What’s Up (Or Not) at Wal-Mart?
By George Anderson
There is something that all those who believe Wal-Mart is predestined to take over the world should consider. The chain, say industry experts, is not doing as well as is generally supposed.
Burt Flickinger, managing director at Strategic Resources, maintains that if you take away newer businesses, such as groceries and gasoline, from Wal-Mart’s final tally, you’ll find that its discount store sales are in decline.
Kurt Barnard, president of Barnard’s Retail Forecasting, told The Associated Press he would not be surprised if that were, in fact, true.
Some believe Wal-Mart came as far as it could under a number of lifers who had been with the company for decades. The departure of some of these executives now offers the company the opportunity to reinvent and reinvigorate itself, according to John Plummer of the retail executive recruiting firm of Plummer & Associates.
“The old operations group at Wal-Mart is probably what caused a lot of the problems they are having now,” said Mr. Plummer. The company’s focus on keeping costs to the bare minimum and rewarding executives for achieving this goal may have been what Mr. Plummer said led to violations of “labor laws and good practices.”
There may be something to this theory, say others. “If a (corporate) culture remains static, loses ground, it loses its right to live, said Mr. Barnard. “That is a reflection of the need to change.”
Wal-Mart spokesman Jay Allen doesn’t find anything particularly unusual or telling in the personnel changes that have taken place at the company’s headquarters. “The make-up has changed, yes. With inordinate speed? I don’t think so,” he said.
Moderator’s Comment: What challenges do you see facing Wal-Mart’s management team? How will (or should) the company meet those challenges?
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George Anderson – Moderator
Their recent moves away from home-grown hires by bringing in talent from Asda (UK) is encouraging, particularly as they play catch-up in softlines. Then again, George, Starter, Danskin and Levi do not a unique apparel presentation make. Wal-Mart should ramp up the proprietary brand acquisitions in all departments (they could use their own Martha Stewart and Thalia) and bring in seasoned brand managers to run them. Ongoing retail consolidation should provide ample opportunities.
While many other retailers have already played the “format card,” it seems Wal-Mart has a huge opportunity to offer a more upscale format. They have already shown they can operate an efficient supply chain and expand into new categories, now they can do the “easy part” by offering more style and service at store level. It is a lot easier task to add an upscale format to an efficient operation than try to make money in a discount format with an inefficient operation. With their lower in-store labor cost, they have the opportunity to offer incentive based compensation programs to their store personnel that emphasize serving the customer. Combine this with a more stylish product line and a flashy store decor and you are ready for Wal-Mart’s next round.
I think it was Disraeli who said, on election as prime minister, “I have reached the top of the greasy pole.” That’s the way life is. Anything one branch of the human race knows or can do, other branches can and will learn and do. That’s good for all of us.
I find it curious that the premature reports of Wal-Mart’s demise are all stated as being an “opinion.” Where are the hard facts that there is any serious trouble?
My company has sold to Wal-Mart for nearly a decade, and every one of those years we have seen double or even triple digit growth. And at this point, we have more growth potential than ever.
On the other hand, companies like Kroger and Albertsons are routinely acknowledged as being one of Wal-Mart’s next… well, let’s say they’re going to get the Kmart treatment.
I have called on Wal-Mart for over 15 years (1990 to present). They still have the culture in place that got them where they are. Most of the good merchants have moved to the International Division and they will teach the skill sets, move people around the globe and improve the performance of their acquisitions and greenfields through IT, logistic, replenishment and product mix. They use their key multinationals to train their global teams with the core principles and best practices. I am more concerned with the US merchants — many transplants that did not grow up in the culture and spend too much time on the “buy” and not enough on the “sell.” Many of these folks worked for companies that no longer exist and we all know what these companies do to survive — force their suppliers to pay to stay. Some of that mentality exists with some of the merchants in Division I. Wal-Mart will grow and be successful globally. They still do many things right and are not complacent. I have seen their skill sets pay big dividends in many countries…Mexico is a great example. They have made their merchants better, as well as their suppliers, than they would have been otherwise.
Their fundamental problem is that no one likes them. People shop there because it’s convenient and cheap, but they have singularly failed to establish any rapport with their customers, employees or (for the most part) suppliers. People will jump ship at the earliest opportunity. Ultimately, this will seriously hurt them.
As a company’s base expands, you can’t expect it to continue growing at the same rate. It also happens to be the world’s biggest target. I expect the gloom and doom talk will continue, but I don’t see any serious flaws here. Wal-Mart is far from a one-trick pony.
When I read opinions from the panelists or consultants on this thread, often times I wonder how many really have done business with Wal-Mart. It seems to me just a lot of theories around; text book knowledge without real actual experience. I have done business with Wal-Mart for more than 7 years and it has grown every single year. My price to Wal-Mart has remained unchanged! Wal-Mart is the world’s best run company. There is no slotting allowance or dubious deductions there (which all chains — including Walgreen, Safeway, Albertsons — exercise now and subsequently book all these charges, as much as hundreds of millions per chain as revenues on their books). Wal-Mart remains pure and its margin is razor thin and sharp. Wal-Mart is already eating many lunches from the old-boys networks who refuse to wake up. What happened to the motto: “treat your customers well–like best prices, and treat your vendors with respect”? Most retail chains are pre-occupied with how to maximize the profits from consumers and charge vendors with outrageous slotting allowances, annual fees, unjustified returns to pad their books. Wake up guys, your days are numbered!
Wal-Mart will prevail and eat everyone else’s lunch (those who still live in dreams)!
I think Wal-Mart faces the same challenges as any other retailer; that is, the further fragmentation and diversity of retailing. I think we tend to look for one big retailer to come along and challenge Wal-Mart. That’s simply not likely to be the case. Sure, there is competition from the likes of Costco, but there is definitely more competition from the many just like other retailers in all segments face.
There are dozens upon dozens of choices and alternatives for the consumer to purchase almost any type of product in a multitude of brick and mortar locations. That’s not to mention the increasing diversity and alternative shopping opportunities that arise on-line each day (or should I say every moment).
Like all other large retailers, they hear the chip, chip, chip sound that is chipping away at their share. It never often comes in one big chop.
Shoppers today seem to be far more willing to use multiple channels and less likely to shop in one place. The one-stop concept offers convenience but, today, consumers are far more willing to once again shop multiple sources. It’s sort of like history reversing itself, isn’t it? Only the sources are different.
Let’s not forget that it was the “old” management team that got the company to where it is today. Growth problems are not unusual for a company of Wal-Mart’s size–especially with the amount of capital they are pumping into overseas markets like Asia and Europe. By the way, I double-dare anyone here to come up with a way to make money in Germany.
New thinking is required for the future. However, I’m willing to bet that Wal-Mart, with a little help from image consultants, will remain a key player. If you think you can simply ride it out and wait for Wal-Mart to run out of steam, then I suggest you take your company’s retirement package, buy a new set of clubs and start chasing a little white ball down the fairway.
The Wal-Mart panzer unit moved outwardly for four decades, destroying almost everything in its path. Wal-Mart’s dramatic success allowed it to envision ever-expanding retail horizons until they became almost “endless.” The world, not just the USA, was envisioned as their retail oyster.
Racing forward dauntlessly, Wal-Mart eventually began to encounter new marketplace conditions as well as new internal challenges. Wal-Mart’s wagonload eventually began to get heavy, and today it has gotten much heavier, as its wagon train continues to race farther and farther from Bentonville with fewer innovative generals to lead it. Meanwhile, its stores and strategic paradigm appear to need closer attention, perhaps reinvention.
There’s a crack in everything. It’s what let’s the light in.