[LINK] "Why Wal-Mart Hasn't Conquered Brazil"

[rfmcdonald]

Renee Dudley, Christiana Sciaudone, and Jessica Brice argue that WalMart is doing worse than expected in Brazil because its lowest-price model doesn't fit Brazilian shopping patterns. This after the chain has ended its ventures in Germany, South Korea, and India, and even faces serious problems in China on top of a slowing American market.

When asked where she does her shopping, Ivanira de Pontes Duarte, a 51-year-old maid in São Paulo, says it depends on what she’s looking for. If she needs olive oil, a small shop in the middle of her two-hour commute is her go-to spot. Hypermarket chain Extra, a unit of France’s Casino Guichard-Perrachon (CO:FP), has the best deals on cleaning supplies, but only on Wednesdays, when they’re on sale. And a local street fair is where she finds the cheapest produce. One place the store-hopper hasn’t tried is Walmart. “I’ve seen their ads on TV, and their prices don’t seem that much better than everyone else’s,” she says. “It’s a question of savings. Most Brazilians don’t make very much and we need to save where we can.”

[. . .]

Wal-Mart executives have said the company needs to more clearly explain its pricing to Brazilian shoppers eager to stretch paychecks that average about $900 a month. Chief Executive Officer Doug McMillon, who ran the international division for five years, acknowledged at an October analysts’ meeting that “we’re not making the most” of Brazil, where the company has had four local CEOs in a decade.

Better communication is probably beside the point, says Thales Teixeira, a Harvard Business School professor, because Brazilians will shop at several stores if that’s what it takes to get the lowest prices. “They’re cherry-picking the promotions. They care more about that and less about Wal-Mart’s one-stop shopping convenience,” says Teixeira, who grew up in Brasilia. “At Wal-Mart, they’re finding a fair price for their basket, but it’s not necessarily the lowest price for all the items in it.”

Sticking with the everyday low price strategy is hurting the company, says Richard Cathcart, a retail analyst at Banco Espirito Santo de Investimento in São Paulo. The hyperinflation of the 1980s that once drove Brazilians to stock up at large stores such as Wal-Mart’s no longer exists. “People would get paid, and then they would go to the hypermarket and buy as much as they could for the whole month—that is not the situation anymore,” Cathcart says. “You either have to bring people in by changing their culture and the way they like to shop or you’re stuck.”