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2012-06-09
Bentonville, AR. The Ice Age Cometh For Wal-Mart Superstores

On August 20, 2011, Sprawl-Busters predicted on The Huffington Post that growth in American Wal-Mart supserstore would slow to a crawl.

"No longer a company in its adolescent growth spurt, the giant retailer is showing its advancing age," I wrote. "In fiscal year 2011, Wal-Mart's U.S. store count grew by only 49 units, or 1.3%. In 2010 by only 52 stores, or 1.4%. For some companies that would seem like an enormous expansion -- but for Wal-Mart, it's definitely a powering down mode. Ten years ago, Wal-Mart's U.S. store division opened 220 new stores -- 4.5 times as many units as today."

For many years Wal-Mart has been over-building superstores, packing them in as close as three miles apart. The Ozark-based retailer was cannibalizing its own sales. 'Old' stores -- sometimes built as recently as the mid-1990s -- were being abandoned to build a bigger store across or down the street.

"As Wal-Mart's U.S. operation loses momentum," I wrote 10 months ago, "and lack-luster same store sales performance from its overbuilt domestic inventory continues to disappoint, shareholders will suffer from Wal-Mart fatigue, and look for more nimble, faster-growing competitors." I predicted that as these stores became obsolete, there would be plenty of people ready to dance on Wal-Mart's grave.

The Ice Age for Wal-Mart superstores may be coming sooner than we think. A retail analyst from Kantar Research recently prognosticated that "In our lifetime, we will see the last Wal-Mart discount store disappear." That statement provoked Motley Fool writer Adam Wiederman to add, "there are already signs that the big box store, while perhaps not headed for extinction, will indeed morph into something very different than we're familiar with."

An analyst with Deloitte LLP told Women's Wear Daily that consumers are growing weary of the big store experience. "As they age and become more time constrained, they do not want to walk to the back of a 300,000 square foot store." Wal-Mart, Target and Kohls are all jumping on the smaller store format.

Wal-Mart says it is very pleased with the results of its new Express stores, which were an experiment similar to the Neighborhood Markets, the former around 15,000 s.f., the latter closer to 40,000 s.f. Express stores carry food, prescription drugs and convenience store items -- Wal-Mart's answer to competitors like Dollar General and Family Dollar, which have been grabbing market share from the big retailers.

The benefit of smaller units is that they require less real estate, and cost less to build and operate. Yet Wiederman quotes a Deutsche Bank analyst as saying that Wal-Mart is "the only retailer out there continuing to open up big box stores, which leads me to think they're not paying enough attention to what the consumer needs."

It is certainly true that Wal-Mart has not paid enough attention to what its neighbors need, leading to an unprecedented community-based battle against their stores over the past two decades. Wal-Mart has spent hundreds of millions of development dollars in wasted time and effort fighting its opponents town by town -- instead of heeding what locals wanted them to do: get alot smaller. Now that the giant retailer has saturated the market and wasted capital competing with itself, they have found the Holy Express land.

What you can do: Recently the editor of Supply Chain Digest wrote that Wal-Mart has turned the corner in its fight against die-hard opponents. "Wal-Mart was a generally despised company in many quarters," Editor Dan Gilmore wrote in late April. "The criticisms included low wages, being non-union, destroying Mom and Pop retailers, destroying American jobs as the world's largest importer, discriminating against women in terms of promotions, who knows what else. The unions ran television ads and built webs sites specifically against Wal-Mart. Many of those criticisms are still out there, but there is no question they have been muted in recent years... Many mostly on the left that might normally be anti-Wal-Mart found the company was on their side on the environment and more."

Gilmore then adds, "I don't want to get political here, but no question Wal-Mart is no longer the bad guy many had seen it as before, even as there has been little change in many of the areas that used to draw the complaints... .Wal-Mart is now often seen arm and arm with those who might have been critics in the past."

It is true that there has been "little change" in Wal-Mart's 'my way or the highway' approach to local development. It is also true that there has also been little change in the fierce opposition that Wal-Mart superstores generate almost every time they go before a local Planning Board. And even the Express stores are running into opposition in the urban environments where they are being proposed -- because most communities in America are already choking on retail -- and once again, Wal-Mart has proven incapable of listening to what the public wants. It's need to keep profits flying and its stock soaring speaks louder than any public voice that rises against it.

This is the main reason why the Superstore Ice Age will catch Wal-Mart completely by surprise.

Readers are urged to go to this link:

http://www.scdigest.com/assets/FirstThoughts/12-04-26.php?cid=5785

and let Mr. Gilmore know that opposition to Wal-Mart is not muted, and that Wal-Mart is still the Bad Guy.










 
 
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