Global Market Trends in Retail: Walmart vs Carrefour - Essay Example

Comparison Company Walmart vs. Carrefour Table of Contents Overview 2 Walmart 2 Carrefour 2 A Brief Profile of the Retail Industry 3 Global Market Trends in Retail 4 Walmart 5 Carrefour 6 The Advertising Strategy of Walmart 7 The Advertising Strategy of Carrefour 7 References 9 Overview Walmart Walmart is the world’s leading retail organization based in the United States of America. It has overseas operations in many countries of the world. It also has operations in the countries of Far East as well as China. Founded by Sam Walton, Walmart enjoys the reputation of being the world’s largest retailer. Carrefour Carrefour is a France based company. It is the world’s second largest retailer. Like Walmart, Carrefour has operations all across the globe. It has about 15,000 retail stores, either company owned or franchisees. A Brief Profile of the Retail Industry Retail means any kind of business that deals directly with the customers. It is a huge and potentially lucrative industry. It employs a large number of people. This industry is sensitive to business cycles. There are different kinds of retail institutions like Departmental Stores, One Stop Shop, and Discount Houses. In the retail industry segment, the world is dominated by Walmart. There are multinational corporations as well like Carrefour, Tesco, and Marks and Spencer. According to the BMI India Retail Report for the third quarter of 2010, the total volume of retail sales will increase from US$ 353 billion in 2010 to US$ 543.2 billion in 2014 (IBEF, “Retail”) Global Market Trends in Retail The important trends noticed in worldwide retail are discussed below. In developed economies like the US and the UK, the retail sales will diminish whereas it will increase in developing economies of China and India Asia is expected to be the most prospective area for the retailers Garments, fashion and accessories are expected to grow The functional food areas are likely to continue with their growth (yStats, “Research on International Markets”) The global recession had a strong impact on consumer buying behavior. Recession has eroded the purchasing power of people. This has considerably diminished the buying frequency of the people. They have become value and price conscious. Moreover, the discretionary buying habits of the people have been considerably reduced. This kind of buying behavior has been noticed in the developed economies of US, UK, Spain and the trend is not entirely changing even after the recession is over. Retailers will have to switch their attention to discount stores, which may lead them to earn losses in the long run. The retailers of the developed markets will have to invest in the markets of the developing economies. Walmart The competitive landscape for Walmart in China is extremely challenging. Even though, Walmart is the world’s largest retailer, in China it has many competitors. Besides, multinational retailers like Carrefour, Tesco, have to compete against a host of domestic companies like 360Buy.Com, Acorn International Inc., Amway (China) Co. Ltd., Auchan Group, Beijing Wangfujing Department Co. Ltd, and Shanghai Lotus SuperStore Co. Ltd. Other competitive factors are very high competition among retailers, threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute channel, competition from online stores, under-developed infrastructure, online payments, and suppliers having increasing number of options. Walmart has captured a formidable portion of the Chinese retail market. Its market share is 35%. The macro environment of Walmart in China constitutes several aspects related to the Chinese economy. They are the disposable income of the people, the annual income of the middle class people which is high and stable, the regulatory framework including the rules and regulations for doing business, credit, import duties, taxes, people concerned with implementing the regulatory norms, the banking system, labor contract laws, import of goods, import duties, and value added taxes. There are also certain issues of concern for Walmart. These are better enforcement of VAT, certain domestic firms paying less VAT, unfair advantage given to domestic firms in the matter of VAT. Carrefour Carrefour is a multinational French company. Even though it ranks second to Walmart worldwide, in China it has lost ground to Walmart and many other domestic retail companies. Among its foreign retail competitors are Walmart, Tesco, Marks & Spencer, and Nike. Its domestic competitors are 360Buy.com, Shanghai Superstore Co. Ltd. Moreover, the company has to deal with a plethora of local issues which are unique to China. They are bargaining power of the suppliers, bargaining power of the buyers, suppliers having substitute channel of supply, local laws concerning to employment and conduct of business. Carrefour ranks fourth in China in terms of market share. The variables that constitute Carrefour’s macro economic environment in China are varied. Apart from a high economic growth resulting in a high disposable income for the consumers, there is also the Chinese regulatory system. The regulatory system begins with laws for starting a new business in China, credit and banking policies. Certain salient features of the Chinese banking policies are – only a few specific banks are allowed to deal in foreign exchange and that the foreign exchange is highly regulated. Any company doing business in China will have to follow the new Employment Contract Act of 2008, import of goods, import duties, and taxes. The taxes are of three kinds- value added tax, business tax, and other taxes. The other issues in macro environment are product labeling and certification, agencies responsible for regulation (Bird & Et. Al., “Retail in China”) The Advertising Strategy of Walmart Walmart follows a very smart strategy to advertise its products. Walmart has acquired competitive advantage over its competitors by selling low priced high value goods. It has maintained an inventory system which can meet the requirements of its retail stores very efficiently. It has segmented customers on three bases – high, middle and low. Its advertising strategy is focused on communicating to the customers the benefit of buying its products. The Advertising Strategy of Carrefour Carrefour follows a fairly simple idea. It maintains a close relation with the customers. It wants to make its products available wherever it operates. To do this, it believes in communicating its products to the customers. It also does in-store decoration for proper identification of the merchandise and greater store mobility (Carrefour, “Strategy a Close Relation with Customers”) References Bird, Britt. & Et. Al. “Retail in China” November 26, 2010. Userfiles, 2009. Carrefour. “Strategy A Close Relation with Our Customers”. November 26, 2010. Docroot, 2008. IBEF. “Retail”. November 26, 2010. Home, 2010. yStats. “Global Retail Trends 2010”. November 26, 2010. Research on International Markets, 2010. Read More