World leader? Not even close

Matt Yglesias, who used to be a liberal US commentator but seems to have turned into a neo-liberal US commentator, has a very odd piece on retailing, in which he argues that being awesome at retailing is the US’s major skill, which will one day benefit poor benighted foreigners:

We’re the world leaders in retail sector organizational innovations, as witnessed by McDonald’s semi-hegemonic global position and the fact that in a place like China where it’s not number one, the company it lags behind is another American firm. But here in the U.S., we’ve long since pushed beyond mere fast food into the realm of big box retailing, with Wal-Mart leading the way. But thought both these firms have some international operations, they’re evidently not that big and in the case of Home Depot seem largely limited to Canada and Mexico and Wal-Mart doesn’t operate in continental Europe at all… That kind of thing will probably change over time, to the benefit of European consumers, and I guess make the Walton family even richer.

Now, there are only two ways in which I can envisage Matt might have come up with this argument. One is that he’s never been abroad, never looked at any case studies on retailing, never spoken to anyone who worked in retail strategy, and never looked at any reports on US retailers’ attempts at international expansion. The other is that he’s well aware that the above is absolute, ridiculous insane nonsense on stilts, but is writing it anyway.

Having worked in retail consultancy, the retailers that people admire and seek to emulate for their amazing supply chain skills are Tesco, Carrefour, Inditex (Zara), IKEA, Aldi, H&M, AS Watson (Superdrug) and Amazon. One of these retailers is from the US, six are European, and one is from Hong Kong.

Wal-Mart has repeatedly tried to expand internationally, but has only been successful in Mexico and Brazil. It has a strong position in the UK, but this was achieved by buying the country’s fastest-growing retailer in 1999 for an enormous price tag, and not changing very much subsequently. Its operations in emerging markets lag way behind Tesco and Carrefour. It invested vast sums in trying to build a German operation, but eventually ended up closing it down because it couldn’t compete with Aldi and Lidl (who pay vastly higher wages but run a more efficient supply chain – and the former is increasingly doing so in the US as well).

Wal-Mart excels at regulatory capture and union-busting, and is good enough at being a retailer to make a lot of money in markets where it’s established a dominant position. Unlike the companies on my list above, it isn’t good enough at being a retailer (in terms of branding, store experience and supply chain management) to establish major positions in markets where it starts without a dominant position. And “being just about competent enough that you can keep your monopoly alive” isn’t really a highly exportable trait, or a particularly beneficial one to The World At Large.

Although on the other hand, it is a pretty good description of the area where big US businesses are actual world-leaders, whether we’re talking healthcare, oil, telecoms or software…