Walmart's strategy to prevail against Amazon saw another development today.
This morning, UK supermarket chain Sainsbury's announced a deal with Walmart to acquire a controlling interest in Asda, Walmart's wholly-owned British subsidiary. The deal rates Asda with £ 7.3 billion and (if it closes), Walmart will raise £ 2.975 billion in cash, accounting for 42 percent of combined business as a "long-term shareholder" and 29.9 percent voting rights in the combined entity Sainsbury's, Asda and Argos Stores, as well as 330,000 employees in the country.
The news underscores how Walmart is still trying to find the right mix of its stores in a troubled quarter of e-commerce sales during the crucial holiday season (news that shook investors enough to stumble upon Walmart's sock) not only to fight the current competition in retail, but also any form that its competitors could take in the future. At the moment, the only major common rival in both scenarios is Amazon.
In the US, Walmart has tested several routes for consumers to find new ways to engage with Amazon customer opportunities. Walmart targets a variety of geographic and demographic characteristics and has made big bets such as Jet.com's $ 3 billion acquisition; Extension of own new delivery services as well as payment and return methods; As well as running pilots with various third parties like Postmates and DoorDash.
Internationally, it's a different story. Walmart has a much smaller presence ̵
"This merger is a unique and courageous opportunity to follow our strategy of finding new ways to drive international growth," said Judith McKenna, President and CEO of Walmart International, in a statement. "Almost 20 years ago, Asda became part of Walmart, and it's a great business and an important part of our portfolio that serves as a source of best practices, new ideas and talent for Walmart companies around the world, and we believe that Combination will create a dynamic new retail player better positioned for even greater success in a rapidly changing and competitive UK market, adding value for both clients and shareholders, but at the same time it will be the colleagues Asda makes the difference, and this merger offers them wider opportunities within the retail group, and we look forward to working closely with Sainsbury's to take advantage of the combined business. "
The British Market is a prime example of a scenario that Walmart has not done so well, and I think the decision For Walmart, retreating from its UK operations has a strong link to the Amazon effect on the market.
In the UK, Asda is the number three in the supermarket share leaders Tesco and Sainsbury's with a 15.6 percent share. All three executives focus on traditional supermarket formats and their modern British twists. This results in huge stores with multiple choices for each product, from bargain prices to more expensive premium varieties; sizable chains of smaller shops in the convenience store style; and online delivery of different popularity.
The three levels of operations may sound like diversification, but they are in fact very undiversified in their category, leading to extreme price competition for the products themselves (and that happens both before and after the purchase) The competitor, the online grocer Ocado, regularly reimburses me for money without relying on products that are sold more cheaply in competing stores. English: www.goredsea.com/en_magazine-archiv…december2005.
In addition, the big three lately have all been cannibals from the uprising of smaller discounters like Aldi and Lidl, who renounce brand names in favor of a smaller selection of their own brands at a cheaper price (a bit like Trader Joes, who owns Aldi but often much cheaper); and partly due to a big shift to shopping online, an area where Amazon hopes to just get bigger and invests a lot. In addition to the acquisition of Whole Foods from Amazon, especially in the UK, rumors have it that the online shopping service Ocado is associated with another British supermarket chain, Morrisons.
The fact that Amazon is now too branching out with the strong online sales and related logistical records into physical locations is a big threat to Walmart and others who first built physical businesses, and I think that Walmart Notably, Walmart alone, along with Sainsbury's (and as a minority partner), could not achieve a leading position in the UK market. Asda and Sainsbury's have a market share of over 31 percent (Sainsbury's today has 15.8 percent, Asda 15.6 percent), ahead of the current leader Tesco (27.6 percent). This also means that the deal is subject to regulatory review and could be subject to a sell-off reservation.
The news about Asda in the UK is in the midst of a number of other changes and changes in Walmart's business outside its core US market.
In India, Walmart is nearing the acquisition of Flipkart, the country's largest online retailer, which itself feels the warmth of Amazon  Walmart's deal for $ 10 billion to $ 12 billion, which will now be completed by the end of June, would give the company a 51 percent stake in Flipkart and rate the Indian online giant at around $ 18 billion. Amazon has made India – a fast-growing economy with strong consumer trends that includes digital commerce – a major priority in its international strategy, with the intention of investing some xx billion in its efforts in the country.
With a view to the future, Walmart is rumored to go one step further from 1964.
It is a long-term plan for the company. Two years ago, Walmart tackled its e-commerce efforts in China with Alibaba's JD.com as a partial withdrawal from that market.
After that, Walmart seemed to have put his efforts there on hold – his local Chinese company site stopped updating after 2016 but did not completely disappear. But just recently, just last month, Walmart opened a reduced "high-tech" supermarket that aims to further combine physical and digital retail – or online-to-offline, as it's often called. Here, people can shop for a select number of foods and other products, as well as search these and many more to buy online on JD Daojia (the JD Venture) while they are in the business and have them delivered.
The newest store in China, and Walmart's approach there could be an interesting template for what we might expect in the UK if the sale gets the green light from the regulators. Sainsbury & # 39; s also owns Argos, a retailer based essentially on the catalog and online sales model: There is no retail space with a large footprint, and instead customers order – either at a counter in the store itself or online – and Both have them delivered to or picked up at another counter in the store. Could we see a scenario of similar "high-tech" supermarkets opening in the UK, where the Asda brand is used in a similar turn with subsequently greatly reduced footprints for the retail trade?