Wal-Mart Waxing, not Waning
October 15, 2007,
When Wal-Mart raised its third-quarter projections last week, I'll bet more than one exec in Bentonville was hoping the Wall Street Journal might feel a bit chastened by the news.
The piece essentially argued that Wal-Mart's days as the most influential retailer in the United States are over, and compared the company to other deposed corporate leaders such as IBM, General Motors and Microsoft. Significantly sized, yes; trail-blazing, no.
The Journal asserted Wal-Mart and other big boxers are steadily losing clout in a fragmented retail world populated by nimble specialty formats. It concluded: "One result is that retail giants hold less sway over their customers — and over their suppliers."
I don't think you'll find many home textiles suppliers agreeing with the notion that large retailers have loosened their power over suppliers.
As for some the stumbles highlighted in the piece — particularly the company's retreat from its ambitious rollout of RFID tags, and its demise in Germany and South Korea — it's worth remembering that Wal-Mart's corporate culture has long embraced failure as an inevitable component of learning how to succeed. It also bears noting that Wal-Mart has barely begun to scratch the surface internationally. Eleven years ago, then international division chief Bob Martin predicted Wal-Mart would one day operate more stores in China than in the United States. (At the end of the most recent fiscal year, it had just 73 stores in China.)
Then there's India, where Wal-Mart plans to open its first cash-and-carry store by the end of the year. India's traditional shop keepers certainly recognize the potential for Wal-Mart in their country — that's what sent 10,000 of them protesting in the streets last week.
The news earlier this month that Wal-Mart de Mexico has been cleared to open its first Banco Wal-Mart de Mexico Adelante as early as November points to another powerful revenue model. An estimated 8 in 10 Mexicans can't afford to open accounts in traditional banks.
Certainly, it is in the nature of behemoths to wear themselves out. But even a wounded pup can hang around for a long time (remember Montgomery Ward?), and Wal-Mart is not a wounded pup.
Wal-Mart may be experiencing a mid-life crisis, but I don't think it's headed for retirement any time soon.
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