Introduction
Walmart is a global force in retail, with over 11,500 stores across 27 countries. The company‘s international expansion has been a key driver of its growth in recent decades, as it has sought to bring its "Everyday Low Prices" model to consumers around the world. But one country that has notably been absent from Walmart‘s global footprint is New Zealand.
The island nation of 5 million people in the southwestern Pacific Ocean has a thriving retail sector, but has so far been untouched by the Walmart empire. This raises the question: Is Walmart considering entering the New Zealand market? And if so, what challenges and opportunities would it face?
In this article, we‘ll take an in-depth look at Walmart‘s international expansion strategy, the current state of the New Zealand retail market, and the potential impacts of the world‘s largest retailer setting up shop in Kiwi country.
Walmart‘s International Expansion Strategy
To understand the likelihood of Walmart coming to New Zealand, it‘s important to first examine the company‘s approach to international expansion. Walmart‘s journey to becoming a global brand has been marked by several key strategies:
Acquisition of Local Players
One of Walmart‘s primary methods of entering new markets has been through the acquisition of existing local retailers. This allows the company to quickly gain a foothold in a country and tap into an established customer base and supply chain.
Some notable examples of this strategy include:
- The acquisition of UK supermarket chain Asda for $10.8 billion in 1999
- The purchase of a majority stake in Japanese retailer Seiyu in 2008
- The acquisition of South African retailer Massmart for $2.4 billion in 2011
- The $16 billion acquisition of Indian e-commerce company Flipkart in 2018
By acquiring these local players, Walmart has been able to rapidly scale up its international presence and adapt its business model to the unique characteristics of each market.
Focus on Large, High-Growth Markets
Another key aspect of Walmart‘s international strategy has been its focus on large, high-growth markets with significant long-term potential. The company has prioritized expanding into countries with massive populations and a growing middle class, where even capturing a small market share can translate into an enormous customer base.
China and India, the world‘s two most populous countries, have been particularly important targets for Walmart. The company opened its first store in China in 1996 and has since expanded to over 400 locations across the country. In India, Walmart‘s acquisition of Flipkart gave it a strong foothold in the country‘s rapidly growing e-commerce market.
Other large markets that Walmart has targeted include Brazil, Mexico, and Canada. As of 2021, the company‘s international operations accounted for about 24% of its total revenue, or $121 billion.
Adaptation to Local Cultures and Preferences
In addition to its targeted expansion strategy, Walmart has also focused on adapting its business model to the unique cultural and economic characteristics of each country it enters. Rather than simply replicating its US stores and products, the company has sought to tailor its approach to the preferences and needs of local consumers.
For example, in China, Walmart stores feature live seafood tanks and in-store restaurants serving local cuisine, catering to Chinese consumers‘ preference for fresh food and dining out. In India, Walmart‘s Flipkart subsidiary has focused on building out its logistics network and offering low-cost smartphones to tap into the country‘s mobile-first consumer base.
Walmart has also adapted its product mix to local tastes and budgets. In Mexico, for instance, the company sells more fresh produce and baked goods than in its US stores, reflecting Mexican consumers‘ cooking and eating habits.
By combining its global scale and resources with a localized approach, Walmart has been able to successfully expand into a wide range of international markets.
The New Zealand Retail Market
So how does New Zealand fit into Walmart‘s international expansion strategy? To answer that question, let‘s take a closer look at the current state of the Kiwi retail market.
Market Overview
The New Zealand retail sector is a significant contributor to the country‘s economy, accounting for around 10% of GDP and employing over 200,000 people. In 2020, total retail spending in New Zealand amounted to NZ$97.1 billion (US$68.4 billion), up 4.9% from the previous year despite the impact of the COVID-19 pandemic.
New Zealand‘s retail market is characterized by a mix of local and international players, with a strong presence of Australian-owned brands. The market is also relatively fragmented, with the top 10 retailers accounting for less than 30% of total sales.
Some of the largest retail categories in New Zealand include:
- Supermarkets and grocery stores (NZ$22.3 billion in sales in 2020)
- Department stores (NZ$3.6 billion)
- Furniture and homewares (NZ$3.2 billion)
- Clothing and footwear (NZ$3.1 billion)
- Hardware and building supplies (NZ$3.0 billion)
Overall, the New Zealand retail market is relatively mature and competitive, with a mix of well-established local brands and international retailers.
Key Players
To understand the competitive landscape that Walmart would face in New Zealand, let‘s take a closer look at some of the major players in the market:
The Warehouse Group
The Warehouse is the closest thing New Zealand has to a Walmart-style retailer. Founded in 1982, the company operates 258 stores across the country under several brands, including The Warehouse, Warehouse Stationery, Noel Leeming, and Torpedo7.
The Warehouse offers a wide range of products, including clothing, homewares, electronics, and sporting goods, at discounted prices. In the 2020 financial year, the company reported revenue of NZ$3.2 billion (US$2.3 billion) and a net profit of NZ$44.5 million (US$31.4 million).
Foodstuffs
Foodstuffs is New Zealand‘s largest grocery retailer, with a 53% market share. The company operates over 400 stores across the country under several brands, including New World, PAK‘nSAVE, and Four Square.
Foodstuffs is structured as a cooperative, with store owners as shareholders. In 2020, the company reported revenue of NZ$11.2 billion (US$7.9 billion) and a net profit of NZ$205.5 million (US$144.9 million).
Countdown
Countdown is New Zealand‘s second-largest grocery chain, with a 32% market share. The company is owned by Australian retail giant Woolworths and operates 180 stores across the country.
In addition to groceries, Countdown also offers a range of general merchandise, including clothing, homewares, and electronics. In the 2020 financial year, the company reported revenue of NZ$6.7 billion (US$4.7 billion) and a net profit of NZ$430 million (US$303 million).
Briscoe Group
Briscoe Group is a New Zealand-based retailer that operates 85 stores under the Briscoes Homeware and Rebel Sport brands. The company offers a range of products, including homewares, sporting goods, and outdoor equipment.
In the 2020 financial year, Briscoe Group reported revenue of NZ$701.8 million (US$494.7 million) and a net profit of NZ$73.2 million (US$51.6 million).
Mitre 10
Mitre 10 is a New Zealand-based home improvement chain with over 80 stores across the country. The company is structured as a cooperative, with store owners as shareholders.
Mitre 10 offers a wide range of products for home renovation and DIY projects, including tools, hardware, and building supplies. In the 2020 financial year, the company reported revenue of NZ$1.7 billion (US$1.2 billion).
Challenges and Opportunities
Based on the current state of the New Zealand retail market, what challenges and opportunities would Walmart face if it decided to enter the country? Here are a few key factors to consider:
Competition
As we‘ve seen, New Zealand already has a number of well-established retailers across various categories, from grocery to home improvement to general merchandise. These companies have strong brand recognition and customer loyalty, and would likely pose significant competition to Walmart.
In particular, The Warehouse Group‘s low-price, high-volume model is very similar to Walmart‘s, and the company‘s extensive store network and localized approach could make it difficult for Walmart to differentiate itself.
Scale
Another challenge for Walmart in New Zealand would be the country‘s relatively small population and market size. With just 5 million people, New Zealand‘s retail market is significantly smaller than those of Walmart‘s typical target countries like China, India, and Mexico.
This means that the potential upside for Walmart in New Zealand may be limited, at least in terms of sheer sales volume. The company would need to carefully consider whether the market is large enough to justify the investment required to establish a presence there.
Regulation
New Zealand also has relatively strict foreign investment laws that could pose a challenge for Walmart. Under the Overseas Investment Act, any foreign company seeking to acquire sensitive land or significant business assets in New Zealand must receive approval from the government.
This approval process can be time-consuming and complex, and would add an extra layer of regulatory scrutiny and compliance for Walmart. The company would need to be prepared to navigate this process and potentially make concessions or adaptations to its business model to meet New Zealand‘s requirements.
E-commerce
One potential opportunity for Walmart in New Zealand is the country‘s growing e-commerce market. In 2020, online retail sales in New Zealand grew by 27.6% to reach NZ$5.8 billion (US$4.1 billion), driven in part by the COVID-19 pandemic.
Walmart has made significant investments in its e-commerce capabilities in recent years, and could potentially use its online platform to enter the New Zealand market without the need for a physical store presence. The company‘s experience in managing complex supply chains and logistics networks could also give it an advantage in serving New Zealand‘s relatively dispersed population.
Culture and Consumer Preferences
Finally, Walmart would need to carefully consider the unique cultural and consumer preferences of the New Zealand market. Kiwi consumers are known for their love of the outdoors, their commitment to sustainability, and their support for local businesses and products.
To succeed in New Zealand, Walmart would need to adapt its product mix, marketing, and store design to appeal to these preferences. The company may also need to invest in building relationships with local suppliers and communities to overcome any perception of being a foreign interloper.
The Potential Impact of Walmart in New Zealand
If Walmart did decide to enter the New Zealand market, what impact could it have on the country‘s economy and society? Here are a few potential effects to consider:
Lower Prices and Increased Competition
One of Walmart‘s core value propositions is its "Everyday Low Prices" model, which aims to offer consumers the lowest possible prices on a wide range of products. If Walmart brought this model to New Zealand, it could potentially drive down prices across the retail sector, benefiting consumers.
However, this could also put pressure on existing retailers to lower their own prices to compete, potentially squeezing their margins and profitability. In the long run, this could lead to consolidation in the market as smaller players struggle to keep up with Walmart‘s scale and efficiency.
Job Creation and Economic Activity
Walmart is known for being a major employer in the markets it operates in, and its entry into New Zealand could potentially create thousands of new jobs in retail, logistics, and related industries. The company‘s investments in new stores, distribution centers, and supply chain infrastructure could also generate significant economic activity and tax revenue for the country.
However, critics of Walmart have argued that the company‘s low wages and preference for part-time workers can depress overall wage growth and job quality in the markets it enters. There are also concerns that Walmart‘s scale and market power can drive out smaller, locally-owned businesses, potentially reducing diversity and resilience in the retail sector.
Supply Chain Impacts
Walmart is known for its sophisticated and efficient supply chain management, which allows it to source products from a wide range of suppliers around the world and get them to stores quickly and cheaply. If the company brought this expertise to New Zealand, it could potentially help to modernize and streamline the country‘s retail supply chains.
However, Walmart‘s global sourcing model has also been criticized for contributing to offshoring of manufacturing jobs and a race to the bottom on labor and environmental standards. The company would need to be mindful of these concerns and work to ensure that its supply chain practices align with New Zealand‘s values and regulations.
Sustainability and Social Responsibility
In recent years, Walmart has made significant investments in sustainability and social responsibility, setting ambitious goals around renewable energy, waste reduction, and ethical sourcing. If the company brought this focus to New Zealand, it could potentially help to drive progress on these issues within the retail sector.
However, Walmart has also faced criticism and controversy around its sustainability claims, with some accusing the company of greenwashing or failing to live up to its commitments. The company would need to be transparent and accountable in its efforts to ensure that they are meaningful and impactful.
Conclusion
So, is Walmart coming to New Zealand? The answer, at least for now, appears to be no. The company has given no indication that it is actively considering entering the Kiwi market, and the challenges and limitations of the market may make it a less attractive target compared to other international opportunities.
However, that doesn‘t mean it will never happen. Walmart‘s history is one of relentless growth and expansion, and the company is always on the lookout for new markets to conquer. As the retail landscape continues to evolve and global competition intensifies, New Zealand may eventually find itself in Walmart‘s sights.
If that day comes, the impact on New Zealand‘s economy and society could be significant. Walmart‘s entry could bring lower prices, increased competition, and new jobs and economic activity to the country. But it could also disrupt existing retailers, reshape supply chains, and raise concerns around sustainability, labor practices, and local economic resilience.
Ultimately, the question of whether Walmart in New Zealand would be a net positive or negative depends on how the company approaches the market and how well it aligns with the country‘s unique culture, values, and regulatory environment. As with any major foreign investment, the key will be to strike a balance between the benefits of global scale and efficiency and the importance of local adapt ation and responsibility.
Only time will tell if Walmart decides to take on the challenge of the Kiwi market. But one thing is certain: if and when it does, it will be a major moment in the history of New Zealand retail, with far-reaching implications for consumers, workers, and the economy as a whole. As the world‘s largest retailer continues to expand its empire, New Zealand may one day find itself in the crosshairs of the Walmart effect.
