the best real estate in Central.
"Borrowed funds? What about collateral and interest?" Sam asked.
"Standard bank terms," Yang Wendong said. "We'll use your company shares as collateral."
"Alright, let me think about it," Sam said, hesitating slightly.
The cash injection could definitely help him expand quickly—but if the economy didn't recover in time, the debt burden might force him to give up control.
Yang Wendong added, "I'm from Hong Kong. There's no way I could run a U.S. retail chain myself.
So no matter how many shares I end up owning, I won't challenge your management. That's a promise."
It was both a commitment and a simple reality. Even if Sam Walton gave him Walmart for free, hiring a manager to run it wouldn't deliver the same results. Mediocrity would be the best-case outcome.
The key to Walmart's future wasn't its stores—it was Sam Walton himself.
After a moment, Walton nodded. "Alright. If nothing else changes, I think this partnership could work."
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