Walmart Sheds Grow-Everywhere Plan in Refining Global Strategy

• April 29 2018
• Michael Sasso, Sarah Ponczek

Walmart Inc.’s plan to shed control of its U.K. grocery chain, Asda, reflects a global strategy to emphasize faster-growing markets over some of its more mature ones.

Walmart Inc.’s plan to shed control of its U.K. grocery chain, Asda, reflects a global strategy to emphasize faster-growing markets over some of its more mature ones.

The world’s largest retailer is expected to announce Monday that Asda will combine with British retailer J Sainsbury Plc, mixing the U.K.’s second-biggest supermarket chain with No. 3 Asda, Bloomberg News reported Saturday. Walmart will retain a stake in the combined company, according to people familiar with the deal who asked not to be identified discussing the plans.

Walmart is pursuing faster-growth markets overseas, including China and India, while battling e-commerce giant Amazon.com Inc. in its core domestic market. It’s close to completing a deal for a majority stake in India’s biggest online retailer, Flipkart Online Services Pvt, Bloomberg reported last week.

“They’ve consistently exited underperforming markets or markets where they just haven’t been able to really get their offering deeply embedded with the customer base,” said Jennifer Bartashus, senior consumer analyst for Bloomberg Intelligence. Moving ahead, “it’s going to be much more of a contained strategy in areas where there’s a substantial amount of income and population growth that will become a key customer base.”

Walmart probably will expand in countries where it already has a presence and international partners for now, rather than targeting entirely new markets, she said. The company may shed its investment in its struggling Brazilian unit, she said.

U.K. Competition

Walmart bought Asda for 6.7 billion pounds in 1999, during a time of aggressive expansion for the retail giant. Asda was seen as appealing to price-conscious consumers, where Sainsbury targeted a higher-end demographic, and both trailed industry leader Tesco Plc. However, the entrance of two low-price players into the U.K. scene -- Lidl and Aldi -- ate into Asda’s market share.

Walmart can now apply what it learned from Asda, especially online retailing, to other markets including its U.S. operation, Bartashus said.

“They’ve extracted a lot of knowledge out of that, and this may be an instance where at this point they may be deciding to focus on higher-growth international markets given the competitive landscape in the U.K.,” she said.

In recent years, Walmart has pulled away from international markets ranging from Germany to South Korea, while growing rapidly in China by partnering with that country’s second-leading online mall operator, JD.com Inc., and expanding its Sam’s Club stores. The next few months could see a flurry of activity as Walmart narrows its focus further.