Walmart is being forced to face street vendors, traditional markets and small stores in Mexico, which the Wall Street Journal reported as its biggest competition, accounting for over half the country’s grocery sales.
The retail giant’s annual sales in Mexico have started deteriorating after reigning success in the past. Walmart said it must “rejuvenate” business in Mexico since it accounts for a near 20 percent of its international sales.
Mexico’s highly populated towns and cities have little room for supermarkets, let alone monopolizing giants like Walmart, so consumers tend to shop in small grocers and family-owned shops.
“Walmart’s solution for Mexico is a mini-grocer format called Bodega Aurrera Express, which the company launched in 2008. The store looks like an oversize mom-and-pop shop, with products stacked high against the walls. Bodega Aurrera’s mascot is Mama Lucha, a chubby cartoon homemaker dressed like a masked wrestler, who fights for the best prices,” WSJ reported.
After a rough start, sales at Bodega Aurrera have exploded this year, rising by 12 percent as opposed to Walmart’s broader same-store sales that haven’t increased at all in Mexico.
Christian Barrientos, head of the Bodega Aurrera formats at the company’s local unit, Walmart de Mexico, said, “We’re concerned about how to reach the low-income segment.” He added, “Most of the mouths are concentrated there,” according to WSJ.
Barrientos further explained that since 80 percent of consumers in Latin America fall somewhere between middle class and poor, retailers who ignore that segment are essentially out of the game.
Simpler and more convenient stores are also winning in other markets. Walmart’s 500 smaller-format Neighborhood Markets grocery stores in the U.S. announced a 5.5% sale increase, not including newly opened or closed locations, in the three months through October, versus Walmart’s total 0.5% same-store sales rise in the U.S. for the same period.
The Bodega Aurrera Express stores average 2,690 square feet of selling space, which is roughly 3 percent of the area needed to open a Walmart Supercenter. Still, street vendors are ruling the market. Traditional open-air market shopping dates back to pre-Columbian times, thus making Mexicans reluctant to shopping indoors, according to WSJ.
“To the vendors outside, the small format Walmart store is competing for sales, but not very successfully,” WSJ explained.