January 4, 2013
Walmart Taking ‘Alternative’ Route to Global Growth
Walmart management expects big things to come from opening small boxes outside of the U.S. The company, which has achieved success in Mexico and elsewhere with formats such as its Bodega Aurrera in Mexico and Neighborhood Markets here, has named an executive to focus on building business through alternative concepts in international markets.
Lev Khasis, a retail executive who joined the company in 2011 from X5, Russia’s largest food retailer, has been named president and CEO of new formats for Walmart International, according to reports.
"Lev has a track record of developing innovative formats, and he will now focus on developing new concepts that can be deployed across our markets to provide future growth," Kevin Gardner, a spokesperson for Walmart, told Bloomberg News.
Walmart currently operates more than 69 banners in 27 countries around the planet. Of its more than 10,500 retail stores, nearly 6,000 are part of Walmart International.
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Discussion Questions
How important are alternative concepts to Walmart’s future growth prospects both here and abroad?
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Walmart has overwhelmed most large retail concepts in America in recent decades. So what’s left to conquer now? The smaller store markets worldwide.
In many nations there are opportunities to bring lower prices and economies of scale to smaller stores in other countries where smaller stores are indigenous. That spells alternate concept opportunities for Walmart.
Retail should be all about filling a need space. Walmart went from rural low price low selection to suburban very good selection (but still low price) successfully. If these new concepts are filling a need/niche, great. But they should learn from Tesco—you can’t just jam a concept that works in one place into another (RIP, Fresh & Easy).
Alternative concepts will be very important to Walmart’s growth. Many more locations can accommodate smaller stores than big box hypermarkets. Cities have been resistant to provide zoning for the big box stores. Having smaller, local alternatives will allow WM to penetrate urban areas. WM realizes this and will continue to experiment with alternative formats.
Walmart’s alternative concepts have offered “Growth & Protection” for their big box formats. The strategy provides continued growth in share of wallet, while supporting real estate and employment needs and capacity of Operations and Distribution. In addition, it protects revenue, market share, and profit, as fluctuating energy costs impact consumers and their own stores.
A vital strategy, that is working. It will only get stronger, as Walmart continues to leverage its internal and external supply chain.
The “division of labor” is the driving concept behind societal efficiency: everybody produces what they produce best, and trades for everyone else’s production. Retail is the final link in this efficiency, and retailers have been at the forefront of the logistics moving goods from producers (factories, today) to consumers, (mostly shoppers, whether in-store or online.)
This subject fits in with my comments yesterday on same day delivery. In that case, the elephant in the room is the largely ignored cost of shoppers SELF delivering by making an inefficient run to the store for one or two items. A great deal of what shoppers need, they need RIGHT NOW!
Yesterday’s question was about how to deliver what they need, RIGHT NOW, today—same day delivery. Many commenters properly focused on the unreasonable COST of making same day deliveries.
This smaller format issue is about assisting shoppers to SELF-deliver by going to the store themselves, (SELF-delivery,) as well as the physical “presence” of a retailer in any given neighborhood—other than through UPS or FedEx.
It will be a LONG time before all of the major advances in this area have been made, but other than the “Amazonification” of WALMART, which proceeds apace, Walmart MUST leverage their higher than world class logistics by moving their “warehouses,” aka neighborhood stores, closer to the shoppers. This should not be seen as simply the “C-store-ification” (“7-Elevenification?” ;-)) of Walmart. Amazon is already hot on this trail. Maybe this could be the next big thing for Walmart, strategically.
Someday, someone is going to merge C-store functionality with the rest of retailing. Maybe it will be when retailers finally come to grips with the fact that ALL of their customers, HALF the time, only want want one or a few items. This is right where the shopper is, but still some distance from our merchant-warehousemen retailers.
Walmart has it right. Be global—shop local. And with Lev from X5 they are putting an experienced field player into the game. The rapid and aggressive retail changes taking place in Russia assures Walmart that they have a person that can deal with retail in many “challenging” regions.
Be Local. Shop Bodega! Have a great weekend!
The Walmart Mass Merchant concept is saturated. They have a choice to either grow that basic business with more stores and higher discounts, therefore cutting their profitability and going the way of the Woolworths and Kmarts and the other retailers in history who have not been able to change. Unlike most retailers, Walmart is not myopic in defining their business. They follow Sam’s basic business model that they are not a retailer, but a distribution system that reflects the best for their customers.
They do not care if the stores are big or small or if they sell online. Nor if they are in the U.S. or China or South Africa. They are not ego centric and they are not U.S. centric.
In teaching strategy, I compare Walmart to other retailers who were once even on the DJI-30 who basically do not exist anymore. Walmart is all about business strategy and nothing about being a “store.”
In all things retail, location and scale matters.
While there are opportunities in the international market where smaller store footprint retail operations are the norm it doesn’t change the limiting factors for a Walmart.
Finding locations in markets where small footprint stores are the norm (densely populated, urban environments) will be difficult as available real estate will be compounded by significant established competition. This competition (such as ALDI in Germany/Europe) has premium locations, established customer base, significant scale and deep pockets.
There aren’t too many niches for Walmart to green field, so look for acquisitions to fuel Walmart’s entry in this arena.
Believe it or not, a 250,000 square foot store does not work everywhere in the world. Walmart should be very successful with smaller format. It requires modified approach to supply chain. Lev Khasis has real hands-on experience with smaller formats at X5 in the Russian Federation.
Walmart was built on one concept: low prices; and this was achieved thru two things (1) wringing every conceivable cost saving from suppliers (and then some), and (2) opening huge stores that were dependent upon auto access (often driving long distances). The former is (presumably) global, the latter, not so much. I think WM’s conflict in the coming years will be choosing between more developed areas (Europe and urban areas in SE Asia and Latin America) where there is better infrastructure—but also more competition—and Third World areas, that are lacking in both. This article hints that they are aiming at the latter.
I think this will work very well. Their logistics are second to none and they are good at trying to adjust what they are doing. Internationally, they have a lot of varied formats and have shown after a couple of failures a bit more of an interest in tailoring the stores to the markets a bit better.
They definitely need to focus heavily the US, for a number of internal and external reasons….
Some things they learn from the alternative concepts may eventually translate to success here, too.
In India, Walmart has tied up with Bharti Group. Initially, they started with cash-and-carry partnership for managing back-end inventory. Now they are planning to set-up retail stores. The alternative concepts come in handy to manage local regulations, as there can be an intricate and bizarre web of various subsidiary companies to handle local business policies.
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Walmart has overwhelmed most large retail concepts in America in recent decades. So what’s left to conquer now? The smaller store markets worldwide.
In many nations there are opportunities to bring lower prices and economies of scale to smaller stores in other countries where smaller stores are indigenous. That spells alternate concept opportunities for Walmart.
Retail should be all about filling a need space. Walmart went from rural low price low selection to suburban very good selection (but still low price) successfully. If these new concepts are filling a need/niche, great. But they should learn from Tesco—you can’t just jam a concept that works in one place into another (RIP, Fresh & Easy).
Alternative concepts will be very important to Walmart’s growth. Many more locations can accommodate smaller stores than big box hypermarkets. Cities have been resistant to provide zoning for the big box stores. Having smaller, local alternatives will allow WM to penetrate urban areas. WM realizes this and will continue to experiment with alternative formats.
Walmart’s alternative concepts have offered “Growth & Protection” for their big box formats. The strategy provides continued growth in share of wallet, while supporting real estate and employment needs and capacity of Operations and Distribution. In addition, it protects revenue, market share, and profit, as fluctuating energy costs impact consumers and their own stores.
A vital strategy, that is working. It will only get stronger, as Walmart continues to leverage its internal and external supply chain.
The “division of labor” is the driving concept behind societal efficiency: everybody produces what they produce best, and trades for everyone else’s production. Retail is the final link in this efficiency, and retailers have been at the forefront of the logistics moving goods from producers (factories, today) to consumers, (mostly shoppers, whether in-store or online.)
This subject fits in with my comments yesterday on same day delivery. In that case, the elephant in the room is the largely ignored cost of shoppers SELF delivering by making an inefficient run to the store for one or two items. A great deal of what shoppers need, they need RIGHT NOW!
Yesterday’s question was about how to deliver what they need, RIGHT NOW, today—same day delivery. Many commenters properly focused on the unreasonable COST of making same day deliveries.
This smaller format issue is about assisting shoppers to SELF-deliver by going to the store themselves, (SELF-delivery,) as well as the physical “presence” of a retailer in any given neighborhood—other than through UPS or FedEx.
It will be a LONG time before all of the major advances in this area have been made, but other than the “Amazonification” of WALMART, which proceeds apace, Walmart MUST leverage their higher than world class logistics by moving their “warehouses,” aka neighborhood stores, closer to the shoppers. This should not be seen as simply the “C-store-ification” (“7-Elevenification?” ;-)) of Walmart. Amazon is already hot on this trail. Maybe this could be the next big thing for Walmart, strategically.
Someday, someone is going to merge C-store functionality with the rest of retailing. Maybe it will be when retailers finally come to grips with the fact that ALL of their customers, HALF the time, only want want one or a few items. This is right where the shopper is, but still some distance from our merchant-warehousemen retailers.
Walmart has it right. Be global—shop local. And with Lev from X5 they are putting an experienced field player into the game. The rapid and aggressive retail changes taking place in Russia assures Walmart that they have a person that can deal with retail in many “challenging” regions.
Be Local. Shop Bodega! Have a great weekend!
The Walmart Mass Merchant concept is saturated. They have a choice to either grow that basic business with more stores and higher discounts, therefore cutting their profitability and going the way of the Woolworths and Kmarts and the other retailers in history who have not been able to change. Unlike most retailers, Walmart is not myopic in defining their business. They follow Sam’s basic business model that they are not a retailer, but a distribution system that reflects the best for their customers.
They do not care if the stores are big or small or if they sell online. Nor if they are in the U.S. or China or South Africa. They are not ego centric and they are not U.S. centric.
In teaching strategy, I compare Walmart to other retailers who were once even on the DJI-30 who basically do not exist anymore. Walmart is all about business strategy and nothing about being a “store.”
In all things retail, location and scale matters.
While there are opportunities in the international market where smaller store footprint retail operations are the norm it doesn’t change the limiting factors for a Walmart.
Finding locations in markets where small footprint stores are the norm (densely populated, urban environments) will be difficult as available real estate will be compounded by significant established competition. This competition (such as ALDI in Germany/Europe) has premium locations, established customer base, significant scale and deep pockets.
There aren’t too many niches for Walmart to green field, so look for acquisitions to fuel Walmart’s entry in this arena.
Believe it or not, a 250,000 square foot store does not work everywhere in the world. Walmart should be very successful with smaller format. It requires modified approach to supply chain. Lev Khasis has real hands-on experience with smaller formats at X5 in the Russian Federation.
Walmart was built on one concept: low prices; and this was achieved thru two things (1) wringing every conceivable cost saving from suppliers (and then some), and (2) opening huge stores that were dependent upon auto access (often driving long distances). The former is (presumably) global, the latter, not so much. I think WM’s conflict in the coming years will be choosing between more developed areas (Europe and urban areas in SE Asia and Latin America) where there is better infrastructure—but also more competition—and Third World areas, that are lacking in both. This article hints that they are aiming at the latter.
I think this will work very well. Their logistics are second to none and they are good at trying to adjust what they are doing. Internationally, they have a lot of varied formats and have shown after a couple of failures a bit more of an interest in tailoring the stores to the markets a bit better.
They definitely need to focus heavily the US, for a number of internal and external reasons….
Some things they learn from the alternative concepts may eventually translate to success here, too.
In India, Walmart has tied up with Bharti Group. Initially, they started with cash-and-carry partnership for managing back-end inventory. Now they are planning to set-up retail stores. The alternative concepts come in handy to manage local regulations, as there can be an intricate and bizarre web of various subsidiary companies to handle local business policies.