Why Walmart Is Failing In Japan

When it comes to dominating the US retail market, there's one clear winner Walmart The company brought in more than $500 billion in revenue in 2018 With Americans accounting for more than three quarters those sales And a study found that in 2016, nearly every US consumer shopped at a Walmart at some point that year including online sales But even though Walmart has comfortably held its number-one spot in the US for years In Japan, well not so much Walmart made headlines in July of 2018 when media outlet Nikkei Asian Review reported that the company was looking to sell its Japanese subsidiaries Seiyu Seiyu is a chain of supermarkets and hypermarkets in Japan which sell a mix of consumables and general merchandise Like US Walmart locations, Seiyu uses the everyday low-cost business plan The Nikkei articles cited anonymous sources familiar with the matter With other media outlets like Reuters and the Japan Times picking up the scoop The Nikkei article said Seiyu faced difficulties due to the crowded food retail scene as convenience stores, drugstores and online marketplaces create intense competition Walmart told CNBC it is not in any discussions with prospective buyers to sell Seiyu and will continue doing business in Japan But analysts who cite the company's lack of understanding of the Japanese culture say the company's time in the country could be limited A lot of retailers struggle with internationalization especially with food Food is so regional, it's so crucial to people's cultures but if you go in and you don't really understand the consumer and how you're gonna stand out in that sea of competition it is very, very difficult to make a dent Walmart first got its start in Japan in 2002 when it purchased a minority stake of Seiyu Walmart invested more than a billion dollars in Japanese operations before the company made Seiyu a fully owned subsidiary in 2008 But Seiyu was struggling even before Walmart took total control In 2007, Seiyu saw a net loss of about $195 million Now fast-forward to today Walmart doesn't report its international businesses' individual earnings or losses in the companies' annual report But we do know that there are less Seiyu units in 2018 than there were when Walmart first took full control Walmart has closed more than a hundred Seiyu units since 2014 So why is Seiyu struggling to capture the Japanese market Some analysts tell us it's because Walmart failed to grasp the preferences of the Japanese consumer Japanese consumers like to buy fresh, locally sourced foods which Seiyu didn't offer And the everyday low price strategy that has made Walmart so popular with American shoppers just confuse Japanese consumers who like to seek out specific deals and sales Price is really important to them and in fact they enjoy the sort of treasure hunt of prices Supermarkets will distribute flyers everyday, coupons and oftentimes Japanese consumers will go to multiple stores in order to take advantage of those daily sales Walmart's misunderstanding of Japanese preferences isn't the only reason Seiyu is stumbling in Japan though The local retail landscape which is rife with different shopping methods, is giving Seiyu a run for its money All of that competition only gives Seiyu 12% market share in Japan Trailing behind companies like Japan based Aeon which has 45% of the market share and Japan's Ito Yokado which has 14% according to data from Euromonitor International So you can't seem to catch local consumers attention However, the struggles faced by international brands in the Japanese market aren't exclusive to Walmart In 2012, the UK's biggest retailer, Tesco bailed out of Japan after nine years when it sold its 117 outlets to Japan's AEON, which leads the country in market share and France's Carrefour sold its 8 outlets to AEON in 2005 But there is one international food retailer still rearing its head in Japan and that's American wholesaler Costco Though Costco only has 26 units in Japan, the company has managed to capture the Japanese market since it entered in 1999 with only 1/10 of the number of stores to Seiyu Costco recorded revenues that were close to half of what Seiyu made in 2017 Grant said Costco is so successful because it did what Seiyu didn't, create an experience Japanese consumers don't like to buy in bulk, however that didn't hurt Costco ,it actually helped it That's because Costco is so different from the rest of Japanese supermarkets that consumers actually choose to shop there just to get a different shopping experience Seiyu didn't do that, it was pretty much just another supermarket and if Walmart does decide to exit Japan it wouldn't be the first venture the company pulled away from in recent months Just a month before Nikkei reported that Walmart was looking to sell Seiyu Walmart announced that it sold an 80% stake of its operations in Brazil to private equity firm Advent International Walmart said it withdrew from Brazil because it was a lower growth market The company also said Brazil's recession combined with operational issues made it difficult for it to expand there So Japan isn't the only market giving Walmart trouble but don't abandon all hope when it comes to Walmart's business in Japan Analysts say there's a way the company can gain popularity there In January, Walmart and Japanese e-commerce platform Rakuten announced that they would be launching an online delivery service in Japan using Rakuten's online platform and Seiyu's merchandise, which could attract Japanese consumers So Walmart may just be able to turn its luck in Japan With the company placing a focus on online retail with the Rakuten deal, it plays right into Japanese consumers' preferences but if it's online delivery service plan doesn't gain enough traction this could mean the end of Walmart in Japan

Channel: CNBC

Views: 1,173,871

Keywords: Retail, cnbc, business news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, stock market news, stocks, walmart japan, walmart, WMT, WMT price, WMT stock, walmart stock, walmart locations, walmart careers, walmart international, walmart price, walmart prices, walmart near me, Japan, Seiyu, Walmart Seiyu, Seiyu closings, store closings, イオン株式会社, AEON, AEON Japan

Id: 32_fm92-EF8

Length: 6min 0sec (360 seconds)

Published: Tue Oct 23 2018