CONSUMER BEHAVIOR

YOU CAN’T PLEASE ALL THE PEOPLE ALL THE TIME

WAL-MART’S ADVENTURES IN JAPAN

SUBMITTED TO: SUBMITTED BY:

PROF. RAY TITUS GROUP - 8

RAJESH PIRGAL

RAZAT RATHORE

SAGARNIL MAZUMDER

SANJANA KUMARI J

SAURABH ARORA

SIMRAN PAL SINGH

SINAJ P T

SNEHA A HURALIKOPPI

SEC – Marketing ‘A’

Market analysis
SWOT

Strengths

 It is the largest retailer in the world.

 One of the strongest brands in the world.
 It has been successful in almost all the countries that it has entered.
 It has achieved economies of scale by adopting latest technology.
 Strong recognition of their in-house brand (Sam’s American Choice)
 Continuous innovation to stick to their motto of “everyday low prices”
(EDLP)
 Strong distribution network.

Weakness

 Failed to understand the Japanese consumer.

 It did not alter the prices in accordance to the Japanese market.
 As soon as it entered Japan the stared making changes in the way Seiyu
did business.
 Failed to understand and adapt itself to the Japanese culture.

Opportunities

 The recent recession has paved way for the acceptance of the EDLP
strategy used by Wal-Mart.
 To understand the Japanese culture and to alter itself to the needs of
the consumer.

Threats
  Strong competitors such as Daiei, Ito Yokado, Jusco, Lawson, Seven
Eleven.
 There can be a backlash from consumers if the Japanese Culture is
ignored repeatedly or not adapted to.
 Competitors like Seven and I and AEON stared developing their own in-
house brands.

Challenges faced by Wal-Mart in Japan.

Public perception of Wal-Mart

Japanese corporate culture was very different from that of America. In US, the
objective of the companies came to be seen as generating profits for the
shareholders, whereas Japanese companies tended to be viewed as job-
creating machines.

One of the first major actions Seiyu management was spurred to by Wal-Mart
advisors was a plan of cutting costs by cutting headcount. While reducing
personnel costs is a classic way for US firms to cut costs even in good times,
“risutora” is a taboo here in Japan. Surprisingly for Wal-Mart, and perhaps
realizing the worst fears of Japanese executives, the jobs cuts did not go
unnoticed. Workers who were forced out began to appear in the media
complaining about how Seiyu had lost its way.

The Japanese media is typically more emotional than its American

counterparts, and disgruntled employees found they had ample opportunities
to air grievances. This not only created a less cooperative workforce but also
hurt the company’s image. With a struggling supermarket chain and a new
foreign owner, public perception is important. If the public is not supportive
of your business methods, they may also not be supportive of your stores.

Japanese Consumer
After cutting down of jobs, Wal-Mart committed another blunder by not
understanding the Japanese housewives. One of the reasons for the
spectacular success of Wal-Mart in the American suburbs was the car society
and the shopping habits. Suburban Americans drive their car to the nearest
mall and stock up goods and groceries for a week. In Japan the shopping habits
largely differ. Shopping in Japan is spread throughout the week and is generally
done on bicycle or foot. Also, Japanese housewives usually compare prices
before they go out in the local newspaper inserts called chirashi. In 2004, Wal-
Mart cut out the chirashi. When Japanese housewives were unable to compare
the prices they got confused and simply went elsewhere. This shows that Wal-
Mart completely failed to understand the way Japan shops.

Famous Wal-Mart strategies that failed to work in Japan

EDLP

Japan has often being called a mass luxury market. Louis Vuitton sells one-third
of its bags in Japan. Seiyu remains far from offering the storewide, permanent
discounts that have made Wal-Mart so dominant in the U.S. Seiyu says full
implementation of Wal-Mart's Every Day Low Prices -- which everyone at the
company refers to as "EDLP" -- is at least two years away because the company
hasn't yet been able to cut costs enough to allow it to offer the deep discounts
necessary to keep customers coming back. One big problem is that Japanese
customers don't seem as motivated by rock-bottom prices as Americans. U.S.
shoppers generally believe Wal-Mart sells the same products as other stores
but for 15% to 20% less. In Japan, shoppers associate low prices with low
quality and are suspicious when a retailer offers jeans for $10.

Problems recreating the logistics miracle

Japan’s distribution landscape is complicated and the distribution system is

also very complex. There are many layers in the traditional Japanese supply-
chain which makes it difficult to secure special deals for merchandise in Japan.
Also, food in Japan changes with season and shopping habits vary accordingly.
Efficiency in logistics has been one of the assets of Wal-Mart. Due to reasons
like demand for seasonal and regional products and complex supply chain,
Wal-Mart has been unable to duplicate that efficiency in Japan.

Comparison of two discount stores – IKEA and Wal-Mart

Why one flourished and the other failed??
Ikea and Wal-Mart have many similarities.
 Both recently entered the Japanese market.
 Both concentrate on selling low-priced goods.
 Both take as many opportunities to cut costs as possible.
 Both were told that their business formats would not work in Japan.
Yet one flourished and another failed. Ikea flourished because it was
successful in maintaining is image as cool and fashionable even though the
goods were low priced. Japanese consumers did not mind cheap products as
long as the image associated with it was hip and fashionable. Ikea understood
that and played with its Swedish roots to gain that advantage. On the other
hand, Wal-Mart came to be perceived as an American hypermarket selling
cheap Japanese products. The strategy of selling cheap Japanese products did
not appeal to the Japanese consumer.

Present strategies of Wal-Mart

Wal-Mart has been in full control of Seiyu for a relatively short period of time.
Wal-Mart is also looking for ways to cut costs that don’t involve cutting jobs.
The advanced global procurement systems SMART and Retail Link that Wal-
Mart uses to track inventory, scour the globe for the cheapest wholesalers of
goods, and place orders automatically, continue to be phased in. These
systems have served Wal-Mart well in the past, and could radically change the
way Seiyu does business.
Furthermore, from 2008 Wal-Mart has announced that goods will now be
centrally purchased at the home office in Tokyo. Japanese retailers typically do
not negotiate with wholesalers for purchases as a firm, but allow each unit to
buy separately. This should give Wal-Mart more control over each store as well
as more leverage with wholesalers. Ordering goods in this way could have
Seiyu start seeing the same kind of purchasing might that Wal-Mart enjoys in
the US, with comparable benefits.
Wal-Mart continues to rebuild and remodel Seiyu stores, hoping to make them
more attractive to Japanese consumers.
Seiyu is putting more and more Wal-Mart goods on their shelves in the hope of
attracting price conscious consumers.
Wal-Mart has finally embraced the paper leaflets. Showing their continued
desire to be the lowest priced retailer and to make sure that Everyday Low
Prices survive in Japan, Seiyu has announced that they will now honor the
“chirashi” of their competitors as well - a marketing coup designed to make
sure that when customers think of low prices, they think of Seiyu.

Wal-Mart Today…
This recession has done something that earlier declines could not: turned the
Japanese into Wal-Mart shoppers. In seven years operating in Japan, Wal-Mart
Stores has never turned a profit. But sales have risen every month since
November, and this year, the retailer expects to make a profit.
Edward J. Kolodzieski is the man in charge of turning Seiyu around. As CEO of
Walmart Japan, Kolodzieski has slashed expenses, closed 20 stores, and cut
29% of corporate staff. In-store butchers were removed, with most meat now
processed in a central facility. With the freed-up floor space, Seiyu bulked up
meals-to-go offerings. To bypass the middlemen, Seiyu has also boosted the
number of products it imports directly from manufacturers by 25% over the
past year, and is also focusing on increasing sales of its own private-label
brands.
The biggest change, however, is a shift away from weekly specials to "everyday
low prices" in areas like baby care and pet products, and, eventually,
throughout the store. Seiyu now uses its marketing dollars to compare prices
against competitors.
One positive sign is that Seiyu has been posting positive comparable store sales
since 2009. Still, profit margins declined in the same period, proving that
progress is slow.