They are already testing a radical new concept downsizing stores, literally, by dramatically shrinking the square footage of new tortes. 2. The Consumer Trends That Are Slowly Killing Walter in USA Shopping behavior has changed. And even though the recession forced many Americans to “trade down” to cheaper items like the ones Walter is famous for, consumers sought out new ways to do so. In many cases they traded even further down and headed right for the Dollar Generals (G) of the world.
The change, of course, is that traffic has shifted from physical stores to online stores. In fact, a startling 50% of Walter’s customers now shop on Amazon. Com (AMAZON), versus Just 25% five years ago. Amazon’s low rises (thanks to its low overhead expenses and no sales tax in most states) and unbeatable selection (thanks to the acquisition of companies like Diapers. Com and Capos), combined with the convenience of online shopping, have attracted a growing fan base of customers stealing more and more customers away from Walter.
That’s because Amazon’s reach will only continue to expand as it builds out its Kindle platform. The ease of purchasing with Just one click from virtually whatever device you choose (your computer, phone, Kindle, or even Apple’s pad) will continue to attract a growing number of consumers again, spelling bad news for Walter. . Walter is losing market share in Brazil : World’s biggest retailer’s Mexican division bribed government officials to secure building permits in the country.
Confronted with evidence of widespread corruption in Mexico, top Wall-Mart executives focused more on damage control than on rooting out wrongdoing. Under fire from labor critics, worried about press leaks and facing a sagging stock price, Wall-Mart’s leaders recognized that the allegations could have devastating consequences, documents and interviews show. Wall-Mart De Mexico was the company’s brightest success story, pitched to investors as a model for future Roth. (Today, one in five Wall-Mart stores is in Mexico. ). Problems in China : In China, however, the company’s problems are much deeper. Even after 18 years of operation, Wall-Mart’s Chinese business has grown to Just 405 stores. The retailer has had problems in understanding discerning Chinese consumers as their buying decisions aren’t always price driven. They are more inclined towards tailor-made products and a shopping environment that reflects the local touch. While Wall-Mart’s strategies to adapt to local tastes haven’t been fruitful, local retail chain Sun-Art retail roof has been extremely successful.
Its imitation of Wall-Mart’s business model and better understanding of consumer behavior have helped it win Wall-Mart’s customers. 5. Economic slowdown in Mexico :- Although Mexico retail sales have grown steadily for the past few years, they remained weak in 2013 due to low consumer confidence and an overall slowdown in the economy. Mexico economy expanded by Just 1 . 1% in 2013, on account of lower government spending, weak demand for exports and sluggish consumption. This marked the region’s slowest economic growth rate in the last four years.
Also, nonuser confidence index declined to 89. 7% in December 2013, reaching its lowest level in the last two-and-a-half years. The index fell further to 84. 5% in January due to increased taxes that prevented consumers from spending freely. 6. Issues in India The Indian government required retailers to source 30 percent from small suppliers which was difficult for Walter to comply with. Another problem was the continuing US investigation of fraud in Mexico, Brazil, China and India.
In Indian, the government investigated whether a loan made by Walter to Birth broke foreign investment rules. Birth and Walter have parted their ways and each management wished the other well, the national differences and the challenges of working together broke up this partnership. Walter entered into the partnership with Birth in hopes of achieving a liberalizing of the Indian market. This hope was not fulfilled and as a result the relationship with Birth was no longer desirable.
While Walter’s growth has exceeded anyone’s dreams, its shifting strategies in India, Japan and Germany highlight the difficulties of operating a worldwide company. Its amazing international expansion often has the unfortunate flavor of inexperience. Dealing with foreign authorities requires finesse and charm, and even so sometimes still doesn’t pan out as hoped. The dominance of Walter in the United States is unrivaled; but the retailer still has to prove itself country by country, city by city. Even for global behemoths like Walter, retailing is still a truly local business.
Future Outlook (Business Expansion Plans) 1 . Home Delivery Service Could Deliver New Growth to Walter Walter’s (WANT) latest move to extend its vast logistical reach directly to customers homes could bring new growth opportunities to the world’s largest retailer. It is launching an online grocery delivery service “Walter To Go” that allows customers to purchase food, health-and-beauty products, medicine and other basic household goods online and have them delivered to their doors for fees starting at $5. However, a minimum order of $49 is required.
Walter competes with other major retailers like Target (TXT), Cost (COST), Amazon (AMAZON) and Best Buy (BY). Walter is testing the home grocery delivery service in San Jose, Cilia. They believe with increasing modernization and Internet penetration, it is likely that customers will be more aware about prices, ND at the same time, display a shifting preference toward spending less time running errands. There are a large number of customers who dislike spending weekends on grocery shopping. The home delivery alternative could tap pent-up demand among such customers.
According to survey results from Bozo & Co. And the Grocery Manufacturers Association, about 62% of shoppers research online deals before heading out to shop at least 50% of the time. 2. Opening smaller stores – Walter Express The first 10 Walter Express test stores opened last year, and more test stores will open later this year. One-tenth the size of the typical Walter discount store, these Express stores are a combination of food, pharmacy, and convenience stores targeting customers more inclined to visit a smaller bargain store like Dollar General (G), Family Dollar (FOOD), or Dollar Tree (DOLT).
These Express stores are cheaper to build, less expensive to run on an absolute basis, and make it easier for customers to quickly find the items they’re looking for. And they’re profitable. Yet despite this being a viable way to reinvigorate domestic growth, Walter’s leadership team is hesitant to fully embrace the new concept. Walter Express stores will carry everything consumers might need at the spur of the moment, from milk and eggs to DVD’s. All locations will have a pharmacy while some will also sell gasoline.
All stores offer check-cashing services and accept food stamps. Walter plans to open about 1 5 to 20 Walter Express locations this year, in rural municipalities in northwest Arkansas and North Carolina and also in urban markets in Chicago. According to a report by the Associated Press, the Walter Express design is sized to fit into cities where space is at a premium, as well as in rural areas that can’t support superstore. The first one was opened in rural Gentry, Ark.
Walter is also experimenting with a prototype for urban markets in Chicago which is expected to open this summer. 3. Walter has lots of room to rise on International Growth Walter’s (WANT) international operations segment continues to be the key growth driver for the company as its U. S. Division has posted declining comparable-store sales for the eighth consecutive quarter. With the company recording sluggish results in developed markets, the developing world has become the growth driver for Walter. This segment consists of retail operations in 14 countries generating 26. % of net sales in 2011. Walter’s international segment has witnessed a substantial increase in its store count from 2,733 in 2007 to 4,557 in 2011 an addition of roughly 360 stores a year Geographically diversified operations also ensure a stable revenue stream for the company, as they tend to provide diversification benefits in terms of inflation or rising commodity costs in a particular region. The growing middle class in emerging economies such as India and China could provide substantial growth opportunities.
Walter could employ its well-known cost saving and technologically tested logistics systems in these nations. 4. International Acquisition Walter has begun a series of acquisitions in order to build its presence in many countries. It recently entered into a minority stake of Hadrian, a popular online retailer in China. The acquisition is aimed at further strengthening its presence in the region. In the African subcontinent, Walter acquired a 51% stake in Master, a leading African retailer that runs nine wholesale and retail chains with approximately 288 stores in 14 countries in Africa.
