🤯 Have you seen our AI stock pickers’ 2024 results? 84.62%! Grab November’s list now.Pick Stocks with AI

Walmart's struggling Japan unit finally delivers with online grocery growth

Published 02/20/2020, 04:52 AM
© Reuters. An employee picks out products to fulfil online orders at a Seiyu store in Tokyo
CARR
-
AMZN
-
TSCO
-
WMT
-
3382
-
8267
-
7532
-
4755
-

By Ritsuko Ando

TOKYO (Reuters) - Walmart Inc (N:WMT) might finally have found the sweet spot in Japan's food market with a fast-growing venture ranked third in a nascent online grocery sector, as the brick-and-mortar stores it bought into two decades ago continue their search for profit.

The barely year-old tie-up between the U.S. supermarket chain's Seiyu and local e-commerce firm Rakuten Inc (T:4755) clocked 30% sales growth for late October through December versus the same period a year earlier when Seiyu was going it alone, said Rakuten Seiyu NetSuper Chief Executive Tamae Takeda.

"We're doing even better since the start of the new year," Takeda told Reuters. Concerns over the ongoing coronavirus epidemic may be encouraging people to try the service, she said. "People aren't really wanting to go out."

The change in fortune is a boost for Walmart as it steps up its rivalry with Amazon.com Inc (O:AMZN) in its home market where retailers are racing to deliver online orders faster.

It also demonstrates that greater confidence in online services and improved logistics can win over Japanese shoppers often considered too picky about freshness to buy produce through the internet, analysts said.

Helping drive overall growth, Takeda said, was demand for time-saving solutions, particularly as an increasing proportion of mothers work. Government data showed over 70% of Japanese women with children under 18 work, versus 50% just 20 years ago.

Helping the venture in particular is Seiyu's access to Rakuten's 99 million members, expanding its reach beyond its 333 stores. Rakuten, in turn, has benefited from Seiyu's ties with local suppliers, helping it fight back against Amazon.com.

Together, they are able to better ease the pressure of a shrinking labour market which has driven up delivery costs and prompted Seiyu's rivals such as Uny, owned by Pan Pacific International Holdings Corp (T:7532), to abandon e-commerce.

PROFIT IN SIGHT

Seiyu entered e-commerce in 2000, an early start which analysts said helped propel it to third place in the online grocery sector. It trails only bigger supermarkets Aeon Co Ltd (T:8267) and Seven & I Holdings Co Ltd's (T:3382) Ito-Yokado, and is ahead of Amazon, showed a Statista consumer poll.

Takeda declined to disclose user numbers or sales, but also placed the venture third. The former McKinsey & Co consultant said profitability was "in sight" although the venture would prioritise growth for another two to three years.

That contrasts with Walmart's overall story in the country.

The U.S. firm entered Japan in 2002 buying 6% of Seiyu, building up its stake before a full takeover in 2008. It slashed costs and closed unprofitable stores but has mostly recorded losses.

Many expected it to go the way of foreign peers including Britain's Tesco PLC (L:TSCO) and France's Carrefour SA (PA:CARR) which bowed out of Japan. Last year, Walmart moved to end on-and-off speculation of an imminent exit, saying it hoped to eventually list Seiyu while retaining a majority stake.

Meanwhile, growth online has prompted Seiyu's venture to plan a second logistics centre for this year to bolster scale and efficiency - considered crucial to offset delivery costs. Takeda said the company was discussing setting up more.

That is in expectation of online shopping accounting for 10% of households' 60 trillion yen ($539 billion) grocery spending from around 2.5%, she said, without giving a time frame.

"It is true that Japanese people appreciate fresh food. But people are realising you don't have to go to the supermarket to get fresh food," said Roy Larke at researcher JapaneseConsuming. "Long term, we will get there."

© Reuters. An employee picks out products to fulfil online orders at a Seiyu store in Tokyo

(This story has been refiled to correct Rakuten membership number in seventh paragraph to 99 million from 99 billion.)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.