2009 in Review

Ooops, I’m a little later this year with my reflections on 2009 as a blogger (last year I managed to do it on New Years Day – oh well, better late than never).

I can tell you that I post exactly 100 times (but 42 of those were in the first 3 months), and that there were just over 14,300 visits to the site. January and December were the two busiest months, with about 2000 visits each. The busiest day was Dec 2 when this post got over 200 clicks.

The most popular posts from 2009 were:

#1 Can Aldi beat Wal-Mart?

#2 A juicy tale of international expansion (about Boost Juice)

and very strangely, one about toilets at #3 Toto, we’re not in Tokyo anymore…

The aforementioned Dec 2 post Why don’t more producers sell on-line? came in at #4 (and thus has the highest average visitors per day).

#5 confirms a retailing bias with Capabilities do matter (about Zara, Ikea & H&M)

And the post from 2008 asked is there Too much Wii in this Blue Ocean? still attracts loads of readers.

Thank you to all who have visited, commented, argued and critiqued. I relish the engagement and the challenge. Here’s to a great 2010…

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Could Wal-Mart have a demonstration effect?

The news this week is that Wal-Mart are reportedly back in the hunt for a Russian acquisition. They may be locked in a battle with Carrefour (the French world #2) and Metro (Germany, #4) for a controlling stake in a Russian hypermarket chain Lenta.

Currently not a single US retailer from the world’s largest 250 (according to Deloitte’s rankings) operate in Russia. This is despite more than 20 other large international players being there, including Metro, Rewe, Ikea, Inditex, and Boots (and despite the US making up 34.8 percent of the top 250).

It would seem that geographic and institutional differences are much larger between the US and its former cold war rival, than between Europe and Russia, and the US and Europe (and indeed the Middle East, Latin America and Asia for that matter).

It is fascinating that Wal-Mart are willing to take on the Russian challenge ahead of opportunities in the remainder of Western Europe. It would seem their format of big-box retailing has more prospects in emerging markets such as Russia, China and Latin America than the more developed world (as an aside, I wonder what that says about the relative economic development status of mid-West US in the 1970s-80s?) .

It will also be intriguing to see the extent to which Wal-Mart might act as a strong example to the laggard US retailers. Will this be a beach head for more entrants in this sector?

One final comment: Lentra does seem a good candidate for such an acquisition. Their format and growth seem comparable to a young Wal-Mart.

So where the bloody hell are the global retailers?

In 2006, Australia ran an ill-fated tourism campaign with the tag line “So where the bloody hell are you?”

The latest list of the 250 largest retailers in the world has just come out from Deloitte, and we could be asking the same question of international retailers with respect to the Australian market.

Back in a 2007 chapter (for a book called The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation), I highlighted the limited presence of retail’s big international players in the Aussie market. The list back then was 13 foreign-owned firms from the Deloitte’s 2006 Top 250, plus 3 Australian firms who were big enough to make the list.

Looking at the 2009 list, there has been a slight decline in this international presence in the intervening three years. There are now only 14 firms from the list operating bricks and mortar stores in Australia. They are (with global ranking, and new arrivals in green):

10. German discount supermarket giant Aldi who operate in 15 countries
22. Aussie behemoth Woolworths (3 countries)
29. Wesfarmers, owner of the Coles, Target, K-Mart and Bunnings brands in Australia (2 countries)
32. Swedish furniture kings Ikea (36 countries)
42. French conglomerate PPR (Gucci, Puma etc) who have a very minor retail presence down under (48 countries)
59. Toys “R” Us from US (36 countries)
68. French luxury goods firm LVMH (15 countries)
113. Gamestop from US, who poerate as EB Games in Australia (16 countries)
129. South African supermarket chain, Pick’n’Pay, who own Franklins (6 countries)
146. Blockbuster video stores from US (22 countries)
150. Sports chain Footlocker from US (20 countries)
174. Italian spectacles seller Luxottica (OPSM, Sunglass Hut) (20 countries)
214. French firm Lagardére (formerly Hachette) who operate Newslink, Relay, Bijioux Terner and various other shops in airports and train stations (30 countries)

The 2009 list also included book retailer Borders who have recently exited Australia. Also gone since 2006 are Gus/Burberry (UK) due to a de-merger and Metcash (South Africa) via an Australian management buyout. (I, like Deloitte, also had erroneously included 7-Eleven which it turns out is run by a licensee in Australia). The Wesfarmers acquisition of Coles shrunk the Aussie-owned presence (as Bunnings will thus leave the list now). The most substantial new kid on the block is EB Games with almost 200 stores in Australia.

So, why the reluctance to head down under? I have argued this about the impact of Australia’s history and location:

As the nation was geographically distant and disconnected, and local suppliers were protected by high tariff walls, domestic retailers quickly built considerable location-bound advantages over any potential inward FDI. Entrepreneurial locals and later powerful incumbents were able to ‘cherry pick’ concepts from overseas and introduce them to Australian consumers confident of their likely success.

Most of the international firms who have broken through have typically had very strong firm-specific advantages (usually in specialist retail formats), and have been pretty aggressive in their internationalisation. It is worth noting that the average firm in the Top 250 operates in 6.8 countries. All but one of the international players in Australia exceeds that average substantially (while the Aussie pair are underperformers).

Is it the case that only experienced internationalisers can make the leap to Australia? Or do they only bother once they’ve exhausted more rewarding locales?

One of the big boys is heading our way – #9 Costco is building in Melbourne right now. Can we really expect too many more from the list on Australian shores in the near future?