Posts Tagged ‘Wal-Mart’

Maybe the downturn isn’t a slow down

January 6, 2009

Getting back to work and catching up on emails, I was struck by the ongoing pace of internationalisation in the retail sector, despite the much-discussed global economic downturn. Many of the big players have been busy expanding their empires (while a few others have been struggling).

I am on the mailing list of a mob called Planet Retail, and they send out a daily newsfeed. Over the past month alone, here are the various international expansion moves they have mentioned (both new FDI and also significant within-host country investments):

  • Office Depot (US) and partner Gigante (Mexico) into Colombia
  • Wal-Mart (US) building stronger ties to Russia with an eye to open stores some time
  • Wal-Mart (US) definitely into Chile
  • Quiznos (US) into Venezuela
  • RadioShack (US) buying out Mexican partner
  • KFC and Pizza Hut (US) into Moldova
  • Costco (US) contemplating France, Spain and India
  • Costco (US) definitely into Australia

  • Hamleys (UK) into Russia
  • Alliance Boots (UK) expanding operations in Norway
  • Aldi (German) into New York City
  • Auchan (France) expanding operations in Romania
  • Metro Cash and Carry (Germany) expanding Indian operations into Punjab
  • Schwarz Lidl (Germany) into Bulgaria
  • Tesco (UK) expanding Chinese operations into Shandong
  • Rewe (Germany) expanding Russian operations
  • Woolworths (Australia) potentially into India
  • Lotte (Korea) into Vietnam
  • Best Denki (Japan) into Kuwait
  • Yamada Denki (Japan) into China
  • Quanjude (China) into Taiwan

I have listed them by the home continents of the expanding firms. As you can see there is a pretty even mix of countries in terms of home and host here. Most interestingly from the perspective of a researcher who looks at the geographic reach of multinationals, a good proportion of these moves have been outside of these firms’ home regions (as typically defined). I have highlighted these moves in green. Given retailing is one of the less-internationalised sectors in the global economy, it is fascinating that such expansion continues to occur.

Advertisements

Untangling the Woolies – a gratutious business history post

December 19, 2008

Posting about Aussie retail giant Woolworths (here, here and here) has reminded me of one curious dimension of international business – the proliferation of firms with very similar brands but distinct identities. There appears to be some confusion caused by the existence of different Woolworths in the retail world. As such, I thought I’d explore the history of each business.

First off the rank, is the US ‘five and dime’ pioneer F.W. Woolworth Company, which kicked off operations in 1878-9 and quickly grew to be one of the largest retail chains in the US. Their headquarters in New York was, for a time, the tallest building in the world. The firm ran what we would now call low-cost, High Street, variety stores. Woolworth did not pursue a supermarket business, but did venture into department stores and speciality stores – most successfully Foot Locker. With the decline of smaller scale variety stores, especially in the face of Target, Kmart and eventually Wal-Mart, the US Woolworth stores eventually all closed and the parent company was renamed Venator in 1997. The company now trades under its most successful brand, Foot Locker, has a retail presence in over 20 countries, and is the world’s 121st largest retailer (according to Deloitte).

The US firm internationalised into Canada, Mexico and more significantly into the UK (in 1909) and Germany (1927). The UK stores flourished and became a staple of the High Street. The UK firm spun off from its US parent in the early 1980s, and was last year the 198th largest retailer in the world. As of last month, this entity is now under receivership, as the firm has failed to manage the competitive onslaught from supermarket chains such as Tesco, Marks and Spencer and Asda, and the decline in CD purchases (one of its biggest market segments).

woolworth-gmbh1The German business was similarly prolific and by the time it spun off from the US parent in 1998 it had over 300 variety stores across Germany and Austria. It continues to operate.

Most of the Canadian stores were sold off to Wal-Mart in the mid-1990s. The rest closed. The Mexican business (in operation since 1956) slowly shifted into Mexican hands from the early 1980s (due to restrictive foreign ownership rules) and still operates under the Woolworth name.

Now we turn to two more lively Woolworths.

First is the South African business. This has been in existence since 1932. It is unclear if it ever had any relationship to the US or UK businesses. Certainly by 1947 it had signed onto a distribution relationship with UK retailer Marks and Spencer which is maintained to this day. It is sells both groceries and homewares. It is one of the more geographically dispersed retailers in Africa, operating via franchise in Botswana, Kenya, Lesotho, Mauritius, Mozambique, Namibia, Nigeria, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe, as well as the United Arab Emirates. The firm also owns Australian fashion retailer Country Road.

So that leaves us with the Australian firm. This firm has never had a formal connection to any of the others above. The gentlemen who started it in 1924 were simply opportunistic in using the brand name. Legend has it that they telegraphed the US firm in New York and told them that they were using the name, and that the Americans replied saying “That’s fine. We aren’t going to expand down there anyway”. The Aussie firm was also originally a variety chain, but did expand into supermarkets in 1960. It is has subsequently extended its reach into a wide variety of offerings and formats. Their stable of brands includes Safeway, which was previously an internationalisation effort by the US firm of that name (#19 retailer in world) but was bought by Woolworths in 1985.

This Woolworths has not been an overly ambitious internationaliser until very recently. It did enter New Zealand in the early 1930s, but sold the brand on in 1979 and only bought it back in 2005. The Aussie Woolies is by the far the largest retailer of this name, coming in at #25 on the global rankings. It recently launched a new logo (see left). It is, as yet, unclear whether expansion into India will involve use of the Woolworths brand.

So, there you go, a complex world of doppelgangers. Intriguingly none of the firms have ever trod on each other’s turf, reflecting the limited internationalisation of retailers generally. Stay tuned for more movements…

The Woolies Indian adventure – a follow-up

December 16, 2008

The very first post on this Blog was back in July, and discussed reports that Aussie supermarket giant Woolworths was contemplating an entry into the Indian grocery arena. It seems talks continue. Reports out of India earlier this week claimed that Woolies were:

“in talks with Kishore Biyani’s Future Group, which owns Pantaloons Retail, for an equal equity joint venture for food and grocery cash and carry business in India.”

Pantaloon is one of India’s largest retailers and spread across a similar range of retail lines as Woolworths (supermarket, variety, electrical). The firms also has a joint venture with US office supplies retail giant Staples. It will be intriguing to see if and how any partnership with Woolworths will play out.

As I said in the earlier post, India is certainly the next frontier for retailing with a huge population currently under serviced and almost unprecedented scope for consolidation and modernisation. The question is whether Woolworths have transferable advantages and capabilities for this environment, especially if they eventually go head-to-head against the recently finalised Bharti-Wal-Mart combo.

Interestingly, Woolworths already has a relationship with another Indian retail goliath, Tata, in the electronics retailing market. I wonder how they will partition these two arrangements.

The International BS Book Club II – Wal-Mart

November 28, 2008

One of my missions on this Blog is to draw your attention to books that might offer insights into strategic management and international business (see my earlier Travels of a T-shirt discussion). I just stumbled across some notes I’d scribbled down after finishing off Charles Fishman’s The Wal-Mart Effect last year.

This was both an insightful and frustrating read. Wal-Mart are clearly a fascinating case study in terms of their growth over a few decades from a fairly inconsequential retailer in the US mid-west to (perhaps) the world’s largest firm.

Fishman presents a series of examples of businesses and industries that have been substantially affected by the practices of Wal-Mart. He presents a viable and reasonably well-balanced thesis that the influences that Wal-Mart has wrought across the US economy and society are multi-faceted. Several of these influences were quite eye-opening, in terms of the extent to which product prices have been driven downwards, and the willingness of Wal-Mart to share savings with consumers. His discussion of various supplier firms reveals Porter-style bargaining power of a buyer writ very, very large. Not surprisingly some of these firms have been driven to the wall, but others seem to have prospered, and consumers have consistently been rewarded with cheaper products (and often products that are more efficiently designed and packaged). Of course, other retailers have usually suffered in the battle for customers. Fishman provides little recognition that the surviving chains are also beneficiaries of the new efficiencies in their pool of suppliers.

Photo by Neato Coolville

Photo by Neato Coolville

I find the actual structure of the book somewhat tiresome however. There was a strong tendency to repeat and repeat the same points in slightly different ways. It was even more frustrating that the internationalisation of Wal-Mart was given such short shrift. As IB scholars have (often gleefully) observed, Wal-Mart has had some considerable failures in its offshore retail efforts (especially in Germany and Japan), and is yet to substantially translate its business model beyond familiar environs. Of course, on the supply side, Wal-Mart is a very big player, benefiting considerably from the emergence of suppliers in Asia (China particularly).

Turning to the Australian retail scene, one issue warrants consideration: Wal-Mart only captures around 10 percent of the retail dollar in the US market. On my calculations, Woolworths and Wesfarmers (as owner of Coles, Bunnings etc) each account for around 21 percent of the Australian retail market. Shouldn’t there be a lot more fuss made about their collective effect on consumers, suppliers etc down here (beyond gutless government reviews)? Where’s the Fishman-style examination of the Woolies Effect?

To get a further taste of the Fishman book, check out these excerpts.