Wal-Mart being one of America's chain hypermarkets tried entering Argentina, as well as other nations across the globe, in an attempt to capture its portion of a profitable market. By bringing these huge types of stores all over the world, Wal-Mart wanted to convey a different shopping experience in other cultures and to of course make a lot of money while doing that. The nature of supermarket industry in Argentina is totally different from that one in America and a number of cultural influences had a great impact on Wal-Marts strategy while entering that market. At the time Wal-Mart was entering Argentina, Argentineans were not that happy with American supermarkets and the company was not receiving the profits that were expected before entering Argentinean market.
Wal-Mart entered Argentinean market alone in 1995, with four stores, two Supercenters, and two Sam?s Club. Wal-Mart had located all of the stores in Buenos Aires region which is the largest region of the country that subsequently has the largest number of potential buyers. Wal-Mart used its approach of offering low prices and a tremendous number of discounts to Argentinean consumers. However, the competitors in Argentina reacted immediately by opening new stores and rejecting Wal-Mart?s discounts and advertising campaign. Wal-Mart was the first American retail seller that offered American style service and much lower prices than local stores that were mostly sole proprietorships.
However, Argentina by 1994 already had big retailers that automatically stood up on the Wal-Mart?s road. The strongest Wal-Mart?s competitor in Argentina is French Carrefour that by the time of Walt-Mart?s entrance had operated for about fifteen years and had fourteen stores in Buenos Aires and it suburbs. Carrefour had already established relationships with vendors by that time and even tried to persuade the latter to refuse working with Wal-Mart. It was a great struggle for American retail giant, although, the managed to overcome this difficulty and tried to gain some market share.
Wal-Mart?s entry to Argentina was really unique as Wal-Mart for the first time entered the foreign market by itself. Wal-Mart had at the first glance good prospects for entering Argentinean market with its strategy. First of all, Argentina is one of the most prosperous South American countries with average income per capita $20,000 where the number of middle class people was rising. Secondly, Argentina was greatly understored having only a couple of foreign retailers. People mostly did shopping in small stores. Wal-Mart could give an alternative to consumers offering different system of shopping.
On the other side, Wal-Mart did not take into account cultural differences between the U.S. market and Argentinean that resulted a negative effect on Wal-Mart?s operations in Argentina. Argentinean consumers spend one close to one third of their incomes on food items. Wal-Mart at the start in Argentina controlled 2.5% of food market comparing to 16.5% of not-food products. It was a very weak point of Wal-Mart because there was a small chance that consumers that just went out shopping for food would go to Wal-Mart to buy non-food products. It was a very good lesson for the company if it decided to further expand on the global market. However, as the company reported, by the end of 1996 Wal-Mart had 35 shopping centers in the country that made sales of $3.8 million.
A number of publishers criticized Wal-Mart?s penetration of foreign markets since they did not even try to adapt the stores to particular tastes of consumers. Most of European retailers that operate in Argentina long time ago started to change the format of their hypermarkets to smaller stores that would suite strange cultural desires of the native population. Wal-Mart did not bother doing that. It is extremely difficult to compete that way. Wal-Mart should have taken seriously cultural differences prior to entering foreign market.
However, Wal-Mart is expected to capture 3% of the Argentine retail market by 2008 with estimated sales of $3.1 billion . Some, economists, although, advise Wal-Mart to close business in Argentina and some other countries and better concentrate on the U.S. market.