Wal-Mart rethinking entry strategy

Wal-Mart, the world’s biggest retailer, may opt to build its own stores in Russia in addition to buying an existing chain, a source familiar with the situation said Thursday.

Working under the radar, Wal-Mart’s Moscow office is looking at these two strategies rather than focusing solely on an acquisition, the source said.

The option of a purchase is “only a small part of the story,” the person said, asking for anonymity because he was not authorized to discuss the matter with the press.

A Wal-Mart spokesman said only that the company still considered Russia a promising investment prospect, declining to discuss specific plans.

“We … are studying the appropriate means of entering the market,” said Konstantin Dubinin, the retailer’s Moscow-based corporate affairs director.

The company has had an office here since the fall of 2008, and it expanded its staff earlier this year. They are currently on the 19th floor of the Northern Tower in the Moskva-City business district.

If Wal-Mart chooses to go it alone, it may construct its stores in three sizes: 15,000 square meters; 8,000 square meters; and of smaller floor space, the source said.

Retailers such as France’s Auchan and St. Petersburg-headquartered Lenta already boast hypermarkets of about 15,000 square meters, while Magnit is betting on 8,000-square-meter stores. Even so, the formats are ­believed to have plenty of room to grow.

Should Wal-Mart build new stores, it will likely do the work itself, targeting locations in high-density residential areas, the source said.

Wal-Mart, known for its inflexibility in standards, would have to rebuild any property if it were to buy an existing premise, and it would want to change relations with suppliers, said Sergei ­Vasin, an analyst at investment company Metropol.

“They would buy no more than the land and the building,” he said. “Why then pay the extra for the brand name and logistics system?”

Wal-Mart has been in no rush to enter Russia since late 2007, when it resumed talk of making the move. Its international vice president, Juan Figuereo, said at the time that the chain was looking for a local partner for assistance.

Retail chains including Lenta, Kopeika, Karusel and Mosmart have since been named as potential targets for a takeover, although a deal has yet to materailize.

After months with no visible progress, Wal-Mart’s chief in Russia, Stephen Fanderl, left the company in October. The chain’s stalled expansion was the reason, Kommersant reported, citing people close to Fanderl.

“They are incredibly slow — slower than everyone could dream of or realize,” the source told The Moscow Times.

On the other hand, French rival Carrefour in October abruptly decided to pull out of Russia after just four months here, a move attributed to lack of any growth or acquisition prospects.

“Hypermarkets are a very underdeveloped segment,” Vasin said. “I still don’t understand why Carrefour left.”

Wal-Mart’s waffling may stem from the price for an entry ticket, he said.

“Seeing demand from foreign chains, perhaps the Russian players asking for too steep prices,” Vasin said.

www.themoscowtimes.com