Successful Global Growers: What We Can Learn From Walmart, Carrefour, Tesco, Metro


This is a selfmade image from the english wiki...Global expansion is the mantra of the world’s four largest retailers. Leading the pack is U.S. based Walmart, registering sales of $466.1 Billion in 2012, followed by French based Carrefour with sales of $112.6 Billion. At $96.8 Billion, U.K based Tesco is third with Germany’s Metro in fourth place with sales of $90.5 Billion.  Each of these behemoths have seen rapid growth in new fast-developing countries where each has invested in stores.   Much can be learned from their successes and their failures.

A study by the Ebeltoft Group and McMillan Doolittle determined that retail growth is fastest in Africa/Middle areas and Latin America where net profit margins are also the highest.  Net profit margins also rank high in North America.  Citing data from Deloitte, the consulting firm McMillan Doolittle projects that between 2010 and 2015 international growth for the four giant companies will be at a compound annual growth rate of 9.8% for Walmart, 7.7% for Carrefour, 10.5% for Tesco and 7.4% for Metro. Compare that with domestic market growth for the same period of 2.7% for Walmart, 3.2% for Carrefour, 5.9% for Tesco and 1.6% for Metro.   Clearly the boost new markets are providing to overall growth for these companies is substantial.
Walmart is expanding its horizon to Chile, India and South Africa; Carrefour will open stores in Bulgaria, India and Iran. Tesco is also opening stores in India, and Metro will open in Egypt and Kazakhstan. These expansion plans sound very exciting, but, there are unknowns and therefore risk.   Both Walmart and Carrefour have pulled out of Russia. In addition, Walmart withdrew from Germany and South Korea; Carrefour left Algeria and Thailand; Tesco left Japan and is currently in the process of withdrawing from the United States; and, Metro left Morocco.  Not every entry into a foreign country is successful.  Local laws and restrictions sometimes can create unforeseen challenges. Sometimes there are local market dynamics that make good supply chain strategies impossible to operate. These large operators have learned, sometimes the hard way, it is important to hire local managers who understand local consumer preferences and how to market to these consumers.   Different tastes mean it is necessary to change the product assortments, adjust pricing and merchandise in-store differently than the companies were used to.  Of course, store location is always important and research on real estate takes time and guidance by local experts.  Given the capital investment required to open a new store, a bad location can be a very costly mistake.  Too many times companies open stores in locations that are off the beaten path and bring disappointing results.
The Ebeltoft Group made some interesting suggestions at a recent meeting for the National Retail Federation.  Their study shows that there is a heavy concentration of International stores in some locations such as Singapore(85%), Denmark (85%), Portugal (77%), Spain (68%), Germany (60%), UK (55%), France (54%), Netherland (51%), while markets such as Australia (40%), USA (39%), Canada (37%), and Switzerland (29%) have lower penetration.   Notably, Switzerland is dominated by a domestic operator, Migros stores, while Singapore is heavy populated by foreign stores. The size and proximity of the domestic market also factors into attractiveness of international growth.   Canada is a good example.  While there was slow growth initially, Canada is now undergoing an American invasion led by Target and Chico’s among others.  While International expansion has grown at a faster pace in the last few years, Ebeltoft Group notes that retailers tend to penetrate similar markets when expanding internationally.  It is easier to expand to the United Kingdom for United States retailers since they have no language barrier.  However, even with higher risk, many retailers view entry into emerging markets urgent given the opportunity to establish stores in good locations before the competition.
Here are some suggestions for successful international expansion:
  1. Have a clear reason for being.   For example, whether it is Sephora or IKEA, customers know exactly what those brands stand for and why they are unique to the market.
  2. Listen to customers and be flexible and be willing to change. Every market has a unique local flavor.
  3. Consider a joint venture with a local leader. Benefit from his knowledge and talent.
  4. Respect local culture and adapt to local customs.
  5. Have a well defined real-estate strategy. Do lots of research.
  6. Invest in appropriate marketing and build a strong infrastructure.
  7. Develop strong local management that has autonomy to respond to their market.
  8. Recognize local competition as a serious threat.
International expansion is a high risk high reward proposition, and for the world’s largest retailers it is absolutely necessary for growth.  Sometimes they get is wrong, more often they are getting it right.
Forbes.com
Successful Global Growers: What We Can Learn From Walmart, Carrefour, Tesco, Metro Successful Global Growers: What We Can Learn From Walmart, Carrefour, Tesco, Metro Reviewed by Unknown on Tuesday, March 19, 2013 Rating: 5

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