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Wal-Mart takes over the world!

January 19, 2006 15:10 IST

What operates in 44 countries, has 2,276 stores outside of the US, has more than 100,000 associates (their term for worker) in Mexico alone and does $56.3 billion in sales overseas?

That $56.3 billion figure nearly matches the size of the US sales of Kroger, and they are the seventh-largest retail company in the world.

It is, of course, Wal-Mart Stores. And now the accounting for 2005 is in--it increased its international 2005 business by 18.3% over 2004 and grew its international operating profits to nearly $3 billion.

John Menzer, until very recently the president of the international division and now head of US store operations, explains the reason why. "Country by country, the world is discovering the great value of shopping at Wal-Mart. We need to be the growth of Wal-Mart when some day the United States slows down."

Menzer led the multistore acquisition of the UK's Asda and Japan's Seiyu. These acquisitions have become the model for how Wal-Mart's rollout in new countries will be accomplished. Go into a country, pick a sizable retailer, take a piece, then take the whole piece, then change the name and voilĂ : a multitude of Wal-Mart stores with discounting in place, new technology behind it and an awesome scale of retailing and supply-chain systems.

Wal-Mart is growing so fast by accelerating electronic sales--taking Apple Computer iPods, Hewlett-Packard printers and Toshiba laptops around the world. They'll grow by pushing their supermarket-arena products. They'll grow as they set up in nation after nation.

Above all, they'll grow a store at a time. Already, they have retail stores operating in Mexico (774 units), Puerto Rico (54 units), Canada (263 units), Argentina (11 units), Brazil (295 units), China (56 units), Germany (88 units), South Korea (16 units), United Kingdom (315 units), Costa Rica (124 units), El Salvador (57 units), Guatemala (120 units), Honduras (32 units) and Nicaragua (30 units).

During 2005, Wal-Mart started its move into India.

They are not only building stores in these countries. They are also building their own distribution centers that are the logistics hubs where they receive, sort and stock the Wal-Mart

stores in their area. These distribution centers can be ten times larger than their stores.

So the commitment within these countries is more than providing stores. It is a full supply-chain system and all the logistics that can go into it. They can have a hundred or more docking stations in one distribution center.

China, for instance, with its 56 stores, has several distribution centers such as the one at Shechen. These centers, like their stores, have local associates, and in China they number in the tens of thousands.

But to keep a balanced view, there is a downside, too.

"Germany has been terrible for Wal-Mart," says Jon Jacobs, retail analyst for Cantor Fitzgerald. "They are taking losses in a soft economy. Their operations in the UK, that are around 50% of their overseas business, have shown uneven results, halted growth and [caused] financial disappointment in a market that has taken a consumer tailspin. This would make it understandable that they would move forward in Japan and both Latin America and Central America, where they have recently made many gains."

Most important, Wal-Mart is exporting a retailing and supply-chain system that trains and influences not only the 'associates' but the public as well. People in these many countries become Wal-Mart customers. They will live with the results of Wal-Mart's (and Procter & Gamble's) commitment to radio frequency identification (RFID). The technology sneaks into the store on cat's feet.

The power of Wal-Mart is partly derived from its partnerships and its bold use of technology. These two things in combination give them the muscle to knock out much of the competition, for better or worse, regardless of state or nation. Retail Forward has predicted that Wal-Mart will top $500 billion by 2010. That will translate into more power and more countries.

The question is, what is this going to change, and how will the world and its customers adapt themselves to a Wal-Mart world?

Goodbye mom-and-pop stores, goodbye local stores in local places. Hello to stores that have a favored position in their procurement processes and their overall supply-chain practice.

Hello to efficient store-owned distribution centers. Hello to mega-stores with discount price advantages and a new sense of providing for shoppers' full-life experiences. Hello to RFID and all its speed, accuracy and increased visibility of product availability.

Robert Malone, Forbes