Wal-Mart Looks East

Wal-Mart chiefs want to expand into the rapidly developing Russian market, with speculation circulating that the retailer has been seeking out potential partners, according to the British business daily Financial Times.

Russian media have reported that a partnership between Wal-Mart and the country's leading food retailer, X5, could be possible, pointing out that X5 also has contacts with Tesco and Carrefour.

German retail executive Stephan Fanderl is to take charge of the possible expansion in his new role as Wal-Mart's president of emerging markets, the Financial Times reported.

Fanderl has previously worked for German retail group Rewe as head of hypermarkets and supermarkets in Germany.

Eastern expansion after Cold War

Leading European Wal-Mart rivals Tesco, Metro and Carrefour all expanded into the eastern Europe in the 1990s following the end of the Cold War. France's Carrefour has continued expansion and is expected to open two hypermarkets in Moscow and Krasnodar this year and add five openings next year.

Wal-Mart, on the other hand, has gone down a rocky road in Europe. The group's acquisition of Asda in the UK was considered a success, but Germany has been a different story.

In 2006, it sold over 80 stores in Germany to the Metro chain. The US giant had struggled to establish itself in the country's intensely competitive market, the world's third-largest after the United States and Japan.

"As we focus our efforts on where we can have the greatest impact on our growth and return on investment strategies, it has become increasingly clear that in Germany's business environment, it would be difficult for us to obtain the scale and results we desire,'' Michael Duke, a vice chairman of Wal-Mart, said in 2006, explaining the move.

In addition to proving ineffectual in fighting off cut-throat competition from local discount retailers Aldi and Lidl, Wal-Mart's disastrous performance in Germany was believed to have been a combination of pressuring German executives to enforce American-style management practices and a failure to fully understand the German market.

Aiming not to repeat mistakes

The Financial Times reported that Wal-Mart's international stores account for 24 percent of its overall revenues, with the retailer eyeing increased international expansion as its US market reaches its saturation point.

This year, Wal-Mart's rate of store growth overseas is expected to exceed that in the US for the first time in the chain's history -- with growth concentrated in in Latin America, Canada and China.