Walmart's failure in South Korea

Following on from their failure in Germany, Walmart failed in another market with a more easily identifiable different culture to that of America and The West: South Korea.

Walmart were keen on gaining a foothold in the South Korean market and again followed the principles which had worked well during their rapid expansion in the USA during the 70s and 80s. New stores were built on out of town or suburb sites due to the land cost being much lower.

The layout of the stores were similar to what worked in America with the famous ‘Action Alley’ and the old mantra of pile ‘em high, sell ‘em cheap in full verse.

Sadly for Walmart it really didn’t work out. In 2006 they sold their 16 stores to local company Shinsegae and their brand called E-mart. Why?

It comes down really to the average South Korean consumer/shopper.

Firstly, they don’t do end of the week big shops. Koreans prefer to shop daily, so increased frequency in shops and obviously smaller shops. This may have something to do with the smaller housing and smaller refrigerators that are common in East Asia.

Secondly, the South Korean shopper likes to be able to walk to their shop. They are not into the culture of driving miles to get a good deal the way Americans and increasingly the British are now in the habit of.

Thirdly, the South Koreans are patriotic. Perhaps this comes from the stalemate of the Korean War and the threat of their communist northern neighbours or maybe not? The South Koreans would rather buy a Korean product or shop in a Korean store than buy from the Imperial Food Conglomerate that is Walmart.

Finally, and in my opinion, most crucial of all is Korean culture. The South Koreans work long hours and work very hard. They like to spend their hard earned cash but are not too bothered about cheap items. Yes they like value, but they like quality also. Walmart were perceived (rightly or wrongly) by the South Koreans as being cheap and of poor quality. Even the store layout was criticised as looking like a warehouse.

This is in contrast to the E-mart brand which has seen some of their stores been described as “like spas”.

Walmart is not alone in failing in South Korea. Carrefour, Nestle, Nokia and even Google have all failed to set the heather on fire.

Ironically, Tesco has performed better. Tesco has placed a more local focus on what the stores look like and indeed content. They go for small packages in their Korean stores and crucially, unlike Walmart, have a local partner in Samsung, the electronics giant. Indeed, many Samsung managers and employees have transferred to Tesco to help them in their quest of eating into the South Korean grocery market.

Samsung’s local dominance also aided Tesco when creating a valuable supplier network, again something that in the US is a major strength for Walmart, but in the Oriental land of South Korea, has proven to be a noose around her neck.

Again, I think this is another interesting story/case to share with students in order that we all realise the importance of culture and that even though the world is becoming smaller, there are still differences, which let’s be honest, should be celebrated. How boring life and business would be if everything and everyone was the same!