Brazil, one of the largest emerging markets in the world, has attracted numerous telecommunication and retail brands, including Wal-Mart. In 1995, the establishment expanded in the country with the intention of replicating its success in the United States, where the company dominated the retail space.
Initially, analysts had high hopes for Wal-Mart’s aggressive campaign. The juggernaut’s universal strategy of offering standard goods at affordable prices seemed like a fail-proof plan that could easily be replicated outside of its origins. Moreover, the business invested heavily in localization services, as reflected in the company’s Brazilian website extension.
Unfortunately, the establishment’s efforts were not received well by locals, which resulted in the closing of over 60 brand-related branches (Maxxi and Supercenter). A company representative confirmed that the business had reported serious operating losses in the region for seven straight years. “It was never clear who Maxxi was for. It wasn’t cheap enough for the poor. But there was no appeal for the middle class,” said Ordecy Gossler, an accountant shopping at Atacadão, a chain run by France’s Carrefour.
What Happened in Brazil?
A culmination of escalating factors contributed to Wal-Mart’s troubles in the country. Labor wars, competitive locations and ineffective operations were just some of the issues that the business was unable to cope with. Most of the company’s problems were internal, and the questionable matters resonated to its struggling workers and confused customers.
An example of this was the establishment’s plan to “invest in completing an integration of legacy computer systems into the wider Wal-Mart platform.” To date, it failed to seal the integration, and as a result, communication between employees and the individual brands suffered. Locals who wanted to go through all of the Brazilian Wal-Mart brands were reportedly forced to use different computers or laptops- one for each type of store. This increased frustration for customers who were interested in comparing prices and looking for new products online.
Meanwhile, the company’s logistics team was also coping with its own delays and performance issues. Deliveries were not reaching some stores fast enough. Wal-Mart implemented a centrally located warehouse system, where other distant branches sourced inventory from. The strategy worked seamlessly in the US, but in Brazil, the plan failed to take off.
Many residents felt that Wal-Mart’s presence was alienating, instead of welcoming. Its initiatives were lost in translation, and as the company pressed further, customers started to treat the business like a wavering foreign brand without a strong foothold in the local retail market.
Localization Services Limitations
Wal-Mart’s troubles are not limited to Brazil; they extend into other countries like China and Mexico. The factors that led to massive success at home haven’t translated overseas, despite Wal-Mart’s commended massive investment over the years in translation and localization services.
One of the main takeaways from Wal-Mart’s international struggles is that localization is not a silver bullet. Having what the average company considers unlimited resources is also no guarantee for success! Without a comprehensive plan to identify, evaluate and validate markets, penetration will remain elusive. “When you build a castle you build the foundation first. Wal-Mart did it in reverse in Brazil,” explained a former Wal-Mart senior executive. “It is so hard to build a national chain when your system backbone is not in place.”
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