Walmart's troubles overseas

[bhchao]

http://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html

This article mentions how Walmart is losing money in overseas markets. Customers in Germany, South Korea, and Japan are shunning the low-priced, cheap retailer.

Walmart in Germany is losing big bucks because Germany has its own chain of discount retailers that appeal to local tastes. Also many German shoppers perceive Walmart as imposing its values on local workers by requiring them to smile at customers. Male shoppers in Germany view this as flirting, and are turned off.

Walmart sold off all its stores in South Korea because Koreans don't find the retailer appealing. It fails to cater to local tastes. Walmart would sell a bundle of shampoo bottles in one box, when customers don't need a bundle of "junk" products that they may not like. Cultural selectivism is very strong in South Korea. So far there is only one Walmart store in Seoul.

In Japan, Walmart is also losing money. Low discount prices that appeal to many American consumers do not appeal to Japanese consumers, who view low-priced products as junk products. In other words, low prices (in the tradition of Walmart) = cheap quality.

[wushijiao]

I wonder about Wal-mart in China. It seems like there is intense competition in the mega-store field- with Metro, Carrefour, Hymall, Haoyouduo, and other Chinese and Taiwanese (like Jinboda in Zhengzhou) brands.

It seems, at least in Shanghai, that Wal-mart entered the market too late.

[td36285n]

The Wal-Mart in Kunming's Xiao Xi Men district are doing pretty darn good at bringing in customers. Imagine trying to fight your way through the crowd in order to get to the second floor......on a TUESDAY morning.

[taryn]

Has anyone been to Walmart in China?

Is everything there "Made in the USA" cause all our stuff is "Made in China"...

[bhchao]

A lot of the products in Walmart stores in the US are made from slave labor camps in China. Exploitative labor practices are one of Walmart's dark secrets.

in a strip mall in this western German city....

He also does not visit this store often, because it is on the edge of town and he does not own a car.....

Sustaining that pace is critical for Wal-Mart, because high fuel prices have helped sap the buying power of Americans. In June, store traffic in its home market declined.

One thing I despise about Wal-mart is that it is associated with sprawl and the car. Swaths of rural land are bulldozed to make way for Wal-mart's huge concrete parking lots. I'm in Seattle right now and I don't see a single Wal-mart store in the city. Thank God. Lovely city by the way, with an excellent and very convenient bus transit system.

It's also no coincidence that there is not one Wal-mart store in NYC, something that New Yorkers have valiantly fought against.

[bhchao]

It seems like there is intense competition in the mega-store field- with Metro, Carrefour, Hymall, Haoyouduo, and other Chinese and Taiwanese (like Jinboda in Zhengzhou) brands

Carrefour is having difficulty in South Korea as well. http://www.nytimes.com/2006/05/23/business/worldbusiness/23shop.html?ex=1306036800&en=af8237180d13f90d&ei=5088&partner=rssnyt&emc=rss

[gato]

It's also no coincidence that there is not one Wal-mart store in NYC, something that New Yorkers have valiantly fought against.

There's a big 3-story K-Mart (or is it 4-story?) on 8th St. and Astor Place in Greenwich Village, across the street from the Starbucks and Barnes & Nobel. It's tremendously popular with the many students living in that area. A good place to get dorm and apartment supplies. It's a NYC kind of store. There's no parking. Everybody walks there. You only buy what you can carry home in your hands or take in a taxi. A Wal-Mart can work in the same way an urban environment, if they just change their strategy a little bit.

Many Chinese cities, by the way, are following the US's footsteps in building highways and suburban sprawl. It's one reason why China will not too long from now replace the US as the #1 oil-consuming country in the world. Cars and condos are now on the top of many people's wish lists. And since condos are expensive by local standards, many people move to places far from the center and commute in, often by driving.

[bhchao]

There's a big 3-story K-Mart (or is it 4-story?) on 8th St. and Astor Place in Greenwich Village, across the street from the Starbucks and Barnes & Nobel. It's tremendously popular with the many students living in that area. A good place to get dorm and apartment supplies. It's a NYC kind of store. There's no parking. Everybody walks there. You only buy what you can carry home in your hands or take in a taxi. A Wal-Mart can work in the same way an urban environment, if they just change their strategy a little bit.

NYC does has its own chain of discount retailers that attract a loyal following; like Rite-Aid, Walgreen's, and Duane Reede. These retailers and city leaders fear that Wal-mart would destroy these establishments and threaten the diversification that currently exists.

There are Target's in NYC, though not yet in Manhattan. In contrast to Walmart, Target has a solid reputation for corporate philanthropy. Last year Target ranked #1 among US retailers in the percentage of total earnings given to charity. Target also has a shrewd marketing strategy that allows customers to perceive its products in a chic way.

For various reasons discount consumers associate Target with the higher-end stuff, while Walmart has this image of being gritty and "low class".

[gato]

For various reasons discount consumers associate Target with the higher-end stuff, while Walmart has this image of being gritty and "low class".

That's definitely a mis-impression. The Wal-Marts I've been to were much cleaner and more orderly than the Targets. There is probably variations among the stores. The Wal-Marts in the wealthy SF Bay Area suburbs were less crowded and better managed than the one I went in lower-middle -class Connecticut. The Connecticut Walmart had much narrower aisles and seemed so much more crowded.

The Kmarts of many years ago were definitely gritty.

[bhchao]

Costco is much better than Target and Wal-mart in terms of quality, variety, and price. Costco's meat selection is very good. They also surprisingly offer decent designer clothing at affordable prices (of course not the high-end, established designer brands you find in urban thoroughfares).

Costco pays its workers well and provides better health insurance coverage compared to Wal-mart and other competitors in the industry. Average pay at Costco is $17 an hour, while average pay at Wal-mart is $10 an hour. Part-time employees at Costco are eligible for health insurance coverage after 6 months on the job, while it's 2 years at Wal-mart.

Not surprisingly employee turnover is far less at Costco than at Wal-mart. When you treat your employees well, customers notice and that translates into higher profits compared to your competitors.

Costco's minor drawback is you need membership in order to shop there. I wonder how Costco is doing in Asia, particularly China (if they have stores there), Taiwan, Korea, and Japan.

[wushijiao]

The Economist has an overview of retailing in China, which is getting very intense.

"Michele Mak, a China retailing analyst at Credit Suisse First Boston, says these mounting pressures are already showing in the industry's 2005 financial results. Store productivity is declining, sales per square foot are falling and profit margins are shrinking. Operating margins at Gome, China's second-largest retailer by sales (see chart 2), declined from 6.2% in 2004 to 4.4% last year. Those at Lianhua Supermarket, the main grocery arm of Bailian Group, the domestic market leader, fell from 2.4% to 1.9%."

http://www.economist.com/business/displaystory.cfm?story_id=7246087

[bhchao]

China seems to be the exception to Walmart's troubles overseas. This article mentions how Walmart is a cultural phenomenon in China. http://www.chicagotribune.com/business/chi-0608060330aug06,1,3671999.story?coll=chi-business-hed

...Wal-Mart has been able to grow in markets where the whole concept of big-chain retailing is still in development. In Mexico, and more recently in China, Wal-Mart has done well because it has entered those markets before other large competitors or partnered with local businesses, Edwards said.

Wal-Mart de Mexico SA, Latin America's largest retailer, said July 10 that second-quarter profit surged the most in five quarters, helped by World Cup merchandise.

In China, Wal-Mart is a "cultural phenomenon," Edwards said. The company operates 60 stores there and plans to open 20 more this year, spokeswoman Amy Wyatt said.

China has been an engine of growth for Starbucks as well. Schultz said in February that China may become the company's largest market outside the U.S. It has about 250 stores there now, out of almost 12,000 worldwide.

It's interesting to see how one company succeeds in one East Asian country, but fails in another. Costco is doing very well in South Korea, but poorly in Japan. Google has been far more successful in China than in South Korea, where it failed miserably and had to compete with local portals like Daum and Naver. Google relied solely on its software to retrieve search results, when the internet culture for finding information in Korea is interpersonal communication between multiple users on an open forum, posting questions and receiving information from experienced locals. Daum and Naver excelled in this area.

Starbucks is one company that has been a huge success in all three East Asian countries by using successful marketing/branding to click with potential customers and tailoring its products to the local market.

A good link on retailers in Korea succeeding because they understood consumer preferences: http://www2.gol.com/users/coynerhm/holding_off_the_wal.htm. Korean shoppers do not like to buy in bulk, and prefer smaller packages that combine quality with practical usage. Walmart applied retail strategies used at home to a country where consumer preferences are much different. Apparently the slogan "low prices beats everything" does not work everywhere.

The average annual median income of Costco shoppers in the US is around $70,000. Theoretically a lower-end discount retailer would become less attractive as per capita income in a certain area increases.