Wal-Mart: What Slowed Japanese Expansion?

With hope that the increasing numbers of working poor and pensioners on fixed incomes in Japan will stimulate a trend towards thrift, Wal-Mart (NYSE:WMT) has announced an expansion in the country for the first time since 2008. The retailer plans to add 22 stores to its 368-store presence.

To aid its entrance into the fragmented Japanese market, the retailer originally partnered with national grocery store chain Seiyu, which was not thriving. Four years ago, Wal-Mart acquired the chain in full, and continues to operate its stores under that name. Howeve,r Japanese consumers, who traditionally equated discounts with poor quality, were slow to welcome Wal-Mart’s low-price strategy.

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While the retailer experienced a difficult beginning in Japan ten years ago, demographic and economic changes have altered consumer spending habits in the intervening years, and the retailer has made some changes of its own. The company has added products that cater to the aging Japanese population; one of its most popular items is a single-serve, freshly prepared “298-Yen Bento,” which sells for the equivalent of $4.

But difficulties remain; analysts say sales at Wal-Mart’s 368 Japanese stores lag behind its operations in high-growth countries like Mexico and Canada, and its stores have secured only a 2.6 percent share of the market. According to analytic firm Planet Retail, Japan accounted for only 2.5 percent of Wal-Mart’s $443 billion in revenue last year. In comparison, Wal-Mart claims 13.4 percent share of the American market and more than three times the revenue of its closest competitors Target (NYSE:TGT) and Costco (NASDAQ:COST).

However, Wal-Mart has outperformed global rivals Carrefour and Tesco in Japan over the last seven quarters.

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