Wal-Mart juggernaut off track?
An article in the Wall Street Journal ("Wal-Mart Era Wanes Amid Big Shifts in Retail", 10/3/07) demonstrates once again that while getting to the top of an industry is hard, continuing to grow when you get there is even harder. The fact is that, while still the Godzilla of world retail, Wal-Mart has slowed down, as it sees same store sales growth is slipping along with Wal-Mart stock price.
As the artcile puts it:
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. …Rival retailers lured Americans away from Wal-Mart's low-price promise by offering greater convenience, more selection, higher quality, or better service.
In addition, the article reports, Wal-Mart dominance of such product manufacturers as Pepsico and Procter & Gamble is slipping as the sales percentage that Wal-Mart represents slips. Wal-Mart keeps having problems in international expansion, and it is having a hard time reaching beyond its rural, working-class audience. Quality, argues the article, is starting to become more important than price.
The company is still building its "Supercenters" at rate of over 170 per year and it is still far bigger than rivals like Target. Macy's and Kroger. But customers, according to the article, want more than efficiency and the lowest prices. Companies like Costco, Best Buy, and CVS in their separate fields of expertise have figured out ways to counter Wal-Mart's clout by superior agility and service, something that destroyed predecessor like Sears and Toys R' Us. The article also credits the Internet for changing shopping patterns enough to have an impact on Wal-Mart. Disruption on every side.
What the article sees is a similar situation to companies like General Motors and IBM that grew to dominance in their fields and rebuilt the industry around them. "Such orchestration can produce solid growth for decades. But it can also produce corporate blinders.' Many of the innovations that propelled Wal-Mart to the front of the pack, like offshoring production and superb inventory and logistics control have been learned by the survivors, and they are gaining share.
Wal-Mart is and will be the biggest of retailer for the foreseeable future, but it would be able to warp the world around it in quite the same way.
