why walmart failed in russia

var addthis_pub="swelshdc"; loop: false, But before that, Alfa may want to see X5 restore its stronghold on the market after the retailer posted its first drop in quarterly underlying sales since its creation in 2006. NATALYA ZAGVOZDINA: I really am puzzled with this move to be present on the ground for many years, and during the crisis, looking at a number of acquisitions and not making one. Walmart's decision to leave Russia came just a week after X5, of which Mikhail Fridman is a significant stakeholder and owner of Pyaterochka, Perekrestok and Karusel, secured the deal. ", Strategy changes also failed to turn the company's fortunes around. rpp: 100, Khasis has a reputation as a dealmaker, growing X5 through $3 billion worth of acquisitions that strengthened its foothold in Moscow and Russia’s second city of St Petersburg, and secured it presence in other regions. The exit comes after two likely targets in Russia dropped off Wal-Mart's radar. features: { PETER VAN DYK: Natalya Zagvozdina is an analyst with Renaissance Capital Investment Bank. tweets: { But analysts have said that Wal-Mart’s extensive international footprint needs further attention to avoid failures similar to those in Germany and South Korea from where the retailer pulled out last decade. She says the global financial crisis meant some good deals were on offer, but Wal- Mart failed to take advantage. Wal-Mart closed its Moscow office of 35 people in December 2010 after top Russian food-to-everyday items retailer X5 Retail Group PJPq.L bought discount chain Kopeika - a target Wal-Mart had eyed. }).render().setUser('JohnsonRussiaLi').start(); Russia, Economy, Business, Investment, Trade. NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. The Russian retail industry is highly fragmented, with the top 10 players controlling under 20 percent of the market. All quotes delayed a minimum of 15 minutes. "The Russian market is very big, there are a lot of people here and the sector in which Walmart operates ­ discount retail ­ is severely underrepresented. There had been rumors circling that the American company was looking for a way to enter the Russian market since 2002, but the representative office only opened in April of 2008. Kopeika was finally bought in December of 2010 by Russia's largest grocery retailer X5, in a deal worth 51.5 billion rubles ($1.65 billion). Experts say that overseas interest is likely to persist in the retail sector, helped by expected economic growth rates in Russia of 3.7 percent this year and forecasts for oil prices remaining high, helping the energy-heavy country’s budget. background: '#002652', "Walmart has very specific branding and image. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^, Top Russian chains in graphics link.reuters.com/vab57s, ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^. Wal-Mart has canceled its plans to expand into the Russian market. “The company has tremendous growth potential in the markets where it already has operations, especially in South America, Africa, China, and India.”. Fearful of getting hamstrung by Russia's complicated and time-consuming bureaucracy, the world number one retailer has been outmaneuvered by its European peers - Auchan. bought discount chain Kopeika - a target Wal-Mart had eyed. timestamp: true, “The international operations have ... been less productive and less profitable than they would like them to be, and more of a drag,” said Budd Bugatch, retail analyst at Raymond James in the United States. Walmart is not the only major international retailer to pull out of Russia in recent years after failing to establish a viable business in the country. But a year later the company had changed its requirements.

For nearly six years, it looked to buy a local company that could ease potential cultural … shell: { It has missed out on the 30 percent-plus sales growth currently enjoyed by Russian retailers - now likely to slow as companies start to realise that further growth will depend on expansion into Russia’s less wealthy provinces. There are only two international hypermarket chains, Auchan and Real, that are operating in this sector, so the market is certainly not saturated". “(Entering Russia) is a matter of opportunities and not a matter of need,” he told Reuters in an email exchange. Wal-Mart’s U.S. sales rose 1.5 percent and operating income rose 2.2 percent last year, while international sales rose 15.2 percent, helped in part by acquisitions of Britain’s Netto and South Africa’s Massmart, and operating income rose 10.8 percent.

"In terms of smaller shops, Sedmoy Kontinent, Azbuka Vkusa and little stores like Kopieka, Spar and Perekrestok were well established. Wal-Mart closed its Moscow office of 35 people in December 2010 after top Russian food-to-everyday items retailer X5 Retail Group. ", For some in the industry, Walmart failed to strike while the iron was hot. "Since we have decided to enter the market through acquisition, not green-field development, and since there is no clear acquisition partner in the near term, there is not a business reason to continue our Moscow representative office," McMillon said. Copyright © 2010 NPR. But several attempts to enter Russia have been thwarted over the past decade, both greenfield and via acquisition. 4 Countries That Wal-Mart Has Failed To Impress. In regard to the acquisition versus starting from scratch debate, Maliborskaya said that in the discount sector, buying an existing chain is the safest bet. }, Wal-Mart closed its Moscow office of 35 people in December 2010 after top Russian food-to-everyday items retailer X5 Retail Group PJPq.L bought discount chain Kopeika - … However, people in Russia’s sprawling countryside or smaller towns may not be so easy to win over. Walmart closed its representative office in Moscow yesterday after failing to crack the Russian market. MOSCOW (Reuters) - Retailer Wal-Mart Stores Inc WMT.N has let caution thwart its ambitions in Russia, and will find profits harder to come by if it delays getting a foothold in the vast market catering to 140 million people.

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