The Country that Killed Wal-Mart

Note: This is a trackback post to http://seoulspace.co.kr/2011/01/28/the-country-that-killed-wal-mart

This reminds me the battle between Hangul Word Processor vs. Microsoft Word. In early 1990’s, Microsoft Word had about 11% of the word processor market share in South Korea while Hangul & Computers¹ was enjoying the rest². Was it because Hangul Word Processor was evidently superior compared to Microsoft Word? No. It was because the market was undoubtedly unfair. Every single official document was being distributed only in .hwp³ format, which can be viewed as an implicit support toward Hangul Word Processor due to its proprietary nature.

Another example would be the web browser market. In 2010, Internet Explorer (6-8 all together combined) occupied over 94% of the market share in South Korea while its market share in the United States stayed under 52%⁴. Again, the Big Brother plays a significant role here. In South Korea, it is required to use SEED algorithm⁵ (a 128-bit asymmetric key based block cipher algorithm) in order to make any electronic financial transactions. The problem is, however, that this is not a part of the SSL/TLS standard for secure HTTP communications, which requires additional software components to suffice the requirements. Not only SEED algorithm is required, but even more software packages are required such as a firewall, anti-virus and a keyboard hooking prevention software. Of course, individuals do not have a choice what software package they want to use for each part. Furthermore, all these software packages are ActiveX controls which can only be embedded on Internet Explorer running on Microsoft Windows.

Now, if you look at the Wal-Mart situation, it’s quite hard to believe that Wal-Mart went out of business just because they failed to accommodate to Korean consumers’ demands or because customers are more accustomed to bazaar-like shopping experience. In practice, upscale department stores such as Lotte and Shinsegae are doing well in Korean market even if they are far different from a bazaar. This is a reflectional evidence showing that businesses can survive as long as they have their own color. Wal-mart has established their reputation for selling inexpensive goods for bulk. Also, Wal-Mart supercenters offer a wide variety of merchandise that can hardly be found anywhere else. This may not sound so attractive to urban citizens, but it may be appealing to rural customers who have a private transportation yet do not have an adequate access to public transportations.

Korean market is tough, especially for those foreign entities. It is abnormally malformed in terms of fairness as previously demonstrated. Were they taxed fairly? Was there any unreasonable barrier to enter the market? Was the government supporting home players by any means? In my opinion, these questions must be answered prior to any further analysis.