Why Walmart Failed In Brazil?

Why Walmart Failed In Brazil?


Walmart is one of the most dominant retailers in the world.
In 2017, Walmart ranks number one in revenue of all major retailers worldwide.
Walmart operates over 11000 locations under 55 banners across 27 countries.
You can find a Walmart anywhere from Botswana to the UK to Costa Rica.
But despite its success abroad, the brand has struggled to stay afloat in one of the biggest markets in Latin America,
Brazil.
After years of hyperinflation and the GDP growing 1.5% from 1980 to 1993 in Brazil,
the country’s economy was on the rise. Brazil introduced economic reforms in the 1990s and according to
The Washington Post Brazil attempted to move the economy from a period of state-run monopolies to a free market.
Brands like Walmart saw this as an opportunity to expand their global reach with an emerging market on the rise.
By 1995, Walmart announced that they would be entering the
Brazilian market and by 1996, the company opened five stores.
By 2000, Walmart had 14 stores in Brazil but it wouldn’t be long until Walmart began rapidly growing in Brazil.
In 2004, the company made an acquisition of Bompreco and its 118 stores for $500 million.
And in 2005, one more finalize a $757 million acquisition of Sonae’s 140 stores across Brazil.
Walmart believed that these acquisitions would improve the company’s position as a national retailer in Brazil;
operating 295 stores in 17 of Brazil’s 26 states.
At the time, Walmart Brazil’s then president stated “We’re looking forward to getting to know the habits of the local
customers and strengthen relationships with the regional suppliers.”
But understanding the habits of the local customers would be something that would end up hurting Walmart’s expansion plans.
At its peak, Walmart Brazil had 558 stores across the country.
This included Walmart and Sam’s Club, along with local banner brands such as Bompreco and Maxxi.
But that was in 2013. By 2018, Walmart had closed 120 of its stores in Brazil.
Walmart Brazil has been hemorrhaging cash and making very little movement in revenue growth.
The company grew too fast and it wasn’t seeing much of a return on its investments.
According to Reuters, Walmart posted operating losses for seven straight years.
Partly due to trouble with labor, inefficient operation, poor store locations and uncompetitive prices.
CNBC reached out to Walmart but the company could not corroborate the report from Reuters
Through 2014 to 2018, Walmart’s participation in the market share stayed flat to 2.5%.
While its main competitors both Carrefour and Casino, French retailers, they saw a increase in overall retailing market shares.
And over the 23 years it’s been in Brazil, it’s failed to reach the local crowd of consumers.
The reason?
Well, Walmart didn’t adapt to the local consumers needs
and the company didn’t capitalize on how Brazilian shoppers spent their money.
The local spender was not all that interested in Walmart’s famous “Everyday Low Prices” and its one-stop-shop business model.
That’s just not how the typical Brazilian shopper spent their money.
Although it works very well in the U.S. and other countries, such as Chile and Mexico, it backfired in Brazil.
Brazilian consumers are very attracted to promotional sales.
But promotions deals are only effective in Brazil if they are punctual.
So since prices were low every day, Brazilians didn’t actually perceive value in the promotion.
According to McKinsey and Company, they would proactively search for savings and oftentimes they
wouldn’t even shop at multiple stores to find the best deals available.
From discount chains to cash and carry format stores.
One type of retailer that Brazilians don’t utilize is e-commerce shopping.
In fact in 2018, Walmart Brazil announced that would be winding down its first party e-commerce business in the country.
The most popular option for today’s Brazilian consumers are the cash and carry format stores known as “Atacarejos.”
It combines words like “Atacado” which means cash and carry and “Varejo” which means retailer.
That’s because these stores are mixed between the two retail formats.
The atacarejos rise in Brazil is mainly tied to the economic crisis that has affected Brazil in the last couple of years.
So while the atacarejos and the hypermarkets are similar in model
so both have a large array of products they have big selling spaces and attractive prices.
Brazilian consumers which were already price sensitive and with now a limited purchasing power, were forced to-
to think strategically how they did their grocery shopping in the month.
From 2017 and 2018, these kinds of stores grew 11% and raked in $12.5 billion in sales. In that same time frame,
supermarkets and convenience stores only saw small growth of 3.7%.
As for Walmart, 60 of its stores were closed in 2018 alone. Walmart trails behind companies like Carrefour
and Casino who are leaders in the cash and carry format stores according to Kantar.
And Walmart has continued to struggle to find its footing in Brazil competing against these kinds of format stores.
In 2017, Carrefour raked in $16.5 billion and Walmart in less than half of that; making a little over $6.7 billion.
So what was its method for success?
Well, there’s no membership fees like other warehouse stores which can cost anywhere from $45 to $100 a year.
Cash and carry stores traditionally have lower operating costs and are able to offer lower prices for products.
And according to Euromonitor, between 2012 and 2017, warehouse clubs in cash and carry stores in Brazil grew 99%.
Brands like Carrefour’s Atacado, offers customers low interest credit cards that can only be used as stores under the Carrefour umbrella.
As of 2018, there are 2 million Atacado credit cards, which leads customers to spend 15% more on the cards.
Despite these missteps, Walmart pursued a footprint in Brazil.
The company tried to position itself to acquire a different banner stores in Brazil to widen its hold on the country.
One of its successful banner stores was Maxxi, which was a cash and carry format store. But since there are
only 44 stores in Brazil it isn’t enough to keep Walmart afloat.
In addition to closing down stores across the country, it
remodeled a 120 stores as leadership fluctuated under four different CEOs in less than a decade.
In June of 2018, Walmart announced that they will be selling 80% of their business in Brazil to a private equity firm called Advent International.
They want to invest more in the atacarejo model.
So they want to rebrand some of the less profiting hypermarkets into the atacarejo.
They’re going to cut costs as much as they can. Raising different suppliers. That they wouldn’t seek new
suppliers that would raise Brazilian products into their shops.
In a statement about the deal, Walmart said that they will continue to have stake in Walmart Brazil and will
continue giving the Brazil business the best opportunity for long term growth.
CNBC reached out to Walmart but the company did not respond to any questions regarding its struggles in Brazil.
The deal with advent would allow Walmart at 20% stake in the Brazil market but the company expects to record a net loss of $4.5 billion.
Advent looks and turn things around for Walmart’s remaining 438 stores in Brazil without opening any new stores.
For now.

100 thoughts on “Why Walmart Failed In Brazil?”

  1. Good to hear Walmart is not working in Brazil, as there are literally thousands of very small to medium sized private retail businesses that people make their living from; the typical Walmart business plan would completely wreak havoc on most Brazilian communities.

  2. Too expensive, not competitive enough. Its not just perceived value, those cultural problems happen everywhere (see Germany Walmart failure). Probably infrastructure issues, technology shyness from the people, and most importantly, horrible work law practices threatening litigation prohibited the Everyday Low Prices strategy from being successful. Maybe through a different strategy and in a future where leftist politics arent so prevalent there will be a chance. Meanwhile the challenges are in India and China.

  3. Wal Mart in Brazil closed the stores they bought from the competitors you mention in the video, it was a move to eliminate competitors and acquire market share. The recession in Brazil, due to the most corrupt Government in all History, maybe even World Wide, the almost 15 years of PT (Workers Party) Government, has hit all the Market Sectors. High taxes, abusive Labor Laws and Corruption are the Problem of every business in Brazil, just ask any Business Owner not involved in the Corruption Scandals during the 15 years of PT (Workers Party) Government. The decision of investing (buyout) during the recession has made Wal Marts numbers to fall, maybe it pays off, maybe not, but they are far from failing, they are still on the top biggest retailers in Brazil.

  4. Hi " Lady America", how are you? Hei! What about if we talk about Camdem city in the american state of New Jersey? Do you know there? It is a place where MORE than 42% of its residents lives in much worse condition than one shown here. People there live bellow porverty line and the violence rates are very, very high; much worse than here. So"Lady America" how about starting show the world your porverty state? Oh…also we can talk about St. Louis – Missouri; Modesto- California; New Orleans -Louisiana and much, much more…Let's show the world that "Lady America" has much more to show (social problems.) So, "Lady America " what are you going to wear tonight to show to yours guests? The "Disneyland"; dress" the Hollywood" gown? Or perhaps the "California" bikini?

  5. Wallmart in Brazil havent not low prices as in USA, is look like another company. Very different. Bad quality , Theres not too much variety, long lines, they use to put a price tag wish is not the real price.

  6. Aqui perto da minha casa tinha um supermercado brasileiro maravilhoso que foi comprado por essa desgraça de wallmart. Foi um choque ver a total perda de qualidade dos serviços e produtos, preços caros, falta de variedade, a enganação colocando um preço na prateleira e outro ao passar no caixa, longas filas. Um lixo!

  7. That's easy: because no one can compete with THE CRAZY EXPLOSIVE PRICES OF MERCADINHO BIG BOM, ALWAYS THE BEST FOR YOU

  8. the reason Walmart failed in Brazil: It´s a unreliable supermarket, it´s always dirty, you can´t trust in the food they sell (the meat are bad, the cheese…). Besides that, they bought other small markets (some of them were good and local) and made of them the worst markets in the city. Walmart failed in Brazil because they are dirty.

  9. Americans do not consider Walmart to be a Supermarket. It is not a place that one travels to to buy food. People travel to Walmart to buy merchandise. The food at Walmart is not the focus in the United States, but is more of a convenience. But, it is true that Walmart has been trying to push itself into Supermarket arena. But, I would say it has not been very successful for some of the same reasons pointed out by the Brazilians below (lack of variety and unimpressive prices). Nevertheless, there are basically only two stores in the US were food and merchandise are sold together (Target & Walmart). It seems that this is may not be the case no Brasil. And it seems that many of the Brazilians commenting below do not understand this fact.

  10. Não esquecer que Walmart no Brasil não tem nada a ver com Walmart nos EUA. Aqui no Brasil Walmart é só mais um supermercado, mas nos EUA as lojas são muuuuuuito mais completas, com muito mais variedade.

  11. Success abroad? From what I have heard, Brazil rather seems the norm, instead of a exception, when it comes to Walmart's success rate outside of the USA. In another video about why Walmart failed in Germany and in China, they quoted some analyst saying that Walmart fails everywhere it can't drive a truck to. How well business is going in any of those remaining 26 non-USA countries, is questionable and this video here is the first one I saw that said anything about Walmart being successful abroad.

  12. Uma vez vi o walmart fazendo promoção de tacos de polo e baseball
    Fui em bora rindo, sabendo que iriam falir
    empresas norte americanas que prestam serviços no Brasil vão à falência pois acham que estão nos EUA
    foi um erro grotesco a rede walmart vir para o brasil com esse pensamento

    1- Valorizamos variedade, qualidade e não gostamos de viver de produtos vindo de conservantes, isso é fato
    Se algum mercado/supermecado não nos atende, nós iremos boicota-lo

  13. Walmart also failed in Germany. They left Germany after a very short period because they were beaten by German retailers.

  14. I hate their self checkout here in the u.s ….they r allllwaysss crowded. they have like 30 registers and only 1 working + self checkout.. fala sério …

  15. You mention that walmart is growing "too fast". Please explain, because if you mean what I thing you mean than I can fore see the US Walmart fallen because it to is changing too fast.

  16. Seems easy enough, open more Sams clubs, and make them cash-and-carry with no membership fees and a card….seems easy enough.

  17. i'm Brazilian, i can say for you guys, nothing changed, the prices are the same, still all are is expensive, the only thing is changed was the name.

  18. Lack of quality, bad management of the stores, and the recent rise of the Spanish discount chain Dia in some regions. That's why Walmart failed here.

  19. Everyday low prices? In Brazil? That's a joke. A $5 toy runs $20 in Brazil. You can't even buy cheddar cheese at WM in Brazil. Why did it fail? Simple. High prices and a lack of variety. The exact OPPOSITE of what WM represents in the US.

  20. i'm really happy about my Brazil being capitalized rn, socialism and communism doesn't works. I want my country being like my friends country ( USA )

  21. Not taking the time to research your market, moving/expanding too quickly and not planning well? Duh. Are you setting yourself up for failure??

  22. Aquela hora que você vê que a maior parte das imagens são no Rio, eles nem se preocuparam em pelo menos dar uma mudada no "cenário" kkkk

  23. Walmart food is freaking expensive. Just because they tell us they are cheap, doesn't mean that they are! Fake news!!

  24. The bloke who says that 'promotional deals are only effective in Brazil if they are "punctual"' (3:20), means that 'one-off/ad hoc' sales do better than continual low prices. (In Portuguese, 'pontual' can mean 'sporadic' as well as 'punctual/on-time'.)  

    One explanation for this could be that a much lower priced product registers with consumers, while slightly higher priced ones don't. Prices vary more from store to store in Brazil than they do stateside; it is not uncommon for neighboring establishments to offer products with price differences that US consumers would reject. My observation is that past hyperinflation and present inflation decrease consumers' ability to know current prices, while high costs of business simultaneously reduce price-leveling completion among sellers.  

    A contributing factor to the difference in success between Carefour/Casino and Walmart could be the relative ease with which the French can make 'facilitating payments' that their US counterparts find more difficult due to FCPA (Foreign Corrupt Practices Act) and other US government regulations.

  25. The first world, classical economies found in developed countries don't work in banana republics and third world countries. Gee. I wonder why?

  26. The problem was a capitalist company in a corrupt socialist country. The problem is always the goddamned left

  27. cnbc are socialist like cnn cbs msnbc and news media la times new yorks times they lying there for leftis and social list

  28. Why does the person doing the voice over sound like he’s 12. Who thought this sounded professional?

  29. Of course a warehouse store is going to do better in a poor country ..hell Sam's club and PJs are doing better in poor American neighborhoods than Walmart people want to be able to buy in bulk for cheap..

  30. Totally inaccurate propaganda, Walmart is famous for moving into every area, buy out or bankrupt their competition thereby owning the market share then start closing stores leaving consumers stranded with no other way to purchase particular consumables in given areas. Secondly its hard to make a profit selling third world products to the third world.

  31. Why is CNBC have a regular underground weird YouTube kid narrating there videos? That sounds like a voice to a YouTube channel that reveals ancient Hidden Mysteries and the little weird teenager that narrates LOL

  32. How funny would it be if Walmart literally had a store straight up in the middle of the Amazon jungle?

  33. What's funny is I lived with Brazilians on and off for 5 years in America. They only wanted to shop at Walmart because I thought it was like the best store ever. If I would have known about this video I would have definitely asked them why they loved it so much and yet why was it failing in Brazil?

  34. Brazil has too much up and downs in sales and salaries to hold the tight margin Walmart works in.

  35. Mate, muito mais preferível comprar fruta legumes, verduras e até peixe em FEIRA muito mais barato mais perto e de melhor qualidade, fora que são frescos. Walmart nunca foi muito grande aqui no BR até pq a Gnt tem extra e mercearias LMFAO EUA FIQUEM NA DE VOCÊS DESGRAÇADOS

  36. Close them down, and lease the buildings as they do in the US – here the government coverts them to FEMA Camps – to house the slobs when the sh#t hits the fan – so rush down to Walmart to contribute to your coming prison. THIS NO JOKE – YOUR PAYING FOR YOUR OWN JAILS.

  37. Wall Mart Direct completion in Brazil …

    Fresh vegetables, fruits , seafood through your weekly neighborhood ‘s farmer market. Price, availability , do not make this outing necessarily convenient during weekdays for dual working parents , yet there is a good chance you will have a Saturday Farmers Market close by. The whole experience of shopping at these makeshift markets is unique , rewarding , allows you choice and sampling the goods . There is also the bond from the vendor towards the paying customers , saving the package for a later pickup, or simply by wrapping up for the customer.

    Dry goods and processed food. Large metro dwellers will shop in supermarkets or hyper markets. Wall Mart got it right on building configuration, parking , demographics, locations . Brazilian’s middle class disposable income equals of your typical American lower classes in Main Street USA.

    Otherwise they erred on not practicing competitive pricing and poor procurement. The availability of lawn mowers and golf clubs makes for a curiosity or oddity, yet they won’t make the average Brazilian into a weekend duffer and there ain’t no lawn to mow.

    On large metropolitan hubs Carrefour gave them a run for the money on balanced inventory and aggressive pricing. And then there is your local grocer with plenty of what Brazilians spend in groceries , sundries , etc.

    Walmart US procurement tactics are based on grind the local manufacturer and corner it as the biggest game in town until such manufacturer concedes defeat. And then there is China low cost imports. Well , with Brazil’s import duties and the manufacturers having more leverage , the entire advantage for Walmart low prices every day , one stop shopping , is out of the window.

    Carrefour has a long standing tradition of building their business since the eighties with one store and one supplier at the time. Buying up the competition means squat if you can’t use the hired brains you just acquired through a buy in. Suddenly that magic recipe is gone in naught.

    Durable goods. Lay away is still king in Brazil. This is a country where you still purchase a pair of sneakers in installment debit payments. Now take that to buying a fridge, stove , your cell phone. Most durable goods are direct financed by the seller. That is how Casas Bahia , Renner , and C&A , a Dutch retailer make their money. Full markup and in installments. Low delinquency rates. Very profitable.

    Street retail and malls still do very well here. So having smaller box sized stores with fewer itens here will get quite a sizeable turnover through the cash registers.

    Bulk cash and carry as Costco , here called atacarejo, do extremely well. A tell tale that price trumps everything else, specially around adverse times.

  38. Bad business practice. Open stores all over a huge, diverse country. Then say "We are looking forward to getting to know the habits of the local customers." Do your homework first.

  39. WALMART IS KILLING PEOPLE WITH THE GMO FOOD. THATS WHY ITS CHEAP.THE APPLES DONT EVEN TURN BROWN WHEN LEFT OUT

  40. Walmart is getting more expensive everywhere. I've moved a lot of my shopping to Kroger and wish we had more options. Alas, Walmart is killing everybody in rural America with"Not So Low" prices on the important food items and lower prices on Chinese imported seafood and dog chewies.

  41. Walmart also failed in Germany.
    But in contrast to Brasil, the fail in germany was a fast and complete fail from the very beginning.
    I felt quite uncomfortable in german Walmarts. Stupid mottos on the t-shirts of employees, inept advertisements, the overall appearance was just unnatural.
    I also visited several Walmarts in the US, but there I felt comfortable.

  42. Wal-Mart arrogance at it's finest
    Interesting that in Brazil they failed/closed because they didn't understand the consumer while here in the U.S. it was because of theft and not necessarily from customers but employees

  43. Even in the USA Wal-Mart stores have been shutting down. Ten years ago it was "cheap" and considered a good low-cost option. Now they're evolving into a blue collar or middle class one stop store. For example, in the borderlands of Texas (at least where I live) they have an expanded cosmetics and beauty section that has become the poor man's Sephora and ULTA with decent quality products and some revivals from yesteryear like Albolene for example. Those aforementioned stores are luxury cosmetic retail chains in the US. Wal-Mart is becoming what Sears Roebuck was 30 or 35 years ago sans the grocery stores as they never sold food.

    What's taking over in the States are dollar stores. You'll see one in every block, unless you live in a gated or very affluent community. Those dollar stores are slowly evolving into local and national chains. Some sell food, hardware and clothes while others specialize in selling limited or one time use items such as birthday or holiday party merchandise in addition to cheap kitchen utensils, dining ware and electrodomésticos (meaning blenders, toasters and the like).

    There are parts of the US where Wal-Mart is viewed with suspicion due to their labor abroad practices and how they pay so little to its employees that they still need government benefits to survive (food stamps, medical insurance, WIC for mothers with small children and even housing assistance). That beats the purpose of working, doesn't it?

  44. The most unwise thing to do as a grocery store business is to try and go international.
    Culture clashes . A British grocery chain tried to put stores in the US but they failed .
    The biggest difference between the US and Europe and probably the rest of the world is shopping habits . In the US we tend to buy in bulk because we do weekly shopping not daily . Americans , unlike Europe , have a fairly big family to shop for .
    I don't expect Walmart to have any big success outside of America.
    The average American is on a budget and Walmart most often is the cheapest place to shop .
    We have a small Aldi in my town but I don't really care to shop there

  45. We have carreffour in Brazil 🇧🇷. It’s a HUGE retail store like Walmart that is usually located inside shopping malls. Brazilians go to the mall several times a week, it’s part of our culture, so it’s easier to go to the mall and at the same time pick up groceries at carrefour, then it is to go to a Walmart at a separate location and skip out on the mall/ food court and movie theater

  46. A perfect reason why giant markets like Walmart shouldn't be in ecosystems like Brazil, Colombia etc. where smaller regional chains do better at staying afloat and meeting sales needs of locals.

  47. Wow now I feel bad for saying why don't they build some Wal-Mart's in Mexico so they can work and keep their economy going

  48. The video never explained WHY Walmart failed.. It just gave figures on revenue and number of stores. It never got to a real reason why they failed. I would love to know – but this video never explained it.

  49. preço baixo todos os dias kkkkkkk, e os brasileiros não gostam de preços baixos também ??? Eu não acho que eles sabem do que estão falando … é mais barato comprar coisas em outros lugares…

  50. Walmart doesn´t even try in France, because Carrefour, Auchan, Cora, U, etc.
    any french hypermarket would wipe the floor with Sam Walton

Leave a Reply

Your email address will not be published. Required fields are marked *