Wal-Mart charts future in Mexico, Canada - plans to expand internationally

Discount Store News, Feb 21, 1994 by Arthur Markowitz

BENTONVILLE, Ark. -- Wal-Mart, in its drive to become an international marketing power, has targeted Mexico and Canada as the two countries where it has the greater immediate opportunity to develop a major retailing presence.

The diversified discounter, which had $67.4 billion in sales last year, sees long-range opportunities in Latin America, Asia and Europe, but expansion in these overseas areas will take a long time because of the need for in-depth market research and the lead time needed to start up ventures.

In Mexico, the 2-year-old Wal-Mart Cifra partnership plans to open 38 to 40 stores this year, including 10 to 15 Sam's Clubs and a few Wal-Mart Supercenters.

The new membership warehouses will use the Sam's Club name, rather than the Club Aurrera logo that the joint venture's initial clubs sported.

In Canada, Wal-Mart's immediate focus is on transforming 120 acquired Woolcos into Wal-Marts (see DSN, Feb. 7, page 1). The discounter is already working on this even though the deal isn't due to be completed until about March 1.

Wal-Mart's international expansion is being engineered by Bobby L. Martin, president and chief executive officer of the Wal-Mart International division. Chairman S. Robson Walton and president David Glass have voiced strong support for international expansion.

Martin noted that "starting up an international venture takes a long time." The discounter decided that Mexico and Canada were the "priorities" for international expansion because of their proximity to the United States and the opportunities in both countries.

The planned expansion in Mexico and the Canadian acquisition are "a pretty good size bite to handle," he said. "It will take time to develop [our presence] in these countries and we don't have anything else to announce or are close to announcing."

He said newspaper reports that Wal-Mart was "closely looking" at ventures in China, Thailand and Indonesia were wrong, as were reports that Wal-Mart didn't see any opportunities in China or in other overseas markets for at least five years.

"The message we want to convey is that we are out exploring markets, as are a lot of other retailers," he said. "Starting up ventures in Asia will take time."

Glass was quoted in one newspaper report as saying that he could see Wal-Mart in China in five years.

Martin said that "China is the largest market in the world with one billion people. We could eventually be in China, but expansion there needs to be worked through to be successful."

Wal-Mart's international growth -- directly or through joint ventures -- depends on the country involved and local laws. "Some countries require a local partner," he said, "so there are different considerations with each country as to whether we enter with a partner. There isn't any single answer."

The NAFTA agreement has helped make Mexico and Canada attractive markets for Wal-Mart.

Martin said that he and Cifra president Henry David have operating responsibility for the joint venture. Goods for the Mexico stores are shipped through Wal-Mart's Lorado, Texas, distribution center. The DC that Wal-Mart set up in a free trade zone in Buckeye, Ariz., isn't involved in shipments to Mexico, but is being used for goods the discounter imports for its own use.