Most South Africans did not know the company at all

Walmart to focus on SA culture

RETAILER NEWS

Fin24 - Jun 6th 2011, 10:18

Cape Town - Walmart was apparently not surprised to find, in its research on South Africa, that most South Africans did not know the company at all. 

Doug McMillon, chief executive of the world's biggest retailer, attributes this to the fact that Walmart usually leaves store brand names unchanged when it enters a new market – just as it plans to do with Massmart Holdings stores like Makro and Game.

As a result, Walmart operates under 55 different brand names in 15 countries. But its expansion plans do not succeed everywhere.

For instance, Walmart failed miserably when it tried to gain a foothold in the German and South Korean markets. In 2006 it exited these countries, tail between the legs. According to analysts, this was largely because it had failed to take local consumer cultures into account.

Considerable research was done on Walmart’s exodus from Germany. The stores purchased were apparently on retail premises which had previously not been very successful. Its 95 stores were also too few to make a difference in a market replete with discount merchants.

Walmart was moreover the victim of bad publicity when the media criticised its store culture.

On top of everything, Walmart apparently attempted to impose American culture on the Germans. It was probably not a good idea to put foreigners at the head of the German business.

It was even alleged that Walmart’s sales staff were too friendly for the Germans, who apparently preferred serious, professional service to smiles.

Analysts reckon Walmart made the same mistake in South Korea, by not understanding local consumers’ needs and preferences.

It would appear that the retail giant has since learnt its lesson, and it plans to keep Massmart’s current management team at the helm in South Africa. As the company expands in South Africa, local people will be recruited and trained.

Walmart has also acquired a fair amount of experience in other developing markets so as not to repeat previous mistakes here. Local
suppliers are mostly used. In China, Mexico, Brazil and India, for instance, 90% of food and groceries is locally procured.

Globally, Walmart is one of the biggest employers in the retail sector. It is a promising investor into South Africa, where government hopes to create five million jobs over five years. In 2009 Walmart created 10 000 new jobs in Brazil and 7 000 in the United Kingdom.

Apart from its investment of some R16.2bn for 51% of Massmart, Walmart will invest considerably more in South Africa. The immediate plan involves 50 to 100 new stores in the next three years and about 20 new Cambridge stalls a year.

Massmart’s food business will expand 50% over the next five years. Fresh food will be sourced mainly from local suppliers. The merged group is consequently planning a programme for the sustainability and development of thousands of local farmers who will provide these products.

Walmart has had a supply office in South Africa for five years and buys 25% of all South African citrus fruit, which is then shipped to America.

The company also wants to boost the local supply chain by improving logistics, inventory management and forecasting models. In other countries this has helped local producers to compete better globally.