Wal-Mart (NYSE: WMT) has hired a new man to help it move into Russia and Eastern Europe. These are two of the large developed regions where the world’s largest retailer has made few in-roads. The other is India, where local laws keep it from having its own stores.
Russia and the part of Europe where Wal-Mart wants to put new stores are part of an expansion born of the company’s slow growth in the US. In the last month reported, the world’s largest retailer said domestic revenue was up in the 5% range while international revenue rose almost 20%.
The excitement over new expansion could cause people to forget that, for all its success in Mexico and China, Wal-Mart loses tons of money in Japan. It has also retreated from the markets in Korea and Germany.
The pattern of Wal-Mart’s success and failure outside the US does not appear to be linked to any one country but is does appear to be a by-product of the demography of the markets where it wants to compete.
Much of the customer base for Wal-Mart in the US is among the lower classes who are drawn to Wal-Mart pricing. Is it any wonder that the company has done well in Mexico and China where disposable income is often modest? On the other hand, in richer countries like German, Wal-Mart has been a flop.
Russia may be a challenge for Wal-Mart. Income in the larger cities is rising as oil money improves the standard of living for many people. This is much less true in Eastern Europe.
In other words, Wal-Mart’s next push overseas will have mixed results.
Douglas A. McIntyre