David McNeill: No shame in Tesco's failing to crack Japan

The Tesco juggernaut, seemingly unstoppable in the UK, has ground to a halt in Japan. Eight years after arriving in Tokyo with ambitious plans to become a big player in the world's third largest market, the retailing giant is pulling out.

Tesco was completely unknown in Japan when it opened for business in 2003 and although half of its 129 stories were reportedly profitable, it failed to imprint itself on this fragmented, hyper-crowded and competitive consumer market. Japan's notoriously conservative and fussy shoppers simply had too many other choices.

The country has a huge network of 24-hour convenience stores – one every 50 metres in many Tokyo neighbourhoods – and a string of powerful, family-owned chains. An ageing, shrinking population, fragile consumer confidence and the impact of the tsunami added to their difficulties. Scaling those barriers would require an enormous investment of time and money.

Tesco shouldn't feel bad about baulking: foreign retailers that do well here in Tokyo tend to be niche upmarket names such as the luxury boutiques that crowd the Ometesando shopping area. The Japanese also failed to warm to Walmart and the French chain Carrefour. Tesco should lick its wounds and train its guns on another uphill battle: the US.