Walmart & International Marketing Strategy: What NOT to Do
If one were to nominate a poster child for international marketing failures, one would be hard-pressed to identify a candidate more ideal than Walmart. In so many cases over the past several decades, Walmart consistently made the wrong choices when making an entrance into a new market. Walmart’s journeys abroad, whether to China, Germany, Brazil or elsewhere, seem to be met with stumbles at every step — though in many cases, the company has learned and adapted over time.
That the company still maintains a presence in many of these locations serves as testament to its ability to learn from its mistakes and adjust its behavior accordingly. By considering Walmart’s initial missteps along with its subsequent corrective actions, we can extract key lessons that you can apply to ensure you begin your international marketing journey on the right foot.
As Walmart has hopefully realized by now, it’s always best to prepare as much in advance so as to ensure positive results from a first attempt. Otherwise, you’ll waste money, resources and time trying while you’re scrambling to make up for lost ground.
Everyone Loves What Americans Love, Don’t They?
“Everyday Low Prices.” These magical words are the secret to Walmart’s success in its home country of the US. Its value proposition to American customers is a simple yet reliable three-part formula:
- All the items you could ever want…
- …gathered together in one massive store…
- …where they’re available at prices cheaper than anywhere else.
Time and time again as Walmart expanded outside its comfort zone, it did so while making the hubristic error of assuming this “proven” strategy would work equally well in all countries. The bad news, as the retail giant has begrudgingly been forced to admit, is that this simply isn’t true. Walmart’s adventures in China serve as a striking example of its lack of foresight.
In China, shoppers have plenty of reasons to be wary when prices seem too low, especially when it comes to food. A torrent of food safety scandals in recent years has led many to interpret low prices as indicative of potential quality shortcuts. Some Walmart branches faced shutdowns at the hands of government regulators after they discovered the retailer had been misrepresenting its pork as organic.
Wealthier shoppers reportedly disliked the stores’ plain interiors and cost-conscious messaging, which advertised discounts and savings at every turn, as the experience felt too pedestrian for their tastes. As a result, Walmart’s bargain-based branding, especially with food, failed to catch on amongst local consumers.
Key takeaway: You can’t copy-paste your formula onto every new market you enter.
Successes at home often won’t translate automatically into triumphs abroad. In porting its tried-and-true American formula to the radically different Chinese shopping environment, Walmart committed the cardinal international marketing sin of assuming all customers want the same things. When entering a new market, you cannot rely on former glories to inform your future plans of action. You can’t force people to bond with your brand if it isn’t something that speaks to them on a foundational level. Instead, reimagine yourself in the context of your new market each time you expand.
To Misquote Darth Vader, “I Find Your Unflagging Cheer Disturbing”.
“Hi, how are you today?”
There are many stereotypes about Americans the world over, many of them less than flattering. Amongst these, there’s one that stands out due to its oddly cheerful nature — people from other countries think Americans smile a lot. It’s an American cultural hallmark that’s near-invisible to someone who’s grown up within the culture and has never had the chance to see it from the outside. Leave the country’s borders, and you might be surprised to learn that the rest of the world is a far less smiley place.
This is not to say that people from other cultures are any less happy on a day-to-day basis. It’s that in many places, feelings and emotions are expressed differently. If you aren’t having the time of your life, many people reason, there’s no reason to pretend as though you are. Greeting someone with a straight face isn’t rude, it’s just honest.
In addition to its price-related guiding philosophy, Walmart also prides itself on creating what it sees as a warm and welcoming shopping experience for its customers. Each store has a dedicated employee at the entrance whose job it is to simply say hello. As part of its team-building strategy, Walmart required all employees to take part in a management-led cheering exercise at the start of every day.
Source: Hot Hardware
While this is all well and good for smile-crazed America, it wasn’t perceived in exactly the same way when Walmart ported its cheer-laden personality over to Germany. You’ve got Americans at one extreme of the smile spectrum, but many people find Germans to occupy the other end. Culture clashes were bound to arise, and arise they did.
Cashiers in German Walmart stores smiled as they were instructed to by corporate, but shoppers found the effect off-putting, with many reporting that it felt inappropriately flirtatious. Germans also took issue with the demeaning and schlocky Walmart cheering routine.
Why did that happen?
When entering the German market, Walmart did not take into account a very important, culture-defining aspect called uncertainty avoidance index.
Cultures with high UAI, such as Germany, are usually bound by societal conventions and only express emotions when necessary. It’s not Germans don’t smile, they just do it when they feel happy or pleased.
Americans, on the other hand, are a good example of a nation with low UAI. These cultures don’t hesitate to express any kind of emotions without really feeling the particular way. Does that sound suspicious to you? Just try to observe German and American groups of people taking group photos; the difference is obvious.
Key takeaway: Not everyone wants to see your smiling face.
Be aware that your business model may be a product of the culture in which it was born. Certain aspects of your strategy, especially those that are directly tied to cultural norms and expectations, may flop when exported abroad.
Here’s where a local consultant can really pull their weight. Hire someone from your target market with experience in localizing brands and let them go over your brand image and presentation with a fine-toothed comb. With their outside perspective, they’ll be able to find potential problem areas that wouldn’t be as obvious to you.
Showing Up Is Not Enough. Become the Best Local Option.
Branding woes aside, Walmart also experienced initial setbacks in China due to the impersonal warehouse-like design of its retail spaces. Due to space constraints at home, Chinese shoppers are less inclined to buy in bulk. As a result, it’s common for people to go food shopping at smaller local markets on a daily basis. Before Walmart could adjust, local retailer Sun-Art was quick to pick up the pieces of Walmart’s failure.
Despite being a big-box retailer like Walmart, Sun-Art mimicked the look and feel of a local market by presenting food items in open displays. Shoppers could touch, hold and even smell their food directly so as to reassure themselves of its quality. By doing so, Sun-Art was able to capture the trust of local shoppers while still enjoying the advantages of its economies of scale.
Walmart eventually reoriented itself, pivoting towards a stronger emphasis on food to attract the daily grocery crowd. Now, shoppers can purchase items individually or in small groups, alleviating the storage restrictions of their smaller apartments and refrigerators. The added comfort of a hands-on inspection can go a long way towards overcoming that initial price-quality skepticism.
Recently, Walmart opened its first high-tech supermarket in China, playing to the country’s love of mobile payments. The new store’s smaller size along with its focus on smartphone accessibility and home delivery will hopefully herald a new era of success for the company in the Chinese market.
In both Brazil and Germany, Walmart has struggled to convince local shoppers of its value as a grocery provider. The company’s “one-stop shop” tactic didn’t captivate Brazilian customers, who are accustomed to frequenting multiple stores in order to acquire all their groceries at the lowest possible prices. When the pursuit of a bargain outweighs the convenience of a single shopping destination, Walmart finds itself without much in the way of a persuasive argument.
Shoppers in Germany, on the other hand, already had options for large-format, low-cost grocery shopping. With Lidl and Aldi as the nation’s preferred options, there was little Walmart could do besides pick up the scraps left behind by these two entrenched companies.
Key takeaway: You can’t shoehorn yourself into a market that doesn’t need you.
The allure of a new market might be tempting, but you’ll only wind up frustrated if you’re a square peg attempting to fit into a round hole. Odds are that when you enter a new market, you won’t be stepping into a vacuum. There might not be someone exactly like you, but unless you’re on the bleeding edge of your industry, the people in your target market will have been getting by without you. Your challenge is to present them with a value proposition that they simply can’t refuse. This is no small feat, but if you can pull it off, you’ll be golden.
Who Has Time for Morals When There Are Profits to Be Made?
No matter where Walmart goes, it has largely followed its American strategy of paying its employees as little as possible. The company can’t seem to resist treating its employees as an expendable resource. There’s no better way to shoot yourself in the foot than by neglecting your people on the ground. Moral qualms aside, this tactic has resulted in real-world troubles for the company as they continue their decades-long slog through various markets across the globe.
In China, Walmart’s employment-related scandals repeatedly earned it the ire of the Chinese government. Following in its established tradition of targeting workers who express dissatisfaction, Walmart was accused of wrongfully terminating a group of workers from their store in Shenzhen. These employees had roused Walmart’s anger by speaking out against what they believed to be unsanitary food hygiene practices.
Walmart has also responded punitively against employees who organized protests for higher salaries. In recent years, the company has faced strikes, protests, boycotts and more from its disgruntled workforce across China.
In Brazil, Walmart battled employment-related lawsuits as a direct result of its cost-cutting measures. These claims would end up costing the company an annual 2 percent of its total worldwide profits. The company said the employment issues stemmed from unclear timekeeping systems used to monitor breaks, overtime and other related issues.
Employment controversies like these are par for the course given the Walmart’s attitude towards its workers back in the US, where it employs one out of every 10 retail workers in the country. Walmart has long faced scandals related to unfair workplace policies and anti-union practices, and though the company recently pledged to increase its minimum hourly wage up to $11, it can’t seem to escape the narrative that its workers receive “poverty wages”.
Source: Adbusters via Twitter
Key takeaway: Be the anti-Walmart and practice fair employment practices.
Not only is it the right thing to do, but it’s good business sense. Happy employees are motivated to give back to their organizations in the form of loyalty and performance. Conversely, every employment-related scandal will only turn local governments and associations against you. If you behave in a way that appears callous or vindictive, you risk losing the patronage of your new market.
Supply Chain Is Only the Most Crucial Aspect of Our Business. Let’s Neglect It.
Walmart’s business model relies on well-oiled supply chains to keep its gargantuan stores stocked with thousands upon thousands of diverse products, and the company can’t guarantee “everyday low prices” if shipping costs aren’t manageable. If the cost of logistics rises, or if the supply chain develops even a hint of a weak link, the entire concept stands to collapse.
Every time Walmart has expanded to a country without a top-of-the-line infrastructure already in place, the company has been slow to compensate. Walmart began its attempted conquest of Brazil with a zealous string of acquisitions and expansions buoyed by overly optimistic sales predictions. However, the company failed to account for Brazil’s notoriously sluggish and expensive internal transportation networks. With such vast distances to cover and no cost-effective means to do so, Walmart’s Brazilian journey has been fraught with frustration at every step.
One would think that Walmart’s experience with Brazil’s logistical difficulties would inform the company’s approach to China, which at the time of Walmart’s entry posed similar obstacles. But it wasn’t until many years after its entry into China that the company began taking control over its distribution network. In the meantime, many underperforming stores were forced to close their doors.
Recently, Walmart acquired a minority stake in JD.com, one of China’s largest online retailers. E-commerce is booming in China, and thanks to JD’s in-house logistics network and gargantuan user base, Walmart now has access to this vastly larger market.
Key takeaway: Don’t accept mediocrity. If your new market can’t provide something you need, make your own.
When it comes to getting your product or services to your customers, there’s no understating the importance of local infrastructure. Make sure you know exactly how each aspect of your business will function — on its own as well as in relation to your overall supply chain and delivery mechanisms — to ensure your grand entrance isn’t spoiled by logistical hiccups. Consider creating your own distribution or supply networks if your target market is lacking in this regard.
If you’re facing an international expansion of your own, you don’t have to go it alone. We’d love to help ensure your big move goes as smoothly as possible. Get in touch with us today!
Featured image source: Marketingland.com