Walmart pares Japanese store portfolio in EDLP move
Walmart’s Japanese subsidiary Seiyu plans to close 30 stores and remodel 50 others next year in an effort to strengthen its every day low price strategy.
Describing an approach that sounds remarkably similar to its U.S. strategy, Walmart said the moves in Japan are designed to improve the store experience, improve fresh offerings and convenience, provide greater access to online shopping and reduce operating costs in order to better execute an every day low price strategy. Walmart’s Seiyu division currently operates 434 stores. The closures, remodeling activity and investments in e-commerce and food manufacturing will result in Walmart taking an earnings charge of four cents to five cents over the next several quarters.
According to the company, Seiyu’s EDLP strategy has led to increasing customer recognition of low prices, and sales and profit growth over the last five years. The company saw its accelerated growth continue during the first half of this fiscal year, significantly outperforming the overall market thanks to price leadership as well as ongoing initiatives to enhance fresh, deli and private brand offerings and services at Seiyu.com.
The company plans to invest in the deli manufacturing facilities of its wholly owned Wakana subsidiary to improve overall productivity and enhance production capabilities. It will introduce more versatile cooking and processing equipment providing greater flexibly to increase and upgrade menu variety, the company said. Regarding fresh foods, the company will set up dedicated quality control facilities and teams at all distribution centers by the end of 2015, establishing a system to implement DC-based comprehensive inspections on all major produce items. The inspection results will be shared with suppliers to pursue continuous improvement both in quality and productivity. The QC system will expand to meat and fish categories in the future, Walmart said.
In the Greater Tokyo area, where demand for online grocery home delivery is growing, Seiyu will increase its fulfillment and service capacities in the next three years. With a goal to expand the service coverage to the entire metropolitan area, the company will accelerate steps to improve productivity of its online grocery operations in order to serve rapidly growing customer needs more efficiently and cost-effectively, according to the company.