SCDigest editorial staff

In a development that must seem strange for Wal-Mart’s U.S. competitors and critics, the retail giant’s CEO called this week for the British government to investigate the growing marketing dominance of Tesco in the U.K.

Six years ago, Wal-Mart bought the U.K. grocery chain Asda, and initially gained share against Tesco there. Of late, however, in part through use of extremely aggressive pricing strategies, Tesco has surged to an estimated 30.5% share of the grocery market in the last three months, versus 16.7% share for the number 2 Asda chain.

In a story Aug. 28 in the Sunday Times of London, Scott said: “As you get over 30% and higher I am sure there is a point where government is compelled to intervene, particularly in the UK, where you have the planning laws that make it difficult to compete.”

Part of Tesco’s success has come from smaller format, convenience-like stores, which have proved very popular in Britain. Wal-Mart doesn’t currently operate that format, but Scott indicated they are looking at it closely for the U.K. market. There is speculation it may buy an existing small-format chain.

Meanwhile, there are rumors that talks about a potential merger between Wal-Mart and French-based Carrefour have recently occurred, with Wal-Mart’s Scott and Carrefour Chairman Luc Vandevelde meeting in France. Carrefour, the world’s second largest retailer behind Wal-Mart, denies any merger intentions.

Interestingly, rumors about Carrefour have surfaced before – with the suitor being Tesco.

Do you have any insight as to why Wal-Mart is struggling to compete with Tesco in the U.K.? Are there any lessons for Wal-Mart’s competitors in the U.S.? Let us know your thoughts.