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2006-05-22
Seoul, South Korea. Wal-Mart Crashes In Korea

Wal-Mart's crash and burn in South Korea today was not the first time the retail giant stumbled badly on the international stage. Before South Korea, there was Indonesia -- a lesser-known case of Wal-Mart departure. Wal-Mart's global brand lost a little luster today with the announcement in the major business media that the company had sold off its stores in South Korea and was packing up all those Mr. Smiley signs after an eight year experience in the country. The Arkansas retailer sold off its "unprofitable" supercenter chain to its rival, Shinsegae for $869 million. Shinsegae owns South Korea's largest discount store chain called E-Mart. Wal-Mart's stock dropped today, while Shinsegae stock rose 6.6%. The media reported this as "Wal-Mart's first acknowledgement of a failure overseas," but the company also abruptly shut down operations in Indonesia less than a decade ago under somewhat unclear circumstances. Sprawl-Busters reported on March 6, 1998 that Wal-Mart's business partner in Indonesia was suing the giant retailer. Multipolar Corp, a top retail chain in Indonesia, sued Wal-Mart, charging that Wal-Mart mismanaged its two stores there and made misleading projections that caused Multipolar to lose close to $50 million. Wal-Mart executives were hurriedly flown out of the country just ahead of the police. The Wal-Mart annual report for 1997 shows 2 supercenters in Indonesia, but by the 1998 report, those stores are gone. As for the Korean implosion, Wal-Mart told the media that it was selling off its 16 stores in South Korea because "it became increasingly clear that in South Korea's current environment it would be difficult for us to reach the scale we desired." Wal-Mart opened 7 stores since 2002, when it listed 9 supercenters in Korea. But South Korea is not the only country to shrug off Wal-Mart. The German Wal-Mart operations has been largely unsuccessful. In 2002, Wal-Mart had 95 supercenters in Germany, today it has only 88. And its Seiyu stores in Japan are still operating in the red. One analyst from A.G. Edwards applauded the Wal-Mart sell-off, noting, "Wal-Mart has no business in our view continuing to waste its time and resources barking up such tiny trees as South Korea." Wal-Mart's international division remains a key growth component for the company, accounting for $1 out of every $5 the company sells. But its main growth areas are countries like Mexico and China, where government regulations are weak, and land more plentiful.

What you can do: For earlier stories on Wal-Mart's international division, search Newsflash by the name of the country. Search by "Indonesia" to see the story about Wal-Mart first major failure abroad.










 
 
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