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Wal-Mart sticking with slow and careful in Asia

After several missteps in its Asian expansion, global retailing giant Wal-Mart is taking a slow and careful approach, with expansion plans primarily aimed only at its three current regional markets, the Asia CEO told CNBC.

"Right now, the three markets are the vast majority of our growth," Scott Price, president and CEO for Asia at Wal-Mart, told CNBC, noting the three – Japan, China and India – account for around 60 percent of Asia's population.

"We continue to look at other markets for potential entry, but we are pragmatic and we will move carefully," he said.

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The company has faced some high profile failures in the region. Its total international operations, including Latin American and European outlets, make up a relatively small portion of the business – less than a third of net sales.

In 2006, Wal-Mart pulled out of South Korea, selling its 16 stores there to a local rival. While in India last year, the company terminated a six-year joint venture with Indian conglomerate Bharti Enterprises, giving up a plan to open retail outlets in the country amid uncertainty over the regulation of foreign retailers.

Kevin Lee | Bloomberg | Getty Images

Indian operations remain relatively slim, with the company operating around 20 "cash and carry" wholesale outlets supplying kiranas, or mom and pop stores.

China has also proved to be a challenging market for the company, with comparable store sales last year growing only 0.7 percent from 2012.

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"Austerity has had an effect," Price said, but he added Wal-Mart is still planning to open another 110 stores in the next three years.

"If you look at China, the big box works very well and will work very well for a long time," he said.

Wal-Mart is also looking for "bolt-on" acquisitions of local operators, particularly in the country's tier-three and tier-four cities, he said, although the company currently is not in negotiations and it could be a long wait.

Although tier classification is far from precise, the third tier generally includes around 200 prefecture level or county-level capitals, while the fourth tier is made up of around 400 capitals of county towns.

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"There have been regional developers of big box (retailers) in those tier-three and tier-four cities. They'll have maybe 6 or 8 boxes," he said. "So in those instances, we see an eventual – like other markets – rationalization begin to happen across China. It may take 10-15 years. But it'll occur, and when that does, we'd like to be a player."

To be sure, analysts have said that Wal-Mart's focus on "everyday low prices" hasn't translated well in China, where consumers, who are often more concerned about product safety and authenticity, may interpret the concept as indicating products are less safe.

However, low prices may play much better in its around 440 stores in Japan after the recent increase of the consumption tax to 8 percent from 5 percent.

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"Japanese customers these days [are] focused very much upon everyday low cost, everyday low price," Price said. "We ended last year with 85 percent of our customers saying value for money is the most important thing," he said.

"In Japan, 30 percent of households make less than $30,000 a year, which is quite significant in such a high cost of living market," he said. "That consumption tax increase obviously had a hit."

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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