Global gaffe: Wal-Martha in Japan?

NEW YORK — Japan's Seiyu made news in March when Wal-Mart Stores offered $46 million for 6.1 percent of the supermarket and general merchandise retailer's stock and a foothold in the country's retail landscape. It was Seiyu's second coup in eight months, following a July 2001 deal to become Japan's home base for Martha Stewart Everyday merchandise, which in the United States is exclusive to Wal-Mart rival Kmart.

Uh-oh.

If the deal goes through — it's still officially classified as pending — Wal-Mart faces arm's-length involvement with a demanding brandmaster whose royalty requirements would make any cost-obsessed Bentonvillian blanch. And Martha Stewart Living Omnimedia must weigh whether it can execute its nascent global branding strategy in conjunction with a retailer loyal to no nameplate but its own.

Omnimedia launched Everyday in 226 of Seiyu's 400 retail stores in late 2002 under a multi-year, multi-business strategic partnership, and shortly thereafter debuted the Martha Stewart Martha [sic] magazine, its first foreign-language publication, as part of a multi-pronged branding push. The company's brand platform in Japan also includes the "Martha Living" television program on cable and sales of Martha By Mail catalog product on Japan's Shop Channel.

Wal-Mart's proposal to Seiyu gives it the option to eventually accumulate up to 66.7 percent of the Japanese retailer, and Wal-Mart is prepared to invest up to $2 billion over time to gain the substantial stake.

Asked about the predicament at last week's Lehman Brothers' Retail Seminar in New York, Wal-Mart International president and ceo John Menzer was sanguine. "We believe they have a contract with Martha Stewart," he said, "and as part of our due diligence, we'll review that and make the appropriate decision."