PwC has said Wal-Mart plans to develop retail partners in Europe. This would be a major change of strategy, as previously Wal-Mart has ‘gone it alone’ when entering new markets. The change may be down to Wal-Mart’s difficulties in Germany. Whilst the Asda purchase in the UK has been successful, Wal-Mart may now need to follow an expansion strategy in Europe more reminiscent of its Dutch rival Ahold.
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On Tuesday Lois Huff, a consultant with PriceWaterhouseCoopers, said at a panel discussion on Wal-Mart’s international growth prospects that it was likely to seek partnerships with European food retail operators in high growth regions. This would be some change for Wal-Mart, which has previously taken a more bullish approach to expansion.
Wal-Mart itself is known for not revealing its future intentions about expansion, but it is likely to be rethinking its European development following its failure in Germany. Despite having entered the German market in 1997, the firm still only has 94 stores and has admitted that it has problems. These include a disruptive consolidation of headquarters and industry insiders mentioned that the US firm has had problems in negotiating with German suppliers.
In Germany, Wal-Mart has been accused of displaying a lack of understanding of local market conditions, and of trying to “run operations out of the US”. German results may indicate that these accusations may have some basis. In order to target new fast growth markets, such as those in Eastern Europe, Wal-Mart may well do best to learn from a local partner first, and then bring its financial muscle and logistical know-how to the fore.
Wal-Mart is not the first to think that partnerships are the way ahead. Royal Ahold, the Dutch retail operation, has long been a fan of using partnerships to enter new markets, having used joint ventures and partnerships in both South America and in Europe. As a result, Ahold has gained the necessary local knowledge first, and then used it to scale-up operations within a country.
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By GlobalDataIt seems that Wal-Mart may need to follow in the footsteps of its archrival. But it won’t have to abandon its existing strategy totally. The partnerships could well provide the basis for more aggressive ‘Wal-Mart-style’ development in the future.
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