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Catching up on late night business stories…Wal-Mart and Seiyu

August 15, 2007
By Ken Worsley


Wal-Mart, which has invested over $1 billion in taking a 53.6% stake in supermarket chain Seiyu, announced that it expects to post its sixth consecutive annual loss in 2007, to the tune of about 5.9 billion yen, or about $50 million. Despite that, Wal-Mart holds that it is not considering pulling out of the Japanese market.

Wal-Mart pulled out of South Korea and Germany last year. Seiyu accounts for 10% of the firm’s international receipts.

Free advice to Wal-Mart: Get out now. Seiyu is a money pit. Here’s why:

1) Being in Seiyu is like being in the late 1970s or maybe up until the mid 1980s. The stores are dirty, cramped and generally useless. Renovating them is a waste of money, because being in them will still be a waste of time. It only serves to enrich the owners of construction firms (Ahem). Not to mention, Seiyu has one of the worst seafood sections in Japan. That should tell you something.

2) Supermarket sales in Japan? How are they going for you? On a year-on-year basis, supermarket sales in Japan have been down 18 consecutive months, and 39 of the past 40. The population is shrinking. Taxes have been increased (tax breaks have been rolled back). The consumption tax will most likely be hiked soon.

3) Seiyu’s brand image is not so good. It’s not going to improve. Rather than simply renovating the stores and hoping that helps the brand image, why not try actually adding value for the customers by carrying a different range of goods (at pretty much the same price) as every other supermarket chain in the country? What does Wal-Mart think is unique about Seiyu?

4) Seiyu customers are not as attractive as Tokyu Store customers. This is true. When I go into a supermarket and see people devolving, I think to myself, “They must eat shitty food.” Then I never go back there. I’d rather be surrounded by attractive fellow customers. Think about it.

The view’s so clear from the outside, isn’t it? If Wal-Mart can turn this around, I’d say it would approach a miracle, but I don’t believe in miracles. Then again, if I had sunk $1 billion dollars into Seiyu, I suppose I’d have no choice.

Filed Under Econ Light, Retail, Supermarkets 

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Comments

4 Responses to “Catching up on late night business stories…Wal-Mart and Seiyu”

  1. Wal-Mart to boost its holdings in Seiyu to 95% - Why we still think it’s a bad idea : Japan Economy News & Blog on December 6th, 2007 12:01 am

    […] written before on why we think Wal-Mart’s tie-up with supermarket brand Seiyu is a bad idea and will continue to lose money unless something about the Seiyu brand is drastically changed. […]

  2. madmilker on May 12th, 2008 4:24 am

    the nice person of Japan are asking…..Who took the “hyphen from the Wal-Mart name and replaced it with a big single “star”?
    quote***In China, as elsewhere, we follow the Wal-Mart tradition of building our business one store and one customer at a time. We strive to provide our customers with friendly service and a wide selection of quality products at Every Day Low Prices. With each Wal-Mart store we bring advanced retail know-how to the local market. By fostering a healthy, competitive environment, we hope to constantly improve our business operations and customer service in order to contribute to the prosperity of the local economy.

    Wal-Mart firmly believes in local procurement. We recognize that by purchasing quality products, we can generate more job opportunities, support local manufacturing and boost economic development. Over 95% of the merchandise in our stores in China is sourced locally. We have established partnerships with nearly 20,000 suppliers in China. At Wal-Mart, we always work with our suppliers to grow together. In August 2007, Wal-Mart once again secured the top spot of the 2007 Supplier Satisfaction Survey conducted by Business Information of Shanghai. Additionally, Wal-Mart directly exports about US$9 billion from China every year. The export volume by third party suppliers is also estimated to be over US$9 billion.***end quote!

    Maybe having been booted out of Germany and South Korea the nice people in those country’s may know the answer.

  3. Ken Worsley on May 12th, 2008 9:58 am

    Madmilker,

    Do you have a source for those quotes?

  4. madmilker on March 31st, 2009 9:46 am

    Ken……it came off Wal*Mart China web page….word for word….

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