Walmart may be on the cusp of making its final checkout from the Japanese retail market

With speculation rife that Walmart Inc. is seeking to offload Seiyu, its Japanese subsidiary, the U.S. retail behemoth’s possible failure may be interpreted as the result of this country’s ultracompetitive retail market.

After all, other global supermarket operators, such as Britain’s Tesco PLC and France’s Carrefour SA, have also suffered failed forays in Japan.

But rather than an inevitable outcome, the struggle to succeed is the result of a string of strategic failures that did little to endear consumers to the Seiyu-Walmart brand, according to a number of industry experts.

Despite cutting-edge logistics, institutional know-how and the ability to manage a massive workforce the size of some small nations, Walmart’s business in Japan was never smooth sailing.

Mike Duke, at the time a Walmart vice chairman, said that the outright acquisition of Seiyu Ltd. in 2007 would “enable Seiyu and Walmart together to accelerate the delivery of long-term benefits to our customers, the communities we serve, our associates and our business partners.”

Yet these long-term benefits never seemed to materialize as the company pursued unsuccessful marketing strategies and failed to identify key consumer preferences, industry experts say.

“Many Japanese supermarkets have different campaigns and sales, so consumers know when it is a good time to buy certain goods,” said Mitsuhiro Hayashida, a chief consultant at Mitsubishi UFJ Research and Consulting.

“But for Walmart, whose business is based on ‘everyday low prices,’ there are few visible sales or campaigns,” Hayashida said. “So even though the prices are low, the marketing strategy is difficult for Japanese consumers to understand.”

Aside from problems with the marketing strategy, Hayashida and other analysts said Walmart also neglected to put sufficient resources into ensuring that fresh produce reached the shelves.

Minoru Fukuda, an analyst at Roland Berger Strategy Consultants, said that for the supermarket business, “fresh food is key” due to the fact that “Japanese consumers place a lot of emphasis on freshness, especially  when it comes to fish.”

Fukuda explained that Seiyu’s inability to sell customers on the freshness of its produce was a major setback for the company’s bottom line.

It is unclear, however, whether Walmart executives overlooked the importance of fresh produce or if they failed to fully understand the fragmented nature of the domestic agricultural market.

“In Japan you have to buy from local farmers or fisherman. In other words, the procurement process is fragmented,” Fukuda said. “Local supermarkets thus sometimes have the edge, as they can buy directly from farmers.”

Still, some foreign companies, such as Costco Wholesale Japan, have been able to find a niche here.

Fukuda believes that one reason Costco has seen growth is because it can, to a degree, bypass domestic producers altogether. Fukuda estimates that Costco sources around 40 percent of its products from abroad.

Aside from the quality of food, Costco may also have another obvious advantage: with its large aisles and items sold in bulk, the company offers a vastly different experience for customers compared with regular domestic supermarkets, a selling point Seiyu was unable to offer.

“Many consumers did not have the impression that Seiyu was different than other Japanese supermarkets,” said Akiko Goto, a senior researcher at the Distribution Economics Institute of Japan.

Goto, who has researched and written about the national supermarket industry, says she isn’t surprised by the rumors that Walmart is looking to sell its stake in Seiyu since the company struggled to expand in the last few years.

Although no longer required to publish its financials as a subsidiary of Walmart, based on the fact that the company has not seen much growth since it delisted from the Tokyo Stock Exchange in 2008, Goto estimates that Seiyu brings in around ¥600 to ¥800 billion a year in revenue.

According to Seiyu’s website, it had 335 stores across the country as of May.

By comparison, Aeon Co. had over 2,000 supermarkets and posted around ¥7.7 trillion in operating revenue in Japan for the business year that ended Feb. 28.

“Over the past few years, Seiyu has not increased the total number of stores, and has had to close many that were not performing well,” said Goto, adding that Walmart’s inability to quickly replace its Japan head also caused her to question the company’s stability.

Selling Seiyu would also be consistent with Walmart’s moves to invest more in growth markets and pull out of struggling markets.

This year the company announced it would be backing out of Brazil’s retail market while also laying out plans to expand its business in India by becoming the largest shareholder in Flipkart Group, an e-commerce business.

For the time being, Walmart is denying the recent media reports that it intends to sell the subsidiary.

A spokesperson for Seiyu, Genya Murata, said in email correspondence with The Japan Times that a sale is not being discussed at this time and that the company will “continue investment and other efforts to further improve business.”

Regardless of the outcome, Walmart’s experience will most likely cause other large foreign retailers to think twice before entering the Japanese market, according to retail analyst Goto.

“I think foreign supermarkets entering Japan will be difficult in the future,” Goto said.

China will keep its economic growth within a reasonable range and achieve this year's growth target despite challenges, the state-run Xinhua news agency said on Tuesday.Bank of Japan Gov. Haruhiko Kuroda holds a news conference in Tokyo on Tuesday.﷯Nintendo's quarterly net profit is up 43.9 percent year on year to ¥30.6 billion, driven by the global popularity of its Switch console and game titles.

الموقع يستعمل RSS Poster بدعم القاهرة اليوم