the Walmart effect

$423 000 000 the value of Walmart’s corporate social investment from

February 2008 to January 2009

500 000 the number of jobs Walmart

wants to create globally in five years, starting in 2010

the percentage of countries in which

Walmart operates where it has union relationships

50%

Since declaring its interest in acquiring a 51% equity

stake in Massmart, US-based retailer Walmart has

been the subject of public scrutiny and media interest.

Interested third parties have offered opinion about

the impact that the retailer may have in South Africa.

Opinion has often been divided and has frequently

focused on emphasising negative perceptions of the

retailer’s practices. There are, however, always two

sides to every story. This publication focuses boldly on

sharing publicly available information about positive

impacts associated with the world’s largest retailer.

02 Walmart global snapshot

03 Walmart job creator

04 Walmart local supply partner

05 Walmart consumer champion

06 Walmart supply chain transparency advocate

07 Walmart best practice innovator

08 Walmart caring philanthropist

09 Opinions

Contents

01

1. Walmart global snapshot

USA: Wal-Mart Supercenters, Discount Stores, Neighborhood Markets, Sam’s Club

UK: Asda Supercentre, Asda Superstore, Asda Living, Asda Supermarket Nicaragua: Palí, La Unión

Mexico: Supercenter, Bodega Aurerra Express, Sam’s Club, Bodega Aurrera, Suburbia, Mi Bodega Aurrera, VIPS Restaurants

Japan: Compact Hypermarket, Seiyu GM, Seiyu GMS, Seiyu, Wakana

India: Best Price

Guatemala: Paíz, Híper Paíz, Despensa Familiar, Club Co., Maxi Bodega

El Salvador: Híper Paiz, Despensa Familiar, La Despensa de Don Juan

Costa Rica: Maxi Bodega, Mas X Menos, Hiper Más, Palí

China: Trust-Mart Hypermarket, Supercenter, Sam’s Club, Neighborhood Market, Smart Choice

Chile: Lider Hiper, Lider Express, Acuenta, Econo, Revive, El Buen Corte

Canada: Supercentres, Wal-Mart

Brazil: Supercenter, Sam’s Club, Todo Dia; Bompreco HyperMarket, SuperMarket, Magazine, Sonae Mercadorama, BIG, Maxxi Atacado, Nacional

Argentina: Supercenter, Changomas, Changomas Express, Mi Changomas

Honduras: Paíz, Híper Paíz, Despensa Familiar, Maxi Bodega

What are Walmart’s retail brands?

Walmart operates under many different banners around the world.

In the United States Walmart operates more than 4 300 facilities including Walmart Supercenters, Discount Stores, Neighborhood Markets and Sam’s Club warehouses. Internationally Walmart operates more than 4 000 stores in 15 markets including Mexico, Puerto Rico, Canada, Argentina, Brazil, Costa Rica, El Salvador, China, Japan, Guatemala, Honduras, Nicaragua, Chile and the United Kingdom. Together with partner, Bharti Enterprises, Walmart is establishing wholesale cash and carry and back-end supply chain management operations in India. Walmart International is the fastest-growing part of Walmart’s overall operations.

How many stores does Walmart operate globally?

(As of 30 June 2010)

USA 4 300 stores

UK 377 stores

Nicaragua 55 stores

Mexico 1 529 stores

Japan 414 stores

India 2 stores

Guatemala 169 stores

El Salvador 77 stores

Costa Rica 171 stores

China 291 stores

Chile 257 stores

Canada 319 stores

Brazil 445 stores

Argentina 46 stores

Honduras 53 stores

02 03

Worldwide employment

Walmart is one of the fastest-growing employ-ers in the world and the company continues to create more jobs for people in its operations. Last year, Walmart announced it would create 500 000 jobs around the world in the next five years. The retailer creates thousands of jobs every year, for example in 2009 more than 10 000 new positions were created by Walmart Brazil. The same year more than 7 000 jobs were created in the United Kingdom, 1 600 new jobs in Argentina and more than 15 000 temporary positions were created to support Christmas trading in Mexico.

Around half of its workforce is unionised

Walmart employs over two million associates worldwide and the company has union relation-ships in around half of the countries in which it operates. Walmart Chile has 50% union membership and Walmart China has 70%.

Walmart recognised as a good employer

One indicator that people want to work for Walmart was the receipt of more than 13-million job applications online and from ap-plicant kiosks in 2008. In Canada The Workplace Institute listed Walmart Canada among the nine best employers for Canadians over the age of 50 (in 2008 and 2009),

In the United Kingdom more than 90% of asso-ciates say they feel good about their future with Asda. In China more than 80% of associates said they would recommend Walmart to a friend or relative seeking employment.

Built on diversity

Walmart is focused on attracting and retaining a diverse workforce. The company recruits from colleges and universities with large multicul-tural populations and as a result has achieved high levels of associate diversity. More than 869 000 Walmart associates are women, 430 000 are mature people of 50 years-old or older and 257 000 are African Americans. Walmart’s employer diversity credentials are widespread and in 2008 the company was recognised by more than 37 external interest groups for its contribution to diversity. These include:

•��� Employer�of�the�Year�(2008),�National� Association of Governors’ Committees on People with Disabilities;

•� Top�Companies�for�Female�Executives�(2008),�National Association of Female Executives;

•� Top�Companies�for�Female�Executives� (2008), National Association of Female Executives; and

•� Best�Companies�for�Multicultural�Women�(2008), Working Mother magazine.

Career building

The company also invests meaningfully in developing the careers of its associates. Walmart provides its associates with on the job training, leadership seminars and direct access to job opportunities through its Career Prefer-ence System. Careers can be built at Walmart. Nearly 75% of the company’s store manage-ment joined Walmart as hourly associates.

2. Walmart job creatorWalmart creates jobs for people around the world. Walmart’s employment practices focus on diversity and the company has union relationships in around half of the countries in which it operates. The company has been recognised as a good employer in many countries, so its associates often regard Walmart as a good place to work.

02 03

Procuring from local suppliers

Walmart looks for opportunities to support local suppliers. In India, the Best Price Modern Whole-sale store serves a clientele of local restaurant owners, hoteliers, caterers, produce resellers, retail store owners, offices and institutions. These patrons choose from a selection of ap-proximately 6 000 food and non-food items, 90% of which is sourced locally.In Mexico, as much as 84% of Walmart’s produce is sourced from Mexican producers (as of November 2009).

Introducing producers to the supply chain

In many of its operations, Walmart partners with emerging farmers and suppliers with the aim of including them into the local supply chain. In El Salvador in 2009, Walmart, helped organise a merchandising show with the programme, A Hand to Grow, to help support the develop-ment of small and medium sized manufacturers. Small local companies were able to display their products for Walmart’s buyers, resulting in the introduction of 50 products in selected stores for a 90-day trial period. After the trial period, Walmart looked for opportunities to increase the number of stores where these products could be sold.

Improving access for local suppliers

For potential suppliers who might benefit from greater support and developmental assistance, Walmart runs initiatives around the world.

In 2008, Walmart China announced that it would engage one million farmers in a direct farm programme within three years. The goal is to establish farmer cooperatives that Walmart can purchase produce from, removing the

middleman and bringing higher returns to farmers and lower retail prices to customers. By working directly with the farmers in China, Walmart is able to transfer knowledge on sustainable growing techniques and food safety to growers. As a result, the quality and freshness of both conventionally farmed and organic produce has improved. By the end of 2009, Walmart built 28 direct farm platforms with 280 000 participating farmers.

In India, Bharti Walmart launched a Direct Farm Programme in 2009 and the joint venture part-nership is working with 100 farmers modernise to their farming techniques, including safer use of pesticides and fertilisers, These farmers also enjoy access to the marketplace to sell their crops.

In Guatemala, Walmart is helping small local farmers improve their agricultural capacity through its Tierra Fértil programme and the Inclusive Market Alliance for Rural Entrepreneurs (IMARE,) a three-year partnership with Mercy Corps and USAID. By offering funds, technical support and market information, Walmart helps the farmers grow high quality, competitively-priced produce that is being sold at Walmart stores or other retailers in the marketplace.

Opening export markets

Walmart is also able to provide access to its international retail network by opening export markets to local suppliers. Walmart Brazil pro-vides opportunities for local industry to export their products all over the world. Candies, corned beef, chocolate, crackers, towels, bedclothes, shoes, coloured pencils, pet toys and furniture are some of the top items that Walmart Brazil exports to the United States, Canada, Mexico, Puerto Rico, Argentina, England, El Salvador, Costa Rica and Guatemala.

3. Walmart local supply partner Walmart’s stores in the United States buy from more than 61 000 suppliers in more than 55 countries around the world. The company also, however, aims to meet local needs by creating and supporting partnerships with local suppliers and farmers.

04

Saving consumers money

A good example of Walmart’s impact on pricing is the Asda Price Guarantee in the UK. The price checker is powered by an independent website that compares like-for-like branded or own label groceries. If it turns out shoppers could have purchased a basket of eight or more comparable products cheaper elsewhere, Asda refunds cus-tomers the difference. In fact, Asda has offered a 10% Cheaper Guarantee, which says that com-parable grocery shopping will be 10% cheaper at Asda than at Tesco, Sainsbury’s, Morrisons and Waitrose or it will give customers the difference.

In the US, a 2008 study commissioned in New England about the effect of Walmart Super-centers on grocery prices and the competitive effects on prices at conventional supermarkets found that Supercenters provide products at significantly lower prices. In fact, prices on national brand groceries decrease 6% to 7% at competitors’ supermarkets within a 5-mile (8km) radius. Annually, families living within 8km of a Supercenter who shop at the store will save an estimated $186 to $298 (R1 339 to R2 145) per person.

Democratising green

Walmart isn’t only about every day low prices. The company also says its customers shouldn’t have to choose between a sustainable product and a product they can afford.

In�2009�The�New�York�Times�discussed�the� legacy of Walmart CEO, Lee Scott, saying that for decades many consumers felt that going green

was a luxury that was reserved for those with enough money and time to buy groceries at natural food stores and organic clothing from specialty retailers. By comparison, today Walmart is working with suppliers to make the most energy intensive products in its stores including personal computers, video game consoles, air conditioners and televisions at least 25% more energy efficient by January 2011 (compared to 2008).

As of January 2010, 75% of the window air-condi-tioners�sold�in�Walmart’s�US�stores�have�ENERGY�STAR® energy efficiency ratings and working with US television suppliers, Walmart has also helped increase the average energy efficiency of the televisions it sells by 67%.

Identifying harmful chemicals

Another of Walmart’s goals is to drive the devel-opment and sale of products that are better for consumer health and the environment. Walmart has developed a team to identify chemicals in products and encourage suppliers to explore alternatives. Walmart’s GreenWERCS assesses and screens the composition of chemical- based products.

Making healthcare affordable

In the US, Walmart is lowering prescription costs for companies and increasing the number of electronic prescriptions. By reducing waste and increasing efficiency in the health care system, the company believes people will have better access to quality, affordable healthcare.

4. Walmart consumer champion Walmart aims to save people money so they can live better and to be the greenest company on the planet. These goals are translating into tangible improvements as Walmart lowers prices, democratises environmental responsibility, investigates chemicals and lowers prescription costs.

05

Improving transparency

Walmart believes its customers want to buy products that are more efficient, longer lasting and better performing. It also believes its customers also want to know more about each product’s lifecycle so that they can be sure the items they buy are produced in a responsible way.

For example, Walmart launched Love Earth® jewellery in 2008, a completely traceable fine jewellery line that allows shoppers to trace pieces back to the mines they came from.

Taking the pursuit of transparency even further, Walmart announced the launch of a Sustainable Product Index in 2009. One key objective of the index is to bring greater transparency into all areas of the supply chain.

Learning about supplier practices

The first step in developing Walmart’s Sustain-able Product Index was to distribute a supplier sustainability assessment to all of the retailer’s suppliers. The assessment asked 100 000 global suppliers to provide responses to 15 questions that evaluate sustainability. The questions were divided into four areas:

Energy and climate•�Natural resources•�Material efficiency•�People and community. •�

Using the information from this assessment, Walmart has been identifying the suppliers who are instrumental to supply chain sustainability progress as well as those who are in need of greater support in building a more sustainable business.

Evaluating product data

The second step in developing the index has been to determine the social and environmental impacts each and every product on Walmart’s shelves might have, from raw material sourcing to safe disposal.

A consortium of universities has been collaborat-ing with suppliers, retailers, NGOs and govern-ment officials. This consortium is responsible for building and maintaining a global database of information on the lifecycle of Walmart’s prod-ucts. This data will ultimately act as the backbone for the development of a consumer-facing index tool for shoppers in Walmart’s stores.

Improving consumer labelling

Once all the data is compiled, Walmart aims to share it with consumers in a simple and easy to use format. The information from the database will be used to label products according to a consumer-friendly rating, allowing shoppers to compare the sustainability of similar products. (How that information is delivered to consumers is still undetermined, but could take the form of a numeric score, colour code or some other type of label.) This will make product information consid-erably more transparent, enabling consumers to access information so they can make choices and consume goods in a more sustainable way.

The index was not, however, Walmart’s first big step in vastly improving transparency. As of the end of January 2009, in aggregate, 49% of the total weight of fresh or frozen seafood sold at Walmart stores in the United States already had a Marine Stewardship Council (MSC) or Aquacul-ture Certification Council (ACC) label. This means Walmart’s customers have been able to easily identify and select products that come from sustainable fisheries.

5. Walmart supply chain transparency advocate

06 07

6. Walmart best practice innovator

06 07

Using less packaging

Packaging is at the nexus of every global supply chain and customer relationship. This is because for nearly every product sold in stores, there is both primary and secondary packaging. Small changes to packaging can have significant impacts on the use of materi-als, manufacturing, shipping containers, trucks, storage, refrigeration, waste and energy used for production. This is why Walmart established its Packaging Network with the aim to reduce the amount of packaging in the company’s supply chain by 5% by 2013. Conservative annual estimates of the changes Walmart can make by 2013 based upon a 5% packaging reduction in its supply chain are (in the United States only):

667 000 metric tons of CO•� 2 not emitted into the atmosphere 213 000 trucks off the road annually •�66.7-million gallons (252-million litres) •�of diesel fuel saved.

Making headway each year

In 2005, Walmart’s packaging team partnered with select private label brand suppliers to improve the packaging on nearly 300 items in its Kid Connection toy line. By making the packaging a little smaller on this one toy line, Walmart used 497 fewer shipping containers and generated freight savings of more than $2.4-million (R17.8-million) per year.

Since 2006, Walmart’s United States Packag-ing Network has hosted an annual Sustainable Packaging Expo in Bentonville, Arkansas.

Here, approximately 2 000 product suppliers meet with 130 packaging suppliers to investi-gate sustainable packaging options.

In 2008, Walmart Brazil created a project called End-to-End, which analyses the lifecycle of products and allows Walmart to work with suppliers to develop more sustainable prod-ucts. In 2009, this project resulted in 10 new or redesigned products that reduced packaging materials or utilised recycled materials for the packaging.

Sustainable packaging scorecard

In addition to Walmart’s annual sustainable packaging expo, the company has also devel-oped an online packaging scorecard to gather information on suppliers’ product packaging.

The scorecard allows suppliers to measure how their product packaging helps reduce energy, eliminate waste and sell more sustainable products. It evaluates many environmental attributes of packaging including greenhouse gas reductions, substrate material choices and chemical composition.

The scorecard database currently contains information for more than 329 000 items car-ried in Walmart stores and 11 000 items carried in Sam’s Club. It has already been rolled out to suppliers in Canada and Mexico, where they are in the process of adding their product packaging information into the system. Wal-mart expects that by the end of 2011, buyers in Canada and Mexico will be able to use the information to influence purchasing decisions.

Walmart’s ultimate aim is to be packaging neutral globally by 2025.

Walmart has many company-wide goals. Included in these are the goals to create zero waste and to sell environmentally friendly products. Walmart has identified packaging reduction as a key opportunity for making headway in these areas and the company is working with its suppliers to develop sustainable solutions around the globe.

Ongoing investment in US education

In 2009, Walmart and its Foundation gave more than $53-million (R381.6-million) to fund educational programmes in communities across the United States. Through its scholarship programmes, the Walmart Foundation recently awarded more than $9-million (R64.8-million) in academic scholarships to help students afford higher education in 2010/2011. The com-pany also recognises the important role teach-ers play and its Teacher Rewards Programme paid out more than $4-million (R28.8-million) to 40 000 teachers for the current school year.

Billions spent fighting hunger

In May 2010, the Walmart Foundation an-nounced a $2-billion (R14.4-billion) cash and in-kind commitment to fighting hunger in the US. Through the end of 2015, Walmart will donate more than 1.1-billion pounds (2.4-billion kg) of food valued at $1.75-billion (R12.6-billion) and give $250-million (R1.8-billion) in grants to support hunger relief.

The company is also mobilising its associates and customers by, for example, having its logistics team lend their expertise to help food banks become more efficient in their operations.

Mobilising fast disaster relief

When disasters reach the point where relief efforts exceed the local level of response, Walmart is able to provide quick assistance. Working with the American Red Cross and Salvation Army, Walmart and its Foundation are able to provide life-sustaining items to those in need in the US. Around the world, the company has committed million of dollars for disaster relief efforts in earthquake-torn regions, such as Chile and Haiti. During the Sichuan earthquakes in China, Walmart committed funds to rebuild schools, repair countryside clinics and purchase ambulances.

International aid

Walmart also invests in ongoing aid programmes to address food insecurity and support skills development.

Walmart Argentina provides food and funding to 29 soup kitchens. Walmart India launched a training centre in Punjab, offering students scholarships and world-class skills training in retail and cash-and-carry operations. Walmart Mexico, meanwhile, established 1 634 vegeta-ble gardens and family farms that supply food and income to more than 3 230 people in Oaxaca.

7. Walmart caring philanthropistIn 2008 Forbes magazine recognised Walmart as the “Most generous company overall”. Through its philanthropic programmess and partnerships, the Walmart Foundation funds initiatives in education, workforce development, economic opportunity, environmental sustainability and health and wellness. From 1 February 2008 to 31 January 2009, Walmart and its domestic and international foundations gave more than $423-million (R3,05-billion) in cash and in-kind gifts globally.

08

This would be our first retailing operation

in Africa, and the people of South Africa

understandably have questions: What is

Walmart? And why do we wish to come

to Africa?

Walmart is a retailer, founded by Sam

Walton, that began in a small town near

the middle of the US in 1962. We desire

to have stores in Africa because we’re

convinced that Walmart’s core mission –

to save people money so they can live

better – is a compelling fit with Africa’s

growing economic vitality. Nowhere is

that vitality more apparent than in SA.

Surveys show that a majority of South

Africans aren’t familiar with the name

Walmart. That’s not surprising. Our inter-

national expansion over the years has in-

cluded the acquisition of local retail chains,

and we typically retain the brand names

of the chains we acquire, as we plan to

do with Massmart’s stores. As a result,

we operate under 55 different local ban-

ners in 15 countries around the world.

While every acquisition and every local

market is unique, our experience of enter-

ing and growing these markets shares

important characteristics that will be part

of our presence in SA. We pioneered the

concept of “everyday low prices” in the US.

The concept is simple: rather than moving

prices up and down with periodic price

promotions, we charge consistently low

prices all the time. By offering everyday

low prices in SA, we hope to increase the

purchasing power of the rapidly growing

middle class and disadvantaged families.

We plan to open new stores in SA and the

region, in communities where consumers

have been traditionally underserved.

In addition to growth in new stores, we

look forward to growth in the food choices

we can offer, especially in fresh produce.

We expect that jobs will be created in SA

to accommodate this.

Consistent with our emphasis on being a

local company, we will rely on Massmart’s

management team. As we expand and

recruit new associates for management

and other jobs, we will recruit local people

and provide training and opportunities for

career growth. We have done this success-

fully in all markets in which we operate.

Around the world, our stores typically

source a majority of products locally. In

China, Brazil, India and Mexico, more than

90% of their food and merchandise comes

from local suppliers. I expect that in SA we

will have similar sourcing strategies. We are

passionate about the opportunity to work

with smaller local farmers to help them

become Walmart suppliers, for our local

stores as well as for global export. We’ve

had a growing sourcing operation in SA

for five years. Our sourcing office in Stellen-

bosch purchases about 25% of the South

African citrus shipped to the US.

We also look forward to working with the

labour unions representing Massmart as

we grow. Half of our national operations

around the world have some level of union

representation. Our focus in these rela-

tionships is on doing what is best for our

customers and employees.

We have become a company with a strong

local focus in our operations, sourcing, hir-

ing and community involvement. Walmart

is known globally for growth in jobs and

stores. We are a company that enjoys

strong relationships with communities,

governments and consumers.

Our emphasis on localisation extends to

becoming a contributing partner in each

country, economically and socially. In SA,

that will mean our active participation in

supporting black economic empowerment.

Massmart has distinguished itself among

retailers in this social programme, having

achieved level-three contributor status.

We will build on that.

We work hard at being a responsible

citizen�of�the�world.�You�c

an�see�that�

in our efforts to forge and promote

sustainability – within Walmart and

among our suppliers and in our

support for social action projects.

Being a responsible global citizen

begins with being a responsible

local citizen. Walmart looks

forward to earning our credentials

as a responsible and productive

citizen of South Africa.

- McMillon is CEO of

Walmart International

DOUG McMILLON: Why Is WaLMart

kNOCkING ON sa’s DOOr?

Walmart is working with South Africa’s Competition Commission on our plan to acquire a 51% interest

in Massmart, the South African-based holding company better known by its retail store brand names

— Game, Makro, Cambridge and Builders Warehouse.

Published: 2011/01/26, Business Day

09

IF�ANYONE�still�questions�whether�Africa�really is the next big investment player,

at least one seriously big hitter, the world’s largest retailer, has no such

doubts. Walmart’s $2,3bn offer for 51% of SA-based Massmart is the Arkansas- based company’s second biggest

investment in more than a decade. In that time, Walmart has grown its

non-US revenue from virtually zero to a quarter of its annual $400bn turnover.The significance of this investment –

and let’s not forget Walmart was pre-pared to stump up double the amount for all of Massmart – has not been

lost on audiences in SA or elsewhere. Recently, for instance, the Daily Record

newspaper reported that farmers in far-off Uganda were likely to benefit

from the deal. It predicted Walmart would “extend its experience in con-

necting farmers with the supermarket’s global supply chain, boosting farmer

incomes, and helping them to improve the quality of their produce”.

Quite how and when all of this will come to pass is not entirely clear: Massmart

has just one outlet in Uganda – a Game shop in Kampala – and even in Mass-

mart’s home market no one seriously expects that the Walmart acquisition

will result in an overnight explosion of new stores. (Massmart has, of course,

put on record its plan to add another 150 to 160 stores in SA and Africa, a more-than-50% increase, which, it has

indicated, will take several years to roll out.)

All indications so far are that Walmart is in no particular hurry to suddenly throw

up what the Americans call “super cen-tres” across the length and breadth of

Africa (Andy Bond, the executive respon-sible for Walmart’s acquisition, has said he is more than happy that Massmart is

appropriately aggressive about expan-sion.) What is quite clear, however, is that Walmart has bought into

the growing belief that Africa is undergoing economic and social

change for the better.By putting $2,3bn where its mouth is,

Walmart has signalled a massive vote of confidence in the future of SA and of the

rest of the continent, a belief in Africa’s future that is, regrettably, not that com-

mon in our own country.The modern African economy is about much more than just resources. These

account for 24% of African gross domes-tic product, while the so-called consum-

er-facing sectors, of which retail is an important component, represent 30%-

40% of the continental economy. Africa has a combined population of 1-billion

and it is not inconceivable that within the space of a generation its number

of consumers could surpass China’s.Greater political stability and more

equitable, rational economic policies, combined with rapid urbanisation,

will see the number of Africans living middle-class lives rising from 35% now

to more than half in only a decade.For these urban consumers, the kind

of modern retail experience a Massmart can offer them comes as manna from heaven. They are used to small neigh-

bourhood corner shops and general-dealer type stores. The big, spacious,

modern stores that Massmart and SA’s other retailers bring to their cities chime

precisely with the kind of lifestyles these people always envisaged for themselves

and their families.

In the wake of the Walmart/Massmart announcement, Bloomberg tracked

down one of this new type of shopper, Richard Twesigye, a 61-year-old busi-

nessman who does his shopping at the Kampala Game precisely because

it gives him such a retail experience.“Some things may appear expensive

MassMart Offer - It’s WIN-WIN as WaLMart pUts Its MONey Where Its MOUth Is

Walmart may have extensive emerging-market experience, even its logistics

experts will be able to learn a trick or two from Massmart.

Published: 2011/01/17, Business Day

10

but considering their superior quality, prices remain good,” Twesigye told a

Bloomberg correspondent. “At such a big store, one can avoid the hazards

of human jam, which tends to come with pickpockets.” Just as appealing

to shoppers such as Twesigye is the previously unimagined variety of

merchandise available.And, of course, the prices. This is where the Walmart clout is going

to have a major effect. The US dis-counter’s experience in sourcing stock

at the lowest possible prices is legend-ary and it bears mentioning that this

experience is not restricted to the US market. In the past decade, Walmart

has learnt a great deal about operat-ing in emerging markets where, as

Bond said recently, they understand the challenges of satisfying a market

that has small homes, small refrigera-tors and few cars.

Walmart’s purchasing clout will help Massmart source electronics and

homeware at prices that will appeal to Twesigye and millions of shoppers

like him. In SA, one can expect the old debate about Walmart’s effect on

small local business to resurface, but what is undeniable is that the Ameri-

cans’ entry will mean lower prices for consumers – particularly those of the

lower living standard measures.With Massmart moving more into fresh produce, the competition, in the

words of Pick n Pay founder Raymond Ackerman, will really have to pull up their socks.

Also, in time – as the Daily Record predicts, small local farmers in Uganda,

SA and elsewhere (at least those who are able to meet the strictures of a

very demanding buyer) will find new and growing markets for their fresh

produce. For Walmart/Massmart it is politically and commercially important

that they are seen to be encouraging local producers but, as the business

expands its footprint on the continent, it will inevitably become increasingly

integrated with the local economies in which it operates. One Walmart

operation with which I am particularly familiar is that of Asda in the UK –

an operation Bond headed up until recently. There is simply no comparing

Asda before and after Walmart. Today’s Asdas are spotless, spacious, the staff are on their toes, the quality is very

good and the prices exceptional. Most significantly for Massmart, the

Asda demographic is one that will help Walmart quickly come to grips with

the emerging consumer in Africa.

In the typical Asda store today, only about 10% of total floor space is

devoted to storage. That’s a testimony to the sophistication of its just-in-time

logistics operations. In SA, the per-centage of space given over to stock

is more like 40%-50%, but that has a lot to do with the much larger dis-

tances delivery trucks have to cover in SA. In the rest of Africa, the challenges

and the cost of getting goods into stores are of a much greater magni-

tude than in SA (although these costs are compensated for, to some extent, by higher margins) and, while

Walmart may have extensive emerg-ing-market experience, even its

logistics experts will be able to learn a trick or two from Massmart. CEO

Grant Pattison and his team are very good at logistics; in the discounting

game they have to be good at driv-ing costs out of the supply chain if

they are to remain competitive.The Walmart/Massmart deal, one has to conclude, is a partnership, if not

of equals, then at least of strength.- Gilmour is an investment analyst at Absa

MassMart Offer - It’s WIN-WIN as WaLMart pUts Its MONey Where Its MOUth Is

Walmart may have extensive emerging-market experience, even its logistics

experts will be able to learn a trick or two from Massmart.

Published: 2011/01/17, Business Day

11

When Walmart arrived in

Mexico in 1991 as a result of

a joint venture with Cifra, then

Mexico’s largest local retailer,

many expressed concern.

At the time I was a manager in

Cifra’s merchandising depart-

ment. What I did not anticipate

was the positive transforma-

tion that Walmart would bring

to the local retail market.

Right from the start, we could

see that Walmart embraced

our local culture. It became

clear to me that Walmart had

come to my country not to

change us, but to help us

grow and become even more

successful. Walmart invested

significantly to help us expand,

particularly into underserved

rural markets. Just in the last

decade, we have added 1 000

new stores – 267 of those

last year.

Most of these stores are

smaller formats that cater to

middle- and low-income fami-

lies. Each of these stores offers

our customers a broad assort-

ment of high-quality products

at consistently low prices.

Walmart pushed us to become

even more local by encourag-

ing us to partner with local

farmers and suppliers. Today,

Walmart de Mexico sources

94% of its products locally,

from 17 000 local suppliers.

Many of our local suppliers

have become part of Walmart’s

global supply chain and have

found a significant market

for their products all over

the world.

Walmart has encouraged

us to work productively

with our local labour unions.

We continue to maintain

healthy and positive relation-

ships with our unions, which

today represent 18% of our

total workforce. In addition,

our employees have benefited

greatly from Walmart’s invest-

ment in training and develop-

ment programmes. In 2010,

we invested more than eight

million man hours into train-

ing. Rather than importing

managers and executives from

abroad, Walmart has prior-

itised local talent and offered

education to encourage career

development.

My personal career journey

is a perfect example of the

opportunities Walmart creates.

I started on the shop floor and

now serve as CEO of the Latin

America region. A large per-

centage of our executive team,

in Mexico and globally, also

came from the shop floor.

Perhaps the greatest benefit

of our partnership is the good

work we’ve done for our

people and our country.

In 2003, we formed the

Walmart de Mexico Founda-

tion, which has benefited and

improved the quality of life

for hundreds of thousands

of Mexican families.

Walmart has also challenged

us to set aggressive sustain-

ability goals. We have set an

objective of 100% of our units

operating with renewable en-

ergy by 2025, and we recently

established a major wind

farm that supplies electricity

to 348 of our stores in Mexico

and Central America. About

10 years after Walmart’s initial

investment in our company,

we decided to change our

company’s name from Cifra to

Walmart de Mexico. This was a

personal choice for us, and it

reflects the positive experi-

ence that we have had within

the Walmart family.

The relationship my company

built with Walmart illustrates

the emphasis Walmart places

on local culture and the care

it takes to serve the local

community. I have every con-

fidence that Walmart will be

an ideal partner for Massmart

and will continue its tradition

of bringing meaningful value

to customers, employees and

consumers across South Africa.

– Solorzano is the chief executive

for Walmart Latin America

WaLMart’s WINNING Ways

Right from the start, Walmart embraced our Mexican

culture, writes Eduardo Solorzano

Published: 2011/01/30, City Press

Published by Shop Talk on behalf of Massmart for the Gordon Institute of Business Science

15 February 2011 conference, Johannesburg.

the Walmart effect