What does the Asda deal mean for Walmart?

Date : 02 October 2020

Stewart Samuel

Program Director - Canada

With Walmart confirming the sale of its UK-business, Asda, to the Issa Brothers and TDR Capital, we look at what the deal means for the retailer.

1. Opportunity to benefit from business improvement

This transaction follows on from a similar move in Brazil in 2018, when the retailer divested an 80% majority stake of its operations in the country to private equity firm, Advent International. As with the Asda deal, Walmart retained a stake in the business. This enables it to benefit from any upside as the new owners bring fresh thinking, investment and capabilities to the business. Walmart has a long history of operating joint ventures and shared business models.

Source: Walmart

2. Free up resources and investments

The UK has been a challenging market for Asda for several years, with intensive competition driven by its supermarket competitors and hard discount retailers. This deal will lighten the load on the Walmart senior team, along with investment requirements, enabling the focus to shift to other parts of the business.

3. Double-down in high growth markets

This includes its higher growth opportunities, including China, India, Mexico and the US. These markets provide the retailer with the opportunity to build one of the world’s leading omnichannel businesses, optimising the scale of its physical store network, especially in the US, well-developed ecommerce operations and wider ecosystem capabilities.

4. Tap into other talent pools

Asda has brought Walmart incredible benefits over the last 20 years. The one that stands out for me is the talent pool which the retailer has been able to access, with many making the trip from Leeds to Bentonville. This includes current Walmart International president and CEO, Judith McKenna and several other business leaders. However, with the nature of retailing changing, Walmart has significant opportunities to tap into its leaders in markets such as China and India to support the wider business.

5. Look for learnings elsewhere

Asda’s grocery ecommerce know-how has enabled the retailer to build the position it currently holds today in the US in the channel. It was able to scale up its grocery store pickup model ahead of its competitors because of what Asda had achieved in the UK. In addition, its private label capabilities, including its George clothing offer, can be seen in several of its international markets, while Asda’s experience in trading against Aldi and Lidl has been key in helping Walmart defend its ground in the US. The retailer will now have to look elsewhere for this infusion of ideas and innovation.

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