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Walmart Marketplace Management Services

The secret of success is simple: The company deliberately adheres to the policy of earning low prices. This allowed very quickly to settle in any city and competitors forced to reduce prices. Despite the sharp decline in the cost of goods, revenue is always coming.


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kazi Fahim

4 months ago | 3 min read
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HOW THE WORLD'S LARGEST RETAILER BECAME DISILLUSIONED WITH JAPAN

 

US-based Walmart sells 85% stake in Seiyu, a Japanese convenience store chain. The world's largest wholesaler and retailer has failed to implement a low price every day strategy because the Japanese have a different idea of ​​quality. What is the future of Walmart in Samurai Land after almost 20 years of failure?

Penetrating the Japanese Market

At the dawn of the new millennium, Japan was an attractive market for foreign companies. Due to the bursting of the economic bubble (1986-1991) and the Asian crisis of 1997-1998, property prices in Japan fell, and the government began to deregulate the economy and encourage cheap loans for start-ups. Hoping for a retail revival after Japan's "lost decade", US Walmart, as well as other major players such as French retailer Carrefour and UK's largest chain Tesco, have begun to enter the Japanese market.

 

To get used to the unfamiliar environment, walmart account management first acquired a 6% stake in Japanese supermarket chain Seiyu. This company is known in Japan as the creator of the second most popular convenience store chain FamilyMart (second only to the 7-Eleven convenience store chain) and the original Muji clothing brand. By 2008, however, Walmart was tired of watching Seiyu's annual losses and took over the company entirely.

 

In 2018, Walmart forged a strategic alliance with major online wholesaler Rakuten, owner of Viber and Japanese rival Amazon. As a result of cooperation in 2019, Walmart Seiyu earned 47 million yen (about $500,000) in net profit.

 

Other standards

Walmart and other retail giants entered the Japanese market with proven strategies but underestimated the characteristics of the average shopper. Japanese housewives, the main customers of chain stores, do not buy food in reserve and value fresh produce from nearby, proven outlets. As Sergei Shaposhnikov, an orientalist and Japanologist at the Graduate School of Business of Moscow State University, notes, Walmart “offered products that were already packaged and had a long shelf life, which is not consistent with the Japanese ideas about freshness.” In addition, although Japanese society is considered to be extremely homogeneous, the tastes of the Japanese differ depending on the region. Local manufacturers are adapting to the characteristics of their consumers, while Walmart expected to wholesale the same type of goods and failed.

 

It wasn't just the picky Japanese customer that was the problem. Walmart's well-established strategy of "every day low prices" summed it up. Sergey Shaposhnikov explains that “the Japanese have a clear idea of ​​the cost of a particular product (golden price — “gold/acceptable price”) and are wary of [it] if the price is lower or higher than expected (especially in the case of an unfamiliar manufacturer or seller). Japanese combines immediately promised prices no lower than Walmart, thereby depriving the company of its main advantage. Walmart found it difficult to establish a cheap supply chain in a new market where trust between wholesalers takes years to build. Then the company tried to save money in a different way and reduced the number of employees, which negatively affected efficiency - another hallmark of Walmart.

 

Due to the inability to change tactics according to the tastes of Japanese consumers, European retail chains such as Tesco and Carrefour were forced to leave the Land of the Rising Sun. It is likely that the same fate awaits the American company Walmart.

 

The Future of Walmart in Japan

Since 2018, there have been rumors that walmart listing is going to sell Seiyu for 300-500 billion yen ($3-5 billion). The price was clearly too high, so on November 16, 2020, Seiyu was valued at 172.5 billion yen ($1.6 billion). Under the terms of the deal, Walmart will retain a 15% stake for now, 20% will go to a well-performing partner, e-commerce company Rakuten, and 65% will become the property of US private equity fund KKR&Co. Inc. It is possible that Walmart will soon list the remaining shares on the stock exchange, finally saying goodbye to Japan.

 

At the same time, Seiyu's new owners are going to bet on online retail, which is booming thanks to pandemic-related restrictions. In 2019, according to data from the Ministry of Economy, Trade and Industry of Japan, the share of business-to-customer online commerce accounted for 6.76% of total trade (up 0.54% from the previous year). However, Seiyu faces serious competition from Aeon (Japan's largest retailer), Amazon and Seven-Eleven, who also see potential in the Japanese online market. One way or another, the Walmart legacy will continue to exist in Japan, but probably without Walmart itself.

 





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