Blog: Can Wal-Mart sway Seiyu?
Leonie Barrie | 23 October 2007
Wal-Mart’s investment in Japanese supermarket chain Seiyu Ltd could have gone one of two ways: either exiting the Japanese market altogether as it did last year in South Korea and Germany, or piling in the funds in an attempt to turn around the money-losing chain. It went with the second option yesterday, deciding to spend around US$862m on buying out the business’ minority shareholders.
The retailer certainly knows what it’s up against, having already invested more than $1bn in Seiyu since 2002 yet still failing to ignite sales. Fickle shoppers and tough competition in the Japanese market have already led to a number of foreign casualties, among them France's Carrefour, but Wal-Mart remains confident it can turn the Japanese unit around.
Reversing losses in Japan – the world’s second largest economy – would be a significant boost for Wal-Mart's fast-growing international business, particularly at a time when US growth is waning. Sales outside the US have risen from 4.8% to 30% of the total over the past decade, driven by strong demand from China, Brazil, India and Central America.
Although Wal-Mart has yet to reveal how it will engineer a turnaround in Japan, taking full control will certainly make it easier to run Seiyu and make faster changes without having to manage minority partners. And now that rumours of Wal-Mart abandoning the market have firmly been put to rest, the retailer will undoubtedly find it easier to do business with local suppliers too.
Both speed and cost control across the supply chain are key to Wal-Mart’s deep discounts model, its so-called ‘Everyday low prices’; all that remains is to convince the Japanese customer that low prices don’t necessarily mean low quality.
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