From Oxcart to Wal-Mart: Dealing with Duality in Emerging Markets

From Oxcart to Wal-Mart

As more and more international retailers make a beeline for emerging markets like India, China, Nigeria, Mexico, and other markets, it is important for these retailers to embrace the chaos and duality that is inherent to these markets.

For instance, in India, more than 95% of the retail market is dominated by Kirana stores or what are called as “mom and pop” stores in the United States. Similarly, in Nigeria and Mexico, the retail space is characterized by the coexistence of small retailers alongside big multinationals like Wal-Mart.

The phrase “Oxcart to Wal-Mart” sums up the situation in many emerging markets where the prevalence of earlier century ways of doing business along with the 21st century business models is a way of life. In this situation, it would be better for international retailers like Wal-Mart to segment and conquer wherein they would have to pick the segments that they would like to target and then market to those segments accordingly. The data for segmentation can come from the census figures and other statistics provided by market research firms.

Tackle the Logistics

As has been discussed briefly in previous articles, the key aspect of doing business in emerging markets is the management of the supply chain and the logistical and infrastructural issues that need to be tackled.

Many emerging markets do not have world-class ports, airports, and roads yet and hence, international retailers must devise appropriate strategies to address these challenges. This means that they would have to forego the logistical mechanisms that work in their native countries and instead, adapt to the local situation.

Coca-Cola in India prefers direct delivery in many countries but in Kenya, it uses a combination of last mile connectors who can navigate areas where there are no proper roads. Similarly, Unilever is another international business that uses the direct delivery method but in Indonesia, because of the presence of so many archipelagos, it often relies on third party transport companies to deliver its products. The implication of this is clear: adapt and devise local strategies wherever possible.

Equip the Frontline with Skills and Technology

The source of competitive advantage in many emerging markets lies in the frontline staff and the execution of a point of sale strategy. Rather than price, quality, or brand image, the convenience of home delivery and a staff who knows people personally often make the difference for the small retailers.

International retailers can gain competitive advantage by use of technology that is superior to those used by the local retailers. By speeding up the point of sale process and by having adequate car parking and transport mechanism, international retailers can hope to tackle the local retailers on their home turf.

Since technology needs money to establish, the international retailers with their deep pockets can ensure that by use of software and hardware that is cutting edge, they gain competitive advantage.

Finally, the challenge of local familiarity can be met by hiring staff that are adept at western selling practices but at the same time are conversant and comfortable with the local mores.