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With Sale Of Majority Stake In Seiyu, Walmart Nearly Exits The Japanese Market

With Sale Of Majority Stake In Seiyu, Walmart Nearly Exits The Japanese Market
After struggling for years to make profits amid stiff competition, a majority stake in Japanese supermarket chain Seiyu is to be sold to investment firm KKR and e-commerce company Rakuten in a deal worth more than $1 billion.
There were speculations over the possibility of the United States based retail giant exiting Japan and this deal pins the value of Seiyu at 172.5 billion yen ($1.65 billion). Reports claimed that this market value is much lower than the 300-500 billion yen that the company had sought to get for the unit a few years ago.
According to a joint statement by the two companies, a 65 per cent share of Seiyu will be bought by KKR while a 20 per cent stake will be bought by Rakuten – which already has an established joint venture for online retailing in Japan with the chain. A 15 per cent stake would be retained by Walmart.
In 2002, Walmart, the largest retailer of the world, had purchased a 6 per cent stake in Seiyu and thereby entered the Japanese market. Walmart acquired the company completely in 2008 after gradually building up stake.
But just like other foreign retailers such as Tesco PLC and Carrefour SA, Walmart too has struggled in Japan as the companies were attracted by the high spending power of Japanese consumers but found the market to be very competitive.
Considering that Walmart had been able to save money-losing Seiyu from bankruptcy by cutting costs and improving private brand sales, therefore, according to analysts, Walmart had comparatively well in the Japanese market compared to the performance of the other foreign retailers.
“Walmart was always going to struggle, because they had to turn around the business and also they needed to grow volume to really have a viable share in the Japanese market and the only way to do that was through more acquisitions, which it wasn’t willing to spend money on,” said Roy Larke who specializes in Japan’s retail industry at JapaneseConsuming.
Walmart had previously exited the markets of Britain and Argentina where it struggled to compete with the more nimble local retailers and this Seiyu deal is the latest by the company in its efforts to pull out of underperforming businesses.
In 2006, Walmart had also exited South Korea while shifting its focus on China as it started to expand its members-only warehouse chain Sam’s Club in the face of intensifying competition from online marketplaces such as Alibaba there.
In India however, Walmart is expanding after it acquired the Indian ecommerce provider Flipkart for a record deal of $16 billion.
It was two years ago that speculation of the selloff of Seiyu by Walmart had started in the Japanese media in a deal worth between 300 billion to 500 billion yen. About 330 supermarkets is owned and operated by Seiyu.
Dispelling the speculations, last year Walmart had announced that it was targeting to list Seiyu while also retaining a majority stake in the business.

Christopher J. Mitchell

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