:: MIS Insights ::

According to a popular economic theory, Consumer Spending, consumers can dictate what happens to the economy because they have the money and spending power. In my opinion, consumers who don’t have money or spending power can also dictate what happens in the economy. Let’s take a look at Wal-Mart’s recent global performance to find out.

Almost a month ago, Wal-Mart pulled out of Germany because of its lackluster performance. The main reason can be attributed to how they forgot to account for the preferences of their customers.

German Wal-Marts adopted the U.S. custom of bagging groceries, which many German consumers find distasteful because they tend not to like strangers handling their food.

This pull-out from Germany happened barely a quarter of a year after Wal-Mart also also got out of South Korea.

The Importance of Culture
In both situations, Wal-Mart failed to take into account the cultures of the repsective countries. Sometimes, these cultures are close to being sacred that they can make or break a business. Business-culture relationships can be influenced by:

• Geography (try selling ice cream at the arctics versus Ice Cream at the beaches)
• Religion (Muslims consider pork as dirty [not sacred] and will not eat it)
• Tradition (Germans wanting to take care of their own food)

Of course this is nothing but common sense available from your local hardware store. Didn’t the analysts and advisers of Wal-Mart think about this? Actually, if there’s a reason why there isn’t a Wal-Mart in the Philippines, it’s because the analysts have done their job.

Pinoy Wal-Mart
In the Philippines, several reasons prohibit wholesale businesses like Wal-Mart from prospering.

• No Money. Filipinos simply can’t afford wholesale purchase of goods. It might be cheaper and more cost-effective, but when getting cheap items mean expensive bulk orders, it no longer looks cheap in the eyes of a budget-conscious person.
• Buying Pattern. Filipinos aren’t used to buying wholesale. We only get what we need at a time - such trait can be traced from our ancestors. In the olden days, everything was a property of the community. Everybody shared everything. This meant that there was no concept of property and no need for hoarding.
• Convenient Competition. There are simply too many supermarkets out there. This saturates the market with enough sources of competition. This availability makes it convenient for people not to hoard. Why hoard? I can always get another bar of soap outside.

On another note, retails stores in the Philippines (i.e. SM or Robinson’s Supermarket) pose a big barrier to entry for wholesale groceries like Wal-Mart. They have a customer-centric ethos which the economies of scale of Wal-Mart cannot bully around. The locals have done their homework and have customized their establishments to fit the needs of the market in terms of pricing and availability, whether they’re servicing those with purchasing power (shops available everywhere so that it becomes convenient for the people to spend) or those without (affordable prices for everyone). Where quality isn’t really much of an issue, economic victors are determined by the price wars.