American invasion rolls into Europe

WAL-MART'S INVASION of Britain has been on the cards for a while. The rumours reached fever-pitch in April when it emerged that Bob Martin, head of Wal-Mart's international division, had "dropped by" to meet Tony Blair in Downing Street in February when he just happened to be in town.

Yesterday the company claimed this had just been a "social visit" and that a possible UK deal had not even been discussed. But however unlikely that may sound, the furore died down just a few weeks later when another Wal-Mart executive stood up at a Goldman Sachs retail conference in London and said the US giant had no plans to expand in Britain.

That is now known to be a bluff. But looking at figures provided by Wal- Mart yesterday, it was a mistake to ever under-estimate this company's international ambitions. Already the biggest retailer in the US, Wal-Mart had no operations outside its home country as recently as 1991. Now it has sales of pounds 6.6bn outside the US in 726 stores in countries like Argentina, Brazil, Mexico, Puerto Rico and China.

Wal-Mart switched its gaze to Europe in December 1997 when it bought 21 stores in Germany trading under the Wertkauf name. A year later it bought the 74-strong Interspar chain.

The attractions of the UK are obvious. In the cut-throat US food retail market Wal-Mart trades on low margins of just 4 per cent. Here margins can be around 6 per cent. But while Wal-Mart may face a ready market in the UK for its low prices and huge ranges, it will encounter problems too. One is high land costs and major planning permission problems when it seeks to open its massive hypermarket-style stores here.

Wal-Mart has three types of stores. The discount stores, which offer general merchandise such as electrical items and household goods, and extend over 150,0000 sq ft of retail space - scope for opening these here might be difficult. The supercentres, which include food and general merchandise, are smaller, with "only" 100,000 product lines - these could have more scope for UK expansion. Wal-Mart's Sam's Clubs, which are membership clubs, have not yet been opened in Europe.