… because the Wal-Mart juggernaut seems to be stalling. Despite this Andromeda Strain-like expansion, the chain may be at a high water mark.
Using a combination of low prices and relentless expansion, Wal-Mart Stores Inc. emerged from rural Arkansas in the 1970s to reshape the world’s largest economy. Its co-founder, Sam Walton, taught Americans to demand ever-lower prices and instructed businesses on running a lean company. His company helped boost America’s overall productivity, lowered the inflation rate, and strengthened the buying power for millions of people. Over time, it also accelerated the drive to manufacture products in Asia, drove countless small shops out of business, and sped the decline of Main Street. Those changes are permanent.
Today, though, Wal-Mart’s influence over the retail universe is slipping. In fact, the industry’s titan is scrambling to keep up with swifter rivals that are redefining the business all around it. It can still disrupt prices, as it did last year by cutting some generic prescriptions to $4. But success is no longer guaranteed.
Rival retailers lured Americans away from Wal-Mart’s low-price promise by offering greater convenience, more selection, higher quality, or better service. Amid the country’s growing affluence, Wal-Mart has struggled to overhaul its down-market, politically incorrect image while other discounters pitched themselves as more upscale and more palatable alternatives. The Internet has changed shoppers’ preferences and eroded the commanding influence Wal-Mart had over its suppliers.
As a result, American shoppers are increasingly looking for qualities that Wal-Mart has trouble providing. “For the first time in a long time, quality has a chance to gain on price,” says Lee Peterson, a vice president at Dublin, Ohio-based brand consulting firm WD Partners Inc.
The American consumer may be sane after all. Heaven knows I will go to five Targets in the area before reluctantly set foot in a Wal-Mart. (And, yes, if I can order it online I will do that first.)
It’s still the biggest kid on the block, but that’s beginning to make it look more like a dinosaur in the retail world..
Wal-Mart remains an enormous force in retailing, of course. Its world-wide sales are almost three times those of France’s Carrefour SA, the world’s second-largest, publicly traded retailer. Wal-Mart’s U.S. revenue is 4½ times that of discount-store rival Target Corp., and four times that of second-largest U.S. food retailer Kroger Co. Its clothing and shoe sales last year alone exceeded the total revenues of Macy’s Inc., parent of Macy’s and Bloomingdale’s department stores.
[…] But the value loop is beginning to unravel. For 10 years through 2005, Wal-Mart’s sales gains at stores open at least a year averaged 5.2%. So far this year, its comparable-store sales, a measure of market share, is up just 1.3%. The pricing gap between Wal-Mart and rivals has narrowed, and more customers are now choosing convenience over wading through a supercenter.
That compares with comparable-store gains of 4.6% at Target, which markets itself as a trend-setting discounter, and 6% at membership-club rival Costco Wholesale Corp., which peddles $500 Bordeaux wines and $4,000 Cartier watches. While Wal-Mart has been portrayed as a ruthless employer, Costco has been praised for providing some of the best employee benefits in retail.
Couldn’t happen to a nicer soulless behemoth.