Retail giants adopt more global outlook

06 January 2010

NEW YORK: Wal-Mart, Tesco and Carrefour are all adopting a more global outlook as they seek to drive growth during the downturn.

Sir Martin Sorrell, ceo of WPP Group, has argued the world's biggest retailers reacted fastest to the recession, and will be able to use their "immense buying power" as "leverage" in the future.

According to a new report released by Deloitte and Stores Media, Wal-Mart remains the most influential player in this sector, and it is now looking to utilise its size and scale in a number of ways.

It has announced plans to cut costs relating to its supply chain by combining store purchases across countries, rather than establishing unique arrangements in the 15 nations in which it operates.

The Arkansas-based firm spends an estimated $100 billion (€69.3bn; £62.3bn) a year on goods for its own brand offerings, such as its Great Value range, at present.

Going forward, it hopes to increase the number of such products bought directly from manufacturers, rather than third parties, from 20% to 80%.

Eduardo Castro-Wright, head of its US arm, said this approach could prove to be "a major source of leverage for the company in years to come".

Further initiatives have included targeting India and China, but the organisation's withdrawal from Germany in 2006 demonstrated the dangers that such ambitions can pose.

Carrefour, the French hypermarket giant, was in second place in the Deloitte–Stores Media study, and was a forerunner of the globalisation trend.

It increased the number of other countries in which it operated from ten in 1995 to 30 five years later, although it has previously had to abandon attempts to break into the US, UK and Russia.

Lars Olofsson, the company's ceo, has warned that considerable challenges remain, as "the only part of the world where they are still dancing the samba is Latin America. The economies there continue to grow quite well."

Metro, the German chain, overtook Tesco, its British counterpart, to take third place in terms of overall revenues in the Store–Deloitte rankings, but this was largely as a result of favourable exchange rates.

Tesco, however, is the second biggest retailer by market value, and currently generates around 90% of its profits in the areas where it is either the top- or second-ranked player.

It has adopted a flexible strategy to date, such as by exchanging some outlets in Taiwan, where its presence was small, for assets owned by Carrefour in Central Europe in 2005.

More recently, it has attempted to expand to the US via its Fresh & Easy format, and it is rumoured to be considering introducing a loyalty scheme, similar to its Clubcard programme in the UK, in America.

However, Tim Mason, chief executive of Fresh & Easy, has suggested that the recession worked against the company, meaning it has not made the impact it originally hoped for.

"We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake," he said.

Despite the risks, the this type of venture can offer substantial rewards, as shown by figures from OC&C, th

Data sourced from Times Online/NRF; additional content by Warc staff