Wal-Mart says global going good
September 15, 2003,
Though Wal-Mart's global reach may have extended from the United States to the rest of the world, the company now sees ideas cross-pollinating across the 11 countries in which it now competes.
And based on its acquisitions in Germany and the U.K., Wal-Mart felt the best way to enter Japan — the second largest market in the world and Wal-Mart's No. 1 international target, said Menzer — was bit by bit. It now owns 37 percent of Seiyu, a percentage that will grow to 50 percent in December 2005 and 66.7 percent in December 2007. Greg Penner, svp and cfo, Wal-Mart Japan, said the retailer felt this was the best way to avoid growing pains.
The Japanese culture has also been changing, Penner said, as the Japanese have become more dollar conscious, and as dollar store equivalents have been on the rise. The food offering at retailers overall is usually high quality, while apparel and general merchandise is less so. And "we think that's a real big opportunity over time."
Seiyu was already undergoing change before Wal-Mart entered the picture, divesting itself of some of its numerous formats and businesses. Now more financially stable, the company has 414 stores and $9 billion in sales. What made the company attractive to Wal-Mart was its openness to change in a culture where that could be difficult as well as its strength in food retailing. Wal-Mart also saw the value of acquiring a company with a strong store base — and about 50 percent of Seiyu's sales are in the Tokyo-area stores — since real estate in Japan is precious and expensive.
Wal-Mart's "Every Day Low Prices" strategy has significant opportunity in Japan because prices are too high, said Noriyuki Watanabe, chairman, Seiyu, and the response to the 100-yen shops and rollbacks have been positive. Seiyu is also able to leverage Wal-Mart's global sourcing and supplier relationships.
Seiyu's operational structure has been simplified, and some of the departments within the stores are cleaner and more open, with new fixturing and signage.
Penner said that they would like eventually to consolidate the number of Seiyu store formats to two or three to better merchandise them. Seiyu also reduced its store closing plan to three to five stores a year because Wal-Mart believes it can enhance the productivity of the existing stores.
Menzer detailed the progress in the other countries where it is located, including Germany, citing "quite a few mistakes." The country recently changed the laws regarding store hours on Saturday, allowing stores to be open four hours longer, and that is a start and has been positive, he said. "We can make money in Germany." China remains its biggest opportunity overall. Canada will see its first four Sam's Clubs next month.
Acquisitions will probably be the route Wal-Mart will take when it enters a new country, which Menzer thought could be in three to five years.