Wal-Mart Steps Up Exploration of Russia

Wal-Mart, it seems, it taking another step toward entering the retail sector in Russia.

The company has registered as a legal entity in the country – establishing a subsidiary dubbed WM Eastern Europe Holdings — and joined a local trade organization, the Russian Association of Retail Trade Companies, the Moscow Times has reported.

The move follows other tentative moves by Wal-Mart in the country. In April, the company announced the appointment of Dr. Stephan Fanderl as president of Wal-Mart emerging markets east to lead the company’s exploration of business opportunities in Russia and neighboring markets. Prior to his Wal-Mart appointment, Fanderl was head of hypermarkets and supermarkets for the Rewe Group, a German retail and travel company. Before that, he held roles with another German retailer, Metro Holding AG, with responsibilities in Poland.

As an entrée into Russia, the Moscow Times added, Wal-Mart is working with an investment bank to identify retail chains that might need cash. The credit squeeze has hit the country and is likely to drive consolidation in the retail sector, which provides Wal-Mart an opportunity to enter the market on good financial terms.

In looking to partner with an existing company, Wal-Mart is approaching Russia a little like it did India. There, Wal-Mart formed a joint venture with Bharti Enterprises for wholesale cash-and-carry and back-end supply chain management operations. The partnership is preparing to launch its first wholesale cash-and-carry store, similar in concept to a warehouse club and selling a wide range of fruits and vegetables, groceries, footwear, clothing and other general merchandise items, in northern India this year. Both Russia and India are subject to what might be termed irregular business and legal practices. A reliable partner that knows the ropes is all the more valuable.

Another factor to consider is that Lee Scott, speaking at the National Retail Federation convention last week, said that Wal-Mart had learned through its experiences internationally, and particularly in Germany, that employing local management is critical to global success. Wal-Mart can provide distribution expertise for the international organization and act as a resource but, he said, knowledge of local preferences and practices is critical to operations outside the United States. Wal-Mart seems to be on the look out for it in Russia.