WalMart’s getting the critical-size Wall Street jitters:
The company’s growth rate has slowed to a crawl, overtaken by rivals once thought to be no match for the “beast of Bentonville.”
which is why they’ve been absolutely delusional for the past few years.
Blah, blah, blah, poor people are already buying as much as they can, rich people wouldn’t be caught dead shopping there, how does WalMart cater to the fashionable Target market without alienating their bread-and-butter fashion-illiterate foodstamp market? Well, mostly they do it by acting like a bunch of newbs who’d never managed a chain of stores before:
Discriminating shoppers in its newest, urban markets are accustomed to higher standards of quality, selection and customer service than Wal-Mart has ever had to offer. And the firm, as it tries to retain its profitability of old, has shown a curious response to that challenge, recently capping wage increases for clerks who already are underpaid, scarce and lacking in product knowledge.
Many Wal-Mart outlets remain an aesthetic dead zone. The company’s belated store-remodeling efforts have been half-hearted, even though an alarming internal Wal-Mart survey in late 2005 found that one-quarter of the company’s U.S. stores fall short of minimal standards in everything from adequate lighting, prompt check-out time and even cleanliness – standards few Wal-Mart observers would describe as especially high in the first place.
…And it’s good news that Wal-Mart has bungled in so many different ways this decade – in rushing into upscale merchandising without realizing you don’t roll out an ad campaign until the advertised goods are in the stores; and that failing to rehabilitate shabby stores is an expensive bargain. Good news, because those are fixable issues that offer significant growth prospects.
Why is WalMart coming up with tactics more appropriate for a desperate drug addict trying to score a hit than a multi-billion dollar chain of stores? Because the system doesn’t reward profit, it rewards growth, insane, unsustainable, mathematically boggling growth:
At 45, Wal-Mart is showing its age. With sales of $345 billion (all figures U.S.) last year at 6,779 stores in 13 countries employing a total of 1.9 million people, Wal-Mart still has the clout to dictate pricing and package design to giant suppliers like Procter & Gamble, Campbell Soup Co. and Dell Inc., which rely on Wal-Mart’s 3,443 U.S. stores and thousands more abroad as one of their biggest, if not their largest, distribution channels.
But last year, Wal-Mart eked out same-store sales growth, at outlets open at least a year, of just 1.9 per cent, a mighty comedown from the routine double-digit increases of the 1990s.
…Last week, Wal-Mart reported anemic same-store sales growth of 1.9 per cent for July, the kick-off of the important back-to-school season, trailing the industry average of 2.6 per cent.
…In fairness, Wal-Mart is confronted with the daunting law of large numbers. It has to grow by $35 billion this year just to post a respectable growth rate of 10 per cent, which means finding new revenues equal to the total sales of Walt Disney Co. or Intel Corp. (emphasis mine)
I’ve never taken even a single economics class, but I have taken a lot of math. Say you have to grow 10% every year, and your first year you make $10. Next year, you have to make $11. And the year after that, $12.10. Which is fine, while you’re still small. But by year 50 you’re going to expected to bring in over $1,000 while your smaller, more limber competitors can post the same growth rate by bringing in less than a tenth as much in actual dollars. I am not stupid enough to think that I am the only one who has figured that bit out.
So why is a 50 year old company being held to a clearly unreasonable 10% growth rate? Why is the number 10% even being mentioned? What is this obsession with unsustainable growth? I know that this is not an original idea, but why do I see it everywhere but the business pages? I am very confused why a person more educated in the ways of economics than I would gloss over this very obvious detail while writing bizarre statements like this:
If Wal-Mart is not to go the way of General Motors Corp., Sears, Roebuck or Xerox Corp., whose long success bred an arrogance that blinded them to changes in the market and doomed them to fail at reinventing themselves, the company will need a top-to-bottom cultural makeover that rejects shoddy stores, outlets understaffed by poorly paid employees with little product knowledge, and a consistent drive to somehow upgrade its merchandise without alienating its base of low-income consumers.
Seriously, how much Koolaid do you have to drink to be a business journalist? Or a businessman for that matter? Problem: After 45 to 50 years of constant growth and market saturation, we’ve stopped growing faster than a bacterial culture. Solution: not expect start-up levels of growth from established company let’s sell shit to the rich and the poor in the same store! All we have to do is remodel the stores to meet the expectations of affluent shoppers without alienating or raising the prices on the poor shoppers while offering trendy, stylish clothing of good quality next to the cut-rate mom jeans which will remain super-deals while hiring a workforce that offers the service and product awareness discriminating shoppers expect while keeping labor costs low and passing the savings on to you. Easy! The faux-rich will flock to WalMart and will happily mingle with the riffraff, who of course will be impressed by the opportunity to study their betters.
Could someone explain this in a way that makes sense? Because I don’t get it. And I still won’t be shopping at WalMart, because they’re clearly not doing anything to meet my standards: I’d never shop at a place I couldn’t see myself working at.
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