Wal-Mart Still a Force
A piece in The Wall Street Journal yesterday,
Wal-Mart Era Wanes Amid Big Shifts in Retail, points out that a number of suppliers are seeking ways to lessen their dependence on the world’s largest retailer by working with other retailers.
While this and other elements of the piece may be factually correct, the tone of the article suggests that Wal-Mart is a lumbering giant that is being outmaneuvered at almost every turn by smaller competitors.
The article’s author, Gary McWilliams, writes that Wal-Mart gained its advantage (economies of scale) and point of difference (low prices resulting from that scale) to drive it to the top of the retailing hill. Now, however, he suggests that Wal-Mart’s emphasis on scale has put it at a competitive disadvantage.
According to Mr. McWilliams, “The big-box retailing formula that drove Wal-Mart’s success is making it difficult for the retailer to evolve. Consumers are demanding more freshness and choice, which means that foods and new clothing designs must appear on shelves more frequently. They are also demanding more personalized service. Making such changes is difficult for Wal-Mart’s Supercenters, which ascended to the top of retailing by superior efficiency, uniformity and scale.”
Burt P. Flickinger III, managing director of Strategy Resource Group, told The Journal that suppliers are increasingly looking to regional grocery store operators and the national drugstore chains to promote and move product.
“Four of the top 10 consumer-products companies say they can move merchandise faster with Walgreen and CVS,” according to an estimate by Mr. Flickinger.
Discussion Questions: Has Wal-Mart lost some of its clout as suggested by The Wall Street Journal article or is this much ado about very little? Has Wal-Mart’s scale become an impediment to success in some respects? Are people within the retailing world making a mistake and underestimating Wal-Mart?
[Author’s note] While Wal-Mart has struggled (particularly when compared to its own historical performance), the chain, as The Journal points out, still dwarfs its competition globally and here at home. Worldwide, Wal-Mart sales are three times that of its next nearest competitor, Carrefour. In the U.S, Wal-Mart’s revenues are four-and-a-half times what Target brings in and four times Kroger’s sales.