International approach pays for Walmart

21 May 2012

NEW YORK: Walmart, the retail giant, is exporting its "Every Day Low Prices" (EDLP) model to a growing number of overseas markets, reflecting its strategic benefits, and the fact shoppers have similar needs.

The organisation is currently pursuing the EDLP initiative at various speeds across the globe, meaning some countries have started the "journey" before others.

"Customers around the world are similar: they want great items at great prices," Doug McMillon, president and CEO of Walmart International, told analysts. "We're serving our customers with a broad assortment, locally relevant items and lower prices."

According to McMillon, the most recent conversions to this plan have occurred in Brazil, Japan and Central America, while its units in Canada, Mexico and the UK are a stage further on.

"We've been transitioning to EDLP in more of our markets," he added. "EDLP is our business model, and when we execute it well, it serves both customers and shareholders well."

As an example, the company began implementing this approach in Brazil almost exactly a year ago, and the organic sales expansion of 14.5% in the last quarter suggested a positive shift has followed.

"The sales growth and stability that resulted from Brazil's adoption of EDLP allowed them to focus on reducing operating costs. Brazil achieved cost reductions in advertising, workforce management, and freight optimisation," McMillon said.

As part of a renewed stress on the fundamentals, Walmart is emphasising its 531 existing Brazilian outlets, to ensure it has a "solid foundation". "Right now, getting the operating model right is more of a priority than new store growth," McMillon argued.

Elsewhere, Central America yielded a 2.6% like for like sales lift in the last quarter, a figure reaching 4% in Japan, where Walmart unveiled its first new supermarket since 2008.

"[This is] a reflection of our success and confidence in our management team and that EDLP is the right strategy in Japan," said McMillon. "For the past five consecutive quarters, Walmart Japan has outperformed the market."

Canada's comparable sales also rose 3.7% in the last three months, when the UK was up 5% and Mexico grew by 5.3%. China saw a more modest 1.2% uptick, but as traffic fell 6.5% and profit rates were flat, it remains a challenge.

"In some ways, China reminds us of Brazil. We have some foundational work to do. You should expect to see us focus on the basics," said McMillon. "We'll still open new stores, but our primary focus is improving operational execution of our current stores base."

Data sourced from Walmart; additional content by Warc staff