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Business Deals

Walmart faces tough hunt for Seiyu buyer in age of Amazon

Online shopping and rising retail costs discourage potential suitors

Walmart has put Seiyu on the block, but it is unclear who will bid.   © Reuters

TOKYO -- Walmart faces a difficult task in finding a buyer for Japanese supermarket unit Seiyu, given the growing costs tied to traditional retail as well as the long shadow cast across the globe by online powerhouse Amazon.

The U.S.-based retailer is "divesting noncore assets" and "investing in new growth areas and technologies," CEO Doug McMillon said at Walmart's annual shareholders meeting June 1. Growth markets such as China and India are a particular focus. The decision to sell Seiyu, after forming a capital tie-up in 2002 and making it a wholly owned subsidiary in 2008, reflects that strategy.

Walmart has spoken with several companies about a deal, such as retailers, investment funds and trading houses. "Walmart approached us about a month ago but we turned them down," said the head of a major retailer with outlets throughout Japan.

Seiyu seems likely to sell for 300 billion yen to 500 billion yen ($2.67 billion to $4.45 billion) thanks to its strong brand name and a network of 335 stores, some in prime locations such as near train stations. But buyers face not only rising costs throughout Japan's retail sector, such as for wages, but also the expense of improving Seiyu's stores as they age.

Yet Amazon's disruption of traditional markets presents perhaps the biggest hurdle. In America, CD seller Tower Records went bankrupt in 2006 thanks to the spread of online sales. The Amazon wave has intensified since then, battering companies from Toys R Us to electronics retailers. The U.S. added only 20,000 retail sales jobs over the past 10 years, out of 8 million new jobs overall in the country.

Most business absorbed by Amazon involves entertainment items like books, electronics and toys. But the company entered the online grocery field and purchased Whole Foods last year, closing in on the market for daily goods as well.

The American e-retailer also is preparing for a battle in Asia, where consumption is rising. In Southeast Asia, home to 600 million people, Amazon entered Singapore last year after Chinese e-commerce rival Alibaba Group Holding bought Filipino peer Lazada in 2016.

Walmart must make hard choices and focus on certain areas to beat rapidly growing online retailers. The global retail industry faces not only a digital shift, but also changes resulting from the rise of cutting-edge technologies and new growth markets. Traditional retailers will need to make up for their slow start.

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