Wal-Mart Learns Lessons Overseas

Discussion
May 30, 2006
George Anderson

By George Anderson


Wal-Mart didn’t get to be the world’s largest retailer by having more failures than successes. In the U.S., Mexico, South America and the U.K., the company and its respective divisions are a force to be reckoned with.


Why then has the retailer faced challenges to its business in countries such as Germany, Japan and South Korea? In some part, government regulations, such as those in Germany, have kept Wal-Mart from leveraging its pricing to gain an advantage against competitors.


In other countries, most notably South Korea, where Wal-Mart recently sold off its stores, the company’s traditional approach to retail merchandising has failed to deliver the numbers of converts needed to be profitable.


According to a Bloomberg News story, Wal-Mart “misread consumer preferences with warehouse stores that emphasized frozen foods in a spartan layout.”


Yasuyuki Sasaki, a retail analyst at Credit Suisse Group in Tokyo, said Wal-Mart should heed its experience in South Korea. “There’s no guarantee that the same thing won’t happen in Japan if Wal-Mart sticks to its own way and ignores the Japanese consumers’ demands.”


Part of what Japanese consumers look for at discount stores is fresh produce. The low prices at Wal-Mart, said Mr. Sasaki, do not overcome the fact that consumers cannot find the produce they are looking for when they go shopping.


“Japan is not America; Korea is not America,” said Edwin Merner, president of Atlantis Investment Research Corp. “Global giants like Wal-Mart fail in these countries because they don’t try hard enough to localize their businesses.” 


Moderator’s Comment: Why does a retailer’s model translate in some countries while not succeeding in others? What do retailers entering the American
market need to know if they wish to be successful here?
– George Anderson
– Moderator

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15 Comments on "Wal-Mart Learns Lessons Overseas"


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James Tenser
Guest
14 years 8 months ago
Why does a retailer’s model translate in some countries while not succeeding in others? What do retailers entering the American market need to know if they wish to be successful here? Expansion of any retail concept into new countries and cultures is always a matter of educated guesswork. Language translation alone is not easy; cultural translation is much harder. Wal-Mart has seen some good successes in several countries where its core retail approach was naturally well-suited to the local expectations and psyche. Apparently, South Koreans didn’t respond well to the Wal-Mart store idiom. Interesting that in Germany, also a highly-educated and industrialized society, it has also encountered consumer resistance. Wal-Mart took a generation to perfect its approaches to the American consumer. It may be asking too much to master the subtleties of new national markets within a fiscal year – even when it buys its way in to an existing nameplate. Of course, Wal-Mart faces enormous stock market pressure to grow its top line. Acquiring chains in new national markets adds sales in big chunks,… Read more »
Gene Hoffman
Guest
Gene Hoffman
14 years 8 months ago

Wal-Mart has its battle plan and they confidently pursued it. Their modus operandi has made them the world’s largest and most profitable retailer. When their operating plan does not enchant a sufficiently large number of sustainable customers in some faraway land — for whatever business, cultural or political reasons — they just pull down their tent and move on without a whimper or additional wasted time and motion. Like “iconic” Starbucks, Wal-Mart just keeps their momentum going as it explores untapped horizons.

Consider this: If Wal-Mart were to be tremendously successful in every country in which they open stores, what would then be the question posed to RetailWire “experts” to help Wal-Mart see the far-off horizons?

Richard Layman
Guest
14 years 8 months ago

Plus, isn’t it inaccurate to say that Wal-Mart isn’t successful in Britain? Asda is successful there. And Wal-Mart bought Asda. And didn’t muck it up.

Don Delzell
Guest
Don Delzell
14 years 8 months ago
Marketplace dynamics vary from country to country or region to region. WM has been successful in the US because of the fit between the business model and the consumer and competitive landscape. Where other regions have similar conditions, and the model is applied without significant change, they are successful. Retail concepts succeed because they meet an important consumer need which is either emerging, poorly served, or not served at all. They stay successful because they protect this niche by continuing to meet the need in a profitable way, or expanding on the needs met to remain high on the need fulfillment scale. This isn’t business school academics. It’s real world experience. Analyze a foreign market. Chart the consumer dynamics and variables. Examine the competition. Determine if the existing business model meets needs of a large enough segment well enough. If not, determine if minor adjustments to the model are possible and within the capability of the organization (parent and subsidiary). The formula is NOT rocket science. It just takes perspective, objectivity, and the willingness to… Read more »
Robert Straub
Guest
Robert Straub
14 years 8 months ago

Having recently toured both a Wal-Mart and E-Mart store in Seoul (E-Mart recently bought Wal-Mart), I can tell you there is no comparison in the shopping experience and no price differentiation. The Wal-Mart store was like an older Wal-Mart in the US – a little dirty and dimly lit. The E-Mart, on the other hand, was clean and well-lit with many of the extras found in the Tesco Hypermarket format — not found in the Wal-Mart format.

As for shoppers, the Wal-Mart was about as busy as a normal Kmart. I think that says it all.

Mark Lilien
Guest
14 years 8 months ago

Great leadership is usually the retailing differentiator. Great leaders know when and how to enter a market. Sometimes the window of easy opportunity has closed. It’s worthwhile to pick and choose which markets are worth the struggle. Otherwise, time and capital are wasted. Withdrawing from the losers and using the capital saved on the winners: isn’t that what all managements are expected to do?

Ryan Yoeckel
Guest
Ryan Yoeckel
14 years 8 months ago

Recently in my marketing class (I’m a graduate student), Japan and Korea were used to exemplify the difficulties that can arise when large national companies decide to become large multi-national companies. I’m assuming the reason that these countries were cited is that they often cast-off companies that do not “fit” Japanese or Korean sensibilities.

Since Wal-Mart is already not only a multi-national company but also a global competitor, why shouldn’t they try to open stores in Japan and Korea? Looking at Wal-Mart’s failure in light of my professor’s characterization of Korea and Japan, Wal-Mart successfully avoided becoming too interested in these markets. In a sort of a “you cannot be all things to all peoples” strategy, Wal-Mart seems to be doing two things: one, sticking to what it understands and, two, avoiding a steep and unprofitable learning curve.

t w
Guest
t w
14 years 8 months ago

I think Don Delzell states the opportunities quite well. I would like to add that living in Asia and watching Carrefour fail in Japan and Korea and watching Wal-Mart fail in Korea, I have had the chance to speak with some folks close enough to have insights into the failures. I have also had the chance to read some of the local press analysis of the failures.

The common theme is that Carrefour and Wal-Mart did not adapt to the local business models. They both failed to participate in the Korean chaebol groups, who own the distribution channel. Wal-Mart bought its way into a Japanese version, shosha, via its investment into Seiyu. However, Wal-Mart is merely buying time as they now need to learn the system and how to work within it. No one is big enough to go it alone when the majority of the distribution channel is tightly controlled. It is not possible to create a new channel.

Bernice Hurst
Guest
14 years 8 months ago

The article addressed the issues quite succinctly – not everyone in the world wants to be (or buy) American. If you look at the current US debate about immigration, it is largely about Hispanics who have come from Mexico and South America. People from those areas want to be American therefore appreciate having American stores on their doorsteps. As for selling into the US, the same argument applies – think local and tailor the store to the audience BUT be cheap as well. There are far more (proportionately) shoppers in the US whose decisions are based on perceived bargains than anywhere else in the world.

Len Lewis
Guest
Len Lewis
14 years 8 months ago

If Wal-Mart wants to know how to compete and satisfy customers in Japan, Korea, China, etc… all they have to do is take a walk around the Asian neighborhoods in any major city. Stopping by these markets and watching how people shop is an excellent education.

Madeleine Forrer
Guest
Madeleine Forrer
14 years 8 months ago

What makes Wal-Mart strong in the US is a disadvantage overseas. The failure was based on not understanding that everyone isn’t like us. Overseas, you not only have to fight regulation, but also different body types, incredible value attached to famous named brands, different social structures, etc.

If they haven’t done that, they’ve really missed the boat.

Pete Hisey
Guest
Pete Hisey
14 years 8 months ago
I spent time with Wal-Mart during their openings in Argentina and Brazil. They were, for Wal-Mart, very forthcoming, and were frank that they had already made a lot of mistakes. The real problems, though, were that they were facing really, really good competition. Carrefour is the best-known, but a lot of small grocery chains had learned through the devastating inflation of the 1980s to turn on a dime. I interviewed the head of one Brazilian grocer, and he said, “Wal-Mart thinks they’re the technological champion. Well, they have a surprise coming. A few years ago, we had to change prices a dozen times a day, on every product in our stores. We had to buy way in advance or inflation would make our prices noncompetitive, so we had to have advanced planning ability.” Another problem was governmental relations. Wal-Mart is used to being treated fairly, and many governments look at the company as a usurper that was up to no good. So they drag their feet every chance they get, come to decisions that clearly… Read more »
Dinkar Suri
Guest
Dinkar Suri
14 years 8 months ago
Any retailer entering an Asian Market is treading on treacherous ground. Wal-Mart succeeded because Sam Walton understood the psyche of the American consumer. It is the same formula everywhere. Tesco is successful in Korea when Wal-Mart isn’t. If Wal-Mart isn’t successful, one has to ask what the country leadership of that particular retailer did or did not do. Did the local management appointed by Wal-Mart to run their stores educate HQ about the way say the Koreans shopped? Maybe they did, but the American colleagues NEVER listened in the name of “transfer of best practices” ! Most western principals come with an arrogance that says ” we have done it all.” The local market may be pretty resilient and the advent of a foreign retailer may actually energise the local counterparts to modernise and appeal to the “national” flavour of the local population. If Wal-Mart, or for that matter any foreign retailer, does not do this then they are doomed. You are less vulnerable if you tie up with a local partner who can hand… Read more »
Richard Alleger
Guest
Richard Alleger
14 years 8 months ago

For the same reason Carrefour did not make it in the northeastern US, Wal-Mart will struggle in certain countries. Demographics, consumer comfort with particular types of shopping experiences, the Wal-Mart experience will not always work in their favor. And, as well as Wal-Mart has maintained the ASDA business, one can see they have not make great strides over there in terms of share. In fact ASDA is losing some ground and has changed their offerings regularly.

It is not surprising that Wal-Mart does not win everywhere and for retailers, that has to be comforting.

Jerry Tutunjian
Guest
Jerry Tutunjian
14 years 8 months ago

You can’t win them all. Wal-Mart has been successful in more than a dozen countries. The occasional failure is expected. What matters is that Wal-Mart has an excellent record of learning from its mistakes. The Korea debacle should help them adjust their Japanese operation.

East is East; West is West and sometimes the twain don’t meet, despite all the talk about globalization.

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