Why did Walmart Fail in Japan?

Written by Eashan Trehan

American retail giant Walmart recently announced the sale of a majority of its stake in Japanese supermarket subsidiary Seiyu to American private equity behemoth KKR and Japan’s largest e-commerce firm Rakuten. After spending almost two decades trying to conquer the Japanese grocery industry, Walmart managed a market share of just over 10%, paltry compared to industry leader Aeon’s market share of more than 40%. But why did Walmart fail so miserably? The answer - poor localisation.

Walmart’s failure is simply another example of an international expansion, without adapting to local consumer preferences and market dynamics. When a company achieves raving success in its home market, it often attempts to replicate its model in a new geography, assuming its way of doing things is the best for everyone everywhere. This “one size fits all” mentality is what becomes an Achilles Heel for companies that mindlessly charge into a new country, without a proper understanding and respect for the domestic market.

Taking a closer look at Walmart’s failure to localise, let’s examine the retail giant’s missteps. First, Walmart’s promise of “Everyday low prices” has been a big hit in America, however in Japan, consumers relish the experience of treasure hunting for the best deals in town. Unlike Walmart, other supermarkets cater to this instinct of the Japanese consumer by actively handing out fliers and coupons, to give them the feeling of bargain hunting that they so crave. Another stumbling block that Walmart faced was that unlike in America, making weekly trips to purchase goods in bulk is not the norm in Japan, where people follow a stricter routine of buying necessities when the need arises. This stark lack of understanding the Japanese consumer’s preferences and purchasing habits is what cost Walmart in Japan, and has also cost them in other international markets such as Brazil as well. It will be interesting to see how Rakuten and KKR, who take control of Seiyu from Walmart, plan to revitalise the Japanese grocery retailer.

DISCLAIMER: The contents of this website are solely owned by the author of each article and does not represent the views of the Awareness Committee or the Editorial team.