Walmart is well known as the retail giant with global outreach, but sometimes failures do happen. This presentation attempts to analyze Walmart's failure in Japan and possible opportunities.

1. Walmart in Japan
Albert Winadi 28 September 2012
Eric Setiawan UPH
Junita Astariyani
Meliana Lumban Raja
Sonny Ongkowardojo

2. 2
About Walmart
• American multinational retailer corporation
• Large discount department stores and warehouse stores
• World's third largest public corporation
(Fortune Global 500, 2012)
• Largest retailer in the United States, and in the world
• 8,500 stores in 15 countries, under 55 different names
(UK - Asda, Japan - Seiyu, India - Best Price)
• WOS in Argentina, Brazil, Canada
• Mixed results in investments outside North America:
– UK, South America, China are successful
– Germany, South Korea were unsuccessful
About Walmart Japan Retail Challenges Analysis Recommendations

3. 3
Walmart strategy
Motto:
“Every Day Low Price”
(EDLP)
• Offer broad assortment with even lower prices
Offer more product variety, achieve lower price by reducing expense, increase productivity
and leverage technology to improve supply chain efficiency.
• Meet local needs while leverage global resources
Always align service to fastest-growing consumer demand in market, focusing on EDLP,
targeting middle-income customers looking for quality-value combination.
• Winning in Global eCommerce
Bold competitive advantage by real-time communication between stores, distribution centres
and the home office. Currently offers social, mobile and global platforms, such as iPad app,
facebook gift finder.
About Walmart Japan Retail Challenges Analysis Recommendations

4. 4
Walmart approach in Japan
Walmart entered Japan in 2002.
• Usual foreign strategy: Joint-venture (used to help with economic and
political challenges).
The company enters foreign markets by purchasing large stakes in similar
retailers and takes gradual control of ownership by increasing investment
through time. Historically these acquisitions are gradual, and have been
met with both success and failure.
• Multinational operations
The retailing giant has operations in 28 countries under 60 different
banners. Examples of failed and abandoned markets include South Korea,
Germany and Indonesia. Expansions that have proven largely profitable are
Mexico and Canada. A struggling market similar to that of Japan is the
United Kingdom. Judging from these varying country performances, one
can see that its formula for success has not yet been perfected.
• Entry to Japan
The third major strategic step in Walmart’s early 2000s global expansion
was entering the Japanese market. In 2002 Walmart set foot in Japan with
the purchase of a 6 percent stake in the 371-store Seiyu chain, a struggling
Japanese retailer.
• Despite continued losses, Walmart gradually raised its stake, making Seiyu
a wholly owned subsidiary in June 2008.
About Walmart Japan Retail Challenges Analysis Recommendations

5. 5
Japan
National Language Japanese
Population (2012 est.) 126,659,683
(5th largest)
GDP (PPP 2011 est.) USD 4.440 trillion
Currency JPY (Japanese Yen)
GNI per capita USD 42,150
Land Area 364,485 sq km
Education Level 15 Years average
education
. 99% literacy rate
90% of students
graduated from high
school, and half
graduated from
University or Junior
College
About Walmart Japan Retail Challenges Analysis Recommendations

6. 6
Japan retail prospect
Japan‟s retail market is the world‟s second largest, worth
some US$1,124 billion (135 trillion yen) in 2007. Benefiting
from a base of sophisticated consumers with high levels of
disposable income, per capita retail expenditures have
reached US$8,800.
Japan is a mature market, yet it hums with the dynamic
development of new businesses, urban renewal, and local city
development, presenting a broad range of opportunities for
market entry.
Japan‟s Retail Sector Attracts throughout Asia
Japan’s retail market attracts consumers from across Asia. The
number of tourists traveling to Japan from other parts of Asia
continues to grow, with roughly 35% citing „shopping‟ as one
of their reasons for visiting. Moreover, women’s fashion
magazines from Japan are especially popular in China, Taiwan,
Hong Kong and South Korea, highlighting the power of
Japanese retail to resonate throughout Asia. For foreign
companies, Japan’s market holds significant opportunities for
advancing into other Asian markets.
About Walmart Japan Retail Challenges Analysis Recommendations

7. 7
Market Shares of Major Forms of Retail
in Japan
As can be seen from the pie
chart, Walmart entry to Japan
as General Supermarket /
Department Stores retail
model means that it’s entering
a relatively small market, at
least when compared to other
forms of retail in Japan.
About Walmart Japan Retail Challenges Analysis Recommendations

8. 8
Shopping centres in Japan
About Walmart Japan Retail Challenges Analysis Recommendations

9. Quality vs Price
Japanese tends to prefer quality over
low prices, which constrasts with
Walmart core value: EDLP (Every Day
Low Price).
When a nation has a very strong
purchasing power, such as Japan,
why settle for cheap stuffs when
you can buy high quality expensive
products and still have money to
spare?
About Walmart Japan Retail Challenges Analysis Recommendations

10. Japan: Minimize Me!
Japan is a small country with limited spaces, which has several
implications for Walmart as below:
• Small housings and apartment sizes, with high rent prices
means that Japanese would need to minimize their
purchases.
Lack of storage room to store purchases.
A typical apartment in Japan would be 1LDK (1 room apartment
with Living, Dining, and Kitchen area). Room size in Japan is
measured by Jo (1 Jo = 1 tatami/Japanese mat = .88m x 1.76m).
1 LDK apartment would be about 18 Jo, which measures to only
27,55 sqm.
• Several small purchases.
Minimize purchases, they would make their purchases several
times a week, in small quantities. This means that stores would
have to be readily available within reasonable distance, and bulk
purchasing is discouraged. Compared to Walmart usual practice
of centralized, big stores, with bulk purchasing to save costs, a
neighborhood convenience store would be more suitable for the
Japanese people.
About Walmart Japan Retail Challenges Analysis Recommendations

11. Japan: Minimize Me!
• High operating costs, especially because of the prices of
rent and buildings in general.
Average commercial land prices in Japan is 156,857 Yen (USD
2,017)/sqm, with average commercial land price in Tokyo
reaching 1,551,400 Yen (USD 19,956)/sqm, followed by Osaka
with average commercial land price of 493,700 Yen (USD
6,360)/sqm.
• Inability to apply original supply chain model
Lots of stores, lots of supplies to be delivered, but no
warehouse space, or overtly expensive warehouse space, since
space is a premium in Japan. Walmart’s supply chain
management that is one of the strengths of Walmart in US,
and based on US model, can't be applied here. That's why
Toyota invented JIT: to avoid the constraint of using
warehouses, and hence, adding more costs to the product line.
About Walmart Japan Retail Challenges Analysis Recommendations

12. Japan: Minimize Me!
Waste Disposal in Japan:
• Trash categorization
In Tokyo, trash (gomi) has to be divided into
three categories (combustible trash, non-
combustible trash, recyclable trash) for proper
disposal.
• Costly trash disposal procedure
Disposal of bulky waste, such as a table, a shelf,
or an old TV, requires a special procedure. You
need to call the local ward office and arrange
for a time for them to pick up the bulky waste.
Before they come, however, you need to buy a
sticker to stick on your large trash. To throw
away an old TV, for example, costs about 300
yen.
• Impact on Walmart
This legendary Japanese environmental
consciousness about waste disposal, added to
their minimalist lifestyle, would discourage any
bulk purchases from Walmart, effectively
nullifying Walmart’s economic-scale-driven
model.
About Walmart Japan Retail Challenges Analysis Recommendations

13. Walmart vs Japanese
Manufacturers and Suppliers
Manufacturers Wholesalers Retailers Customers
Line of governance
“Retailers effectively represented the interest of the manufacturer,
rather than that of consumers” (Tsukiizumi, 2004)
• Protection from above
Heavily
Retailers are often protected from financial risks by wholesalers and
manufacturers through a number of distinctive market practices (such as rebates). guarded
• Price and distribution control barrier of
Manufacturers and wholesalers controlled prices by enforcing districting and entry for
exclusive dealerships.
• Closed-network impact to government new
For foreign retailers, Japan’s complex retail and distribution system has long retailers
been inaccessible, so much so that the U.S. government considered it a nontariff
barrier and a structural impediment for U.S.-Japan trade
About Walmart Japan Retail Challenges Analysis Recommendations

14. Walmart vs Japanese
Manufacturers and Suppliers
Impact for Walmart
SCM strategy Small profit margin Culture challenge
Walmart supply chain Walmart’s business model is Japan is used to the top-bottom
management system aims for based on a low price strategy and approach, while Walmart insists
strategic sourcing to find low transportation costs allow it on bottom-up approach. Walmart
products at best price from to sell its products at the lowest has to challenge the unusually
suppliers. Walmart establishes possible prices. EDLP allows powerful Japanese suppliers and
strategic partnerships with most Walmart to break even or make manufacturers to conform with its
of their vendors, offering small profit per sales, while Walmart model.
potential long-term and high customers also win by saving
volume purchases in exchange for money buying at low prices.
the lowest possible prices.
About Walmart Japan Retail Challenges Analysis Recommendations

15. 15
Japan-US Geert-Hofstede comparison
91 95 92
80
62
54
46 46
40 Japan
29
United States
PDI IDV MAS UAI LTO
4 contrasting elements may cause business relationship to be more difficult
between Walmart and Japan market
Power Dominance Individualism Masculinity Uncertainty Long Term
Index Index Index Avoidance Index Outcome Index
• Relatively equal • Contrasting • Contrasting • Contrasting • Contrasting
• Japan is more • Collectivism of • Japan strives for • Japan may have • Japan may plan
hierarchical than supply chain and quality and numerous ahead and more
US. relation to perfection. restriction and punctual and
customer is While Walmart laws which may strict, contrast to
difficult for US. enters market be viewed as US.
with value- unnecessary by
goods approach US.
About Walmart Japan Retail Challenges Analysis Recommendations

16. Further cross-cultural analysis
Trompenaars Individualist Walmart (US) vs. Communitarianist Japan.
Verbal Communication Japan vs US
(indirect vs direct) / (succinct vs elaborate) /
(contextual vs personal) / (affective vs instrumental)
Communication Flows Japan vs US
“Why Wal-mart can‟t find happiness in Japan”
• First changes brought by Walmart is by successfully persuading Seiyu to dismiss 25% of their
HQ staff, including 1500 employees and managers.
• Japan never have anything like this mass layoffs, because this kind of action would create too
much embarrassment for a typical Japanese company.
• Walmart, a US corporation, is seen as the outsider who meddle too much in Japan’s community
(Communitarianism)
• Walmart viewed it as a company’s priority to cut cost, in order to implement EDLP
(individualism)
• This created a climate of resistance for policies that Walmart is trying to implement
• Introducing cheap products from China doesn’t help, especially with bad relations between
Japan and China.
http://money.cnn.com/magazines/fortune/fortune_archive/2007/08/06/100141311/index2.htm
About Walmart Japan Retail Challenges Analysis Recommendations

17. Further cross-cultural analysis
Trompenaars and Geert-Hofstede
Conformist Society (High Uncertainty Avoidance, High Communitarianism)
• High communitarianism: high peer pressure, need peer approval to make decisions
• High uncertainty avoidance: tried and true is better, something new is to be avoided
• Variety offered by Walmart is not attractive to Japanese, who tends to choose a
small selection of tried and tested product.
• Not to mention, they are wary of the “new” products offered by Walmart
About Walmart Japan Retail Challenges Analysis Recommendations

18. 18
Our recommendations
Alternatives for Walmart and Seiyu
Alternative 1: Riding the disaster.
Japan was hit by recession during the 2008 period. This increases demand for EDLP due to decreasing
consumer buying power. This shows in increasing sales in Walmart Japan (Seiyu) from November 2008
(World Economic Crisis time).
Enter 2011. Japan was hit by tsunami and this event occurs again. Seiyu sales rose again during this period.
Walmart could perform market survey to determine again Japan’s interest in value goods. If results are
positive, Walmart could try once more to grab the value goods market.
Alternative 2: Think global, act local.
A nation with low to medium purchasing power would be great for EDLP as well. Walmart has to adapt
to premium-lover Japan, and it's not easy.
Different nation, different culture, different strategy: universalist approach may look simpler and less
costly in the long run, but there are cases where there are countries with unique culture. Especially with
a with a very proud, traditionalist, conformist society like Japan where others
have followed.
What do you think?
About Walmart Japan Retail Challenges Analysis Recommendations