Blog: Retail giants look to new markets
Catherine Sleep | 5 March 2007
Last week was a busy one on the international retail scene with retail juggernauts Wal-Mart, Carrefour and Tesco all rumoured to be eyeing entry into new markets.
While Wal-Mart has struggled to promote healthy sales growth in the US, the retailer appears to have turned its attention on the more fertile soil of emerging markets.
On Tuesday (27 February) Wal-Mart announced a deal to up its stake in Bounteous Company, which operates Chinese hypermarket chain Trust-Mart. The agreement could see Wal-Mart challenge Carrefour as the largest hypermarket operator in China. A day later reports out of Russia said the world's biggest retailer might also be looking at an acquisition there. A co-owner of a Russian hypermarket operator was said to confirm that Wal-Mart was in sale talks with Karusel.
Whether or not anything comes of this, with Wal-Mart's international sales increasing 30.2% to US$77.12bn in the previous fiscal year, compared to a 7.8% increase in US sales, it seems clear that international markets are set to become an ever more important aspect of the company’s operations.
Meanwhile, French retail colossus Carrefour is reportedly “months away” from following in Wal-Mart’s footsteps and entering the Indian market through a tie-up with a local group. The retailer is rumoured to be in talks with as many as six companies, including the Wadia Group.
Like Wal-Mart, Carrefour has struggled of late in its home market, with total sales for the previous fiscal year growing only 0.8% in France. As a result, the group is increasingly looking to international markets that offer solid growth opportunities. With demand in the Chinese, Russian and Indian markets expected to skyrocket in coming years, established global retailers want to be there to make the most of these opportunities.
Rumours surrounding Tesco’s entry into India have also persisted throughout the week, with the UK company now linked to India’s Tata Group. With India’s strict rules limiting foreign direct investment in the retail sector, international players are scrambling to cement links with local businesses.
Interestingly, each of these international retail giants has also been linked with the sale of Australia’s Coles. Following the news that Australia’s second largest retailer was “evaluating ownership options” reports identified Wal-Mart, Carrefour and Tesco as possible trade buyers. However, it seems more likely that the group will be swallowed up by private equity investors who have already made several unofficial approaches.
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