Walmart Is Almost Out Of Japan’s Retail Market Threatened By Tough Competition

Walmart is selling its majority stake in Japanese supermarket chain Seiyu to investment firm KKR and e-commerce major Rakuten in a deal valued over $1 billion, almost exiting the country’s competitive retail market, Reuters reported.

This is Walmart’s latest divestment, following exits from Britain and Argentina due to tough competition. Japan has been a hotbed for retail activity as consumer spending attracted bigwigs like Tesco and Carrefour SA, which heated the battle for the best in the sector.

Seiyu has been struggling in the market for years, putting Walmart in a tough spot. It will be valued at 172.5 billion yen, approximately $1.65 billion, after this stake sale. Just a few years ago, the company sought a valuation of 300-500 billion yen, the report said. Walmart will now have a 15% stake in the company, while KKR will bag 65% and Rakuten will get a 20% stake.

Speculations regarding the selloff had been rife for some time now as there were rumors that Walmart was looking to exit Japan since 2018. However, reports suggest Walmart could not find a buyer. It first entered the country in 2002, buying a 6% stake in the company. Over the years, it increased its stake stealthily, before a complete takeover in 2008.

Analysts are quoted as saying in the report that Walmart saved Seiyu from bankruptcy with efficient austerity measures but it still failed to make money through the company.

“Walmart was always going to struggle because they had to turn around the business and also they needed to grow volume to really have a viable share in the Japanese market and the only way to do that was through more acquisitions, which it wasn’t willing to spend money on,” said Roy Larke who specializes in the country's retail industry at JapanConsuming

Walmart’s strategy is to focus on markets that give it the best returns. It pulled out of South Korea in 2006 for the same reason and put all its attention on China, competing with local behemoths like Alibaba. It is expanding in India via homegrown e-commerce giant Flipkart, which it bought in a deal valued at $16 billion.

Seiyu entered into a partnership with Rakuten in 2018 for an online marketplace, which has helped the retail chain bolster sales. It saw a net profit of 47 million yen in 2019, after years of reporting net losses. The online venture especially helped during the COVID-19 pandemic as online grocery shopping touched highs in Japan.

Other local retail rivals in the country like Aeon and Ito-Yokado have also been riding the e-commerce wave during the pandemic.