Scot Rank, the chief executive of Walmart’s Central American unit, Walmex, confirmed to a conference audience last week that the company has identified 300 new cities in Mexico and Central America where it could open stores, in addition to further expansion in the 348 cities in the region in which it already operates.

Planet Retail forecasts that the retailer will double its sales over the next five years to reach $50bn (£33.7bn) by 2015, much faster than the market average.

Earlier in the year, Walmex unveiled what it called an “unprecedented investment plan” for 2010 totalling MXN12.5bn (£676m) to open 300 new stores and 140 branches of its own bank, Banco Walmart. The retailer was keen to point out that the investment would bring about 7,000 new permanent jobs.

Estimated sales area growth in 2010 will be 11% in Mexico and 3.4% in the rest of Central America. “In 2010, company performance will combine the growth of our traditional business formats with the drive of our three most recent platforms: Bodega Aurrerá Express, Banco Walmart and the merger with Walmart Centroamérica operations.”

Such aggressive plans will no doubt strike terror in the hearts of the leading local retailers and it will also alarm the region’s family-owned store operators, who together currently account for the bulk of retail sales. Many consumers in the area, however, are likely to welcome the growth of the world’s largest retailer.

Of the 300 new stores slated for Mexico, 186 will trade under the Bodega Aurrerá Express banner. Bodega Aurrerá and its smaller Express variant are Walmex’s preferred format for reaching the under-served consumers of Central America’s low-income neighbourhoods. These remarkably successful stores constitute a mixture of hard discount and convenience store, offering leading brands at Everyday Low Prices in an environment that even the retailer itself admits is ‘austere’.

The announcements will also be greeted with a mixed reaction from the supplier community. Walmart’s southward expansion will, of course, benefit its existing supplier base of both multinationals and local Mexican manufacturers. The downside lies in the fact that with the lower margins involved in supplying modern retailers, as opposed to the traditional trade channel, many suppliers in the region will see their profitability come under serious pressure, as Walmex’s growth outpaces that of their other key accounts.

 

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