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Brazilians Not as Fond of Wal-Mart as Americans

First Posted: Feb 19, 2016 07:41 AM EST
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Wal-Mart is very popular in the U.S. It is among the busiest stores in the country. However, it does not sustain the same success in Brazil.

Wal-mart Closed Down Stores

Last December, Wal-Mart closed underperforming stores, which is five percent of its business in Brazil. They did not state how many stores were shut, but reports said there were about 30 stores.

Another report suggested that the U.S. retailer closed both of its Maxxi brand and cash-and-carry stores in Campo Grande as part of their restructuring. About 60 Supercenters and Shoppers were shut across Brazil.

How Wal-Mart Started in Brazil

Wal-Mart entered in Brazil in 1995. Shortly after, it became the country's third-largest retailer following its two major acquisitions in 2004 and 2005. Its progress continued until it halted in 2013.

In November, Wal-Mart announced that the net sales in Brazil fell 0.4 percent in its fiscal third-quarter, which attributed to high inflation and economic headwinds.

Per the report, Wal-Mart struggled to keep up with the other two largest retailers in Latin America, which are Casino Guichard Perrachon & Cie's (CASP.PA) GPA SA (PCAR4.SA) and Carrefour SA (CARR.PA).

David Cheesewright, Wal-Mart's new international CEO, admitted that Brazil is a challenging market for the company for several reasons.

Potential Reasons Wal-Mart Did Not Sustain Its Success

1. Brazilians cherry-pick promos - Thales Teixeira, a professor of business administration at Harvard Business School in Boston revealed that Brazilians are cherry-picking promotions. They are willing to shop at several stores just to get the lowest possible price for the items on their list.

2. Lack of Relationship - In Brazil, strong relationships are important and it looks like the U.S. retailer fell short in this area as Susan Perkins, a professor of international business strategy at Northwestern University's Kellogg School of Management in Evanston, Illinois believes.

Sergio Lazzarini, a professor of business strategy at Insper, added that Brazil is a tough market to operate. It has strict labors, costly to hire and fire workers, wage disputes, and more issues.

"Over time you develop expertise in all those things," Lazzarini said. "Wal-Mart hasn't."

Brazil Still A Profitable Market

Although Wal-Mart didn't sustain its success in Brazil, the country remains a strong market for Procter & Gamble Co. and Nike Inc. Moreover, despite its struggles, Coca-Cola Co. has had years of success and growth in the country. Meanwhile, Domino's Pizza and Dunkin's Brands Group Inc. continue to grow.

Wal-mart's Shortcoming

Overall, Wal-Mart failed to adapt its marketing strategy to Brazil.

"If you don't think about how your business model fits into a local context, you're going to suffer for a long time," Perkins said. "If you don't eventually cultivate the local skills, you'll have to leave."

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