Maybe it’s the cold, maybe it’s the vodka or maybe it’s Wal-Mat learning the ropes of Russian business, but more than a year later, Wal-Mart is still circling the retail market in Russia like a wolf from the steppes wary of that lamb staked in the snow.
Wal-Mart Stores Inc. is moving closer to a possible expansion into Russia with the appointment of an experienced European executive to scope out possibilities in a vast retail market worth more than $140 billion a year in food sales alone.
The world’s largest retailer, which has been weighing a Russia move for some time, on Monday named German retailing veteran Stephan Fanderl as president of Wal-Mart Emerging Markets-East to “explore retail business opportunities in Russia and neighboring markets.”
Fanderl, a German citizen, had been a board member at German retail and travel company Rewe Group, where he was responsible for its supermarkets and “hypermarkets”, large stores that combine groceries and general merchandise. Fanderl left Rewe last May.
Russia may be the ideal country or a retailer’s worst nightmare for expansion. Wal-Mart does well in countries where it can service the equivalent of America’s rural heartland. It’s track record in urbanized nations — Japan, Korea, Germany — has not been good.
Russia has huge stretches of rural land (just ask Napoleon or Hitler), but it also has a prejudice against outsiders that borders on the pathological (again, ask Napoleon or Hitler). This may be one reason Wal-Mart is moving carefully to invade the market.
At a meeting last October in Bentonville, Mike Duke, head of Wal-Mart International, said:
an increasing share of that international growth will come from developing countries. Wal-Mart’s business includes developed nations such as Britain and Canada but most of its 13 countries are developing markets, including Mexico, Central America, Brazil, Argentina, China and India.
The gnomes aren’t quite sure what to think about Wal-Mart Russia.
Fund manager Patricia Edwards said Wal-Mart needs to look at Russia to fuel overall growth as its U.S. business, still about three-quarters of sales, is no longer growing as fast.
“The number of big countries that can really move the needle of Wal-Mart sales globally is limited,” said Edwards, who helps manage $14.8 billion in assets including 544,069 Wal-Mart shares at San Francisco-based Wentworth, Hauser and Violich.
Wal-Mart’s international sales were $90.6 billion last year, or 25 percent of total sales. But international grew by 17 percent from the previous year compared to 6 percent growth at Wal-Mart U.S. stores.
Edwards said Fanderl’s appointment “signals Wal-Mart is getting more serious and really looking for places they can go.”
Makes you wonder at what point Wal-Mart begins to fund its own space program.