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  • Walmart is one of the most dominant retailers in the world.

  • In 2017, Walmart ranks number one in revenue of all major retailers worldwide.

  • Walmart operates over 11000 locations under 55 banners across 27 countries.

  • You can find a Walmart anywhere from Botswana to the UK to Costa Rica.

  • But despite its success abroad, the brand has struggled to stay afloat in one of the biggest markets in Latin America,

  • Brazil.

  • After years of hyperinflation and the GDP growing 1.5% from 1980 to 1993 in Brazil,

  • the country's economy was on the rise. Brazil introduced economic reforms in the 1990s and according to

  • The Washington Post Brazil attempted to move the economy from a period of state-run monopolies to a free market.

  • Brands like Walmart saw this as an opportunity to expand their global reach with an emerging market on the rise.

  • By 1995, Walmart announced that they would be entering the

  • Brazilian market and by 1996, the company opened five stores.

  • By 2000, Walmart had 14 stores in Brazil but it wouldn't be long until Walmart began rapidly growing in Brazil.

  • In 2004, the company made an acquisition of Bompreco and its 118 stores for $500 million.

  • And in 2005, one more finalize a $757 million acquisition of Sonae's 140 stores across Brazil.

  • Walmart believed that these acquisitions would improve the company's position as a national retailer in Brazil;

  • operating 295 stores in 17 of Brazil's 26 states.

  • At the time, Walmart Brazil's then president stated "We're looking forward to getting to know the habits of the local

  • customers and strengthen relationships with the regional suppliers."

  • But understanding the habits of the local customers would be something that would end up hurting Walmart's expansion plans.

  • At its peak, Walmart Brazil had 558 stores across the country.

  • This included Walmart and Sam's Club, along with local banner brands such as Bompreco and Maxxi.

  • But that was in 2013. By 2018, Walmart had closed 120 of its stores in Brazil.

  • Walmart Brazil has been hemorrhaging cash and making very little movement in revenue growth.

  • The company grew too fast and it wasn't seeing much of a return on its investments.

  • According to Reuters, Walmart posted operating losses for seven straight years.

  • Partly due to trouble with labor, inefficient operation, poor store locations and uncompetitive prices.

  • CNBC reached out to Walmart but the company could not corroborate the report from Reuters

  • Through 2014 to 2018, Walmart's participation in the market share stayed flat to 2.5%.

  • While its main competitors both Carrefour and Casino, French retailers, they saw a increase in overall retailing market shares.

  • And over the 23 years it's been in Brazil, it's failed to reach the local crowd of consumers.

  • The reason?

  • Well, Walmart didn't adapt to the local consumers needs

  • and the company didn't capitalize on how Brazilian shoppers spent their money.

  • The local spender was not all that interested in Walmart's famous "Everyday Low Prices" and its one-stop-shop business model.

  • That's just not how the typical Brazilian shopper spent their money.

  • Although it works very well in the U.S. and other countries, such as Chile and Mexico, it backfired in Brazil.

  • Brazilian consumers are very attracted to promotional sales.

  • But promotions deals are only effective in Brazil if they are punctual.

  • So since prices were low every day, Brazilians didn't actually perceive value in the promotion.

  • According to McKinsey and Company, they would proactively search for savings and oftentimes they

  • wouldn't even shop at multiple stores to find the best deals available.

  • From discount chains to cash and carry format stores.

  • One type of retailer that Brazilians don't utilize is e-commerce shopping.

  • In fact in 2018, Walmart Brazil announced that would be winding down its first party e-commerce business in the country.

  • The most popular option for today's Brazilian consumers are the cash and carry format stores known as "Atacarejos."

  • It combines words like "Atacado" which means cash and carry and "Varejo" which means retailer.

  • That's because these stores are mixed between the two retail formats.

  • The atacarejos rise in Brazil is mainly tied to the economic crisis that has affected Brazil in the last couple of years.

  • So while the atacarejos and the hypermarkets are similar in model

  • so both have a large array of products they have big selling spaces and attractive prices.

  • Brazilian consumers which were already price sensitive and with now a limited purchasing power, were forced to-

  • to think strategically how they did their grocery shopping in the month.

  • From 2017 and 2018, these kinds of stores grew 11% and raked in $12.5 billion in sales. In that same time frame,

  • supermarkets and convenience stores only saw small growth of 3.7%.

  • As for Walmart, 60 of its stores were closed in 2018 alone. Walmart trails behind companies like Carrefour

  • and Casino who are leaders in the cash and carry format stores according to Kantar.

  • And Walmart has continued to struggle to find its footing in Brazil competing against these kinds of format stores.

  • In 2017, Carrefour raked in $16.5 billion and Walmart in less than half of that; making a little over $6.7 billion.

  • So what was its method for success?

  • Well, there's no membership fees like other warehouse stores which can cost anywhere from $45 to $100 a year.

  • Cash and carry stores traditionally have lower operating costs and are able to offer lower prices for products.

  • And according to Euromonitor, between 2012 and 2017, warehouse clubs in cash and carry stores in Brazil grew 99%.

  • Brands like Carrefour's Atacado, offers customers low interest credit cards that can only be used as stores under the Carrefour umbrella.

  • As of 2018, there are 2 million Atacado credit cards, which leads customers to spend 15% more on the cards.

  • Despite these missteps, Walmart pursued a footprint in Brazil.

  • The company tried to position itself to acquire a different banner stores in Brazil to widen its hold on the country.

  • One of its successful banner stores was Maxxi, which was a cash and carry format store. But since there are

  • only 44 stores in Brazil it isn't enough to keep Walmart afloat.

  • In addition to closing down stores across the country, it

  • remodeled a 120 stores as leadership fluctuated under four different CEOs in less than a decade.

  • In June of 2018, Walmart announced that they will be selling 80% of their business in Brazil to a private equity firm called Advent International.

  • They want to invest more in the atacarejo model.

  • So they want to rebrand some of the less profiting hypermarkets into the atacarejo.

  • They're going to cut costs as much as they can. Raising different suppliers. That they wouldn't seek new

  • suppliers that would raise Brazilian products into their shops.

  • In a statement about the deal, Walmart said that they will continue to have stake in Walmart Brazil and will

  • continue giving the Brazil business the best opportunity for long term growth.

  • CNBC reached out to Walmart but the company did not respond to any questions regarding its struggles in Brazil.

  • The deal with advent would allow Walmart at 20% stake in the Brazil market but the company expects to record a net loss of $4.5 billion.

  • Advent looks and turn things around for Walmart's remaining 438 stores in Brazil without opening any new stores.

  • For now.

Walmart is one of the most dominant retailers in the world.

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なぜウォルマートはブラジルで失敗したのか? (Why Did Walmart Fail In Brazil?)

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    PENG に公開 2021 年 01 月 14 日
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