Current event
Issue:
Wal-Mart and other discounters are expanding as a
Japanese recession looms and after household income has fallen three straight
years.
Overview:
With Japan’s economy on the bottom of a third
recession since 2008, and household incomes falling for the last three years, more
and more Japanese customers shop at discount stores. Japan’s economy shrank at
a pace of 0.9 percent in the three months through September as government data
shown. The country’s famously picky and brand-fascinated shoppers are changing
to bargain-hunting style. Discount stores are gaining and expanding.
Wal-Mart’s Japan business is operating in name of
Seiyu supermarkets and there is no stores operated under the Wal-Mart banner.
Wal-Mart acquired a 6.1% state in Seiyu in 2002. In 2005, Wal-Mart acquired a
majority interest in Seiyu, making Seiyu a Wal-Mart subsidiary, and in 2007,
Wal-Mart increased its ownership stake of Seiyu from 50.9% to 95.1%. After
acquiring the remaining shares, Seiyu became a wholly owned subsidiary in 2008.
Wal-Mart’s Japan business saw net sales rise 2
percent during second quarter. Its Seiyu unit will open seven new stores this
year and three more in 2013. Steve Dacus, the CEO of the Japanese unit of
Wal-Mart Stores Inc, said Seiyu has built a successful business model for
food-oriented supermarkets. By thoroughly implementing the “everyday low price”
strategy, same-store sales increased 1.9% on the year in the July-September
quarter. Sales and profits will exceed year-earlier figures for the full year
as well, he added.
However, Wal-Mart faces hurdles in others parts of
Asia. In China, as more and more local retail discount stores is opening,
Wal-Mart is adding fewer stores than previously planned. And its strategy in
India has been hindered by regulations that until September banned foreign
companies from investing supermarkets.
Managerial
implications:
Wal-Mart expansion in Japan not only improve its
revenue, but also can serve more Japanese
customers, who are under rapid socio-economic changes - such as lower annual
income, aging population increase, food price hike and etc, which fit
Wal-Mart’s global mission of “save money, live better”.
1. “Wal-Mart Bets on Japan’s Falling Income
in Soft Economy: Retail” http://www.bloomberg.com/apps/news?pid=webport_news&tkr=MCD:US,PFE:US,WMT:US&tkr2=WMT:US&sid=ash921Sey6dw
2. “Walmart moves on in Japan with 10 new
stores”
3. “Walmart
Japan to open 22 SEIYU supermarkets by end 2013”
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