Walmart Reworks Its Global Strategy
On Wednesday, Walmart announced that it would pay around $ 16 billion to acquire a controlling interest in Flipkart, India's largest online retailer.
"India is a priority market for us," said Chief Executive Doug McMillon on a call with Wall Street analysts. "We take action to position the company for the future."
The move comes weeks after Walmart has taken control of British supermarket chain Asda.
By retiring to a saturated grocery store in the UK and using its resources in India, Walmart pursues a more surgical approach than the "bulls in a China shop" mentality, said Paula Rosenblum, Managing Partner at Retail Systems Research.
"Walmart sees a long, protracted battle in the European marketplace," said Matt Sargent, a retail expert for consulting firm Magid. The focus on India is a "continuation of their desire to focus on the high-growth segment".
McMillon told analysts Wednesday that the company would prioritize investments that generate new sales and profits.
In the United States, this meant a shift in tactics to courting wealthier Americans shopping online and extending beyond the lower-income customers in the suburbs and rural areas. Walmart has acquired native digital brands such as Bonobos, partnered with grocery start-ups and expanded eCommerce capabilities with Jet.com.
Related: Walmart stumbles with online growth
But Walmart stands online against Amazon's home and looks for opportunities abroad.
The company took its first step outside the United States in 1
Walmart operates more than 6,300 stores in 27 countries, including Africa, Latin and Central America, Asia and Canada. About a quarter of the $ 500 billion in sales last year came from outside the United States.
But international sales have dropped 12% in the last five years. Walmart has won a new CEO for its international division earlier this year.
Successful international expansion has proved difficult for large retailers who rely on economies of scale to sell at low prices. Target, Sears and Best Buy could not crack Canada.
"SMBs are unique from state to state, and retail as a whole was not an internationally scalable business," said Scott Galloway, a professor at the NYU Stern School of Business.
Walmart tried to interfere in Germany and South Korea, but left both countries about ten years ago. Now it's weighing up in Brazil, the Wall Street Journal reported. Walmart has closed dozens of stores in Brazil in recent years.
Since acquiring Asda in the United Kingdom in 1999, Walmart has had problems defeating British competitors as industry leaders combined. More recently, Walmart faced stiff competition from German discounters Aldi and Lidl, which undercut prices and the rise of online grocers.
Related Topics: Germany's Aldi Takes Over Amazon in Food Warfare
"Food retailing has always been an intense battlefield, and nowhere is this truer than in the UK," said Neil Saunders, managing director of Research firm GlobalData Retail said in an e-mail.
The company is trying to defy the trend in India, the most recent battleground against Amazon.
"Everyone hopes India is the next China," Galloway said.
With more than 400 stores in China and a partnership with the JD.com online site, Walmart is "well-penetrated" in China.
Walmart and Amazon are fighting for online market share in India, which is four times faster than retail, according to Walmart.
According to Morgan Stanley, sales in 2026 could be worth $ 200 billion. Jeff Bezos said India has "huge potential" and Amazon has pledged $ 5 billion there.
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Amazon has built a big lead over its rival to become India's second-largest online player. It controls about 30% of the online market, Morgan Stanley estimates.
Walmart ( adjusts a joint venture strategy for India. "You are a self-grown winner," said McMillon of Flipkart. The partnership gives Walmart a strong presence overnight in the region to reach Amazon. )
In India, Walmart has the opportunity to do what they have always been good at. This brings raw materials at a reasonable price for the mass market, said Rosenblum.
-CNNMoney's Rishi Iyengar has contributed to this story.
CNNMoney (New York) First published on May 9, 2018: 9:36 pm ET