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Monday
Sep012008

Carrefour's Emerging Markets Retail Battle

Carrefour has announced a major investment plan in Krasnodar, Russia. The company expects to be functional in Southern Russia by the end of 2008. Furthermore, it plans to have 5 additional hypermarkets in 2009. The company realizes the importance of “growth markets” given that its international composition of sales grew 3% yoy to 28% of all sales.

Meanwhile, Wal-Mart is left in the dust in its emerging markets expansion plan. Media reports last year discussed Wal-Mart's search for a Russian partner, which likely included Lenta and X5. One potential cause for the delay in entry has been the process in dealing with government regulations which require partnerships. It may not help that diplomatic relations are strained following the conflict between Georgia and Russia, and the US' perceived role therein. While Wal-Mart's troubles in regards to its Russia market entry remain relatively unchanged from a year ago, Wal-Mart is being left behind.

The retail giant serves 49 million customers per week in 3210 units outside of the US. It grew its 2008 year end international revenue by 17.5% yoy. Yet with growth exploding in non-BRIC emerging markets and Wal-Mart operating in only a handful of the BRIC countries (excluding Russia of course), it begs the question about whether it is overlooking market opportunities elsewhere. Granted, its ventures into some European countries have not been as successful. But Wal-Mart is not capitalizing on market opportunities in the markets that are less conventional and lesser known. As mentioned in this topic's last post, Wal-Mart has been very late to expand into the Middle East where it could likely expect high growth rates and cut costs for millions of consumers struggling with double-digit inflation. In addition, the region is relatively unshaken by the turmoil in North America, Asia and Europe. Despite potential political risks existing in the region, such risk has not dissuaded many other American retailing companies from locating to the region.

Conversely, Carrefour has expanded in the past two decades to China, Indonesia, Japan, Jordan, Kuqait, Malaysia, Oman, Pakistan, Qatar, Saudi Arabia, Singapore, Taiwan, Thailand and the United Arab Emirates (UAE), Algeria, Egypt and Tunisia. The store is very popular among consumers in these countries, and one should not underestimate First Mover Advantage in being the first of its kind to expand to these markets.

Sources:

"International Fact Sheet." Wal-Mart. March 2008.
http://walmartstores.com/FactsNews/NewsRoom/8601.aspx
http://www.carrefour.com

SIS International Market Research.  Copyright (C) 2008.  All Rights Reserved.

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