Walmart in South Korea

Walmart in South Korea

In May 2006, Wal-Mart decided to leave South Korea by selling its 16 stores to a major local discount chain, Shinsegae Co., at $882 million. Wal-Mart’s stores in Korea lost approximately $10 million in 2005 on sales of $720 million. Wal-Mart’s failure in the South Korean market was due to many reasons but the main issue was the ability to adapt to a new culture which Wal-Mart failed to do on many different levels. Although its’ strategy of low costs is a great competitive advantage in numerous markets, its’ ability to perceive a new foreign market was blurred and therefore Wal-Mart was not able to recognize the different expectations and market conditions that South Korea encompassed.
Wal-Mart’s strategy fits well in North America where consumers are willing to compromise service and quality for low price however it had critical shortfalls in enabling Korean consumers to see the value in this approach to shopping because of the different tastes and preferences in their culture. Compared to Americans, who would rather make fewer frequent trips to supermarkets and purchase bulk sized products for longer storage, Koreans consider the freshness of food products very seriously and are willing to make frequent trips to the markets and buy in small volumes. Korean’s hypermarkets have live seafood, local delicacies, and on site packaging services that have the same features as outdoor markets and their merchandise mix is heavily focused on food and beverages. They have mastered their localization strategy which fits well with their consumers’ tastes.   Wal-mart’s merchandising mix differs which has uniform merchandising and distribution strategies that limit differentiation which hinders its adaptation to local preferences. Koreans’ shopping behaviors did not match with Wal-Mart’s retail format which was set up to serve infrequent bulk shopping whereas Korean’s went to their substitutes such as E-Mart which offered discounted pricing in smaller quantities, fresh produce...

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