Walmart State of Mind: The Big Picture
For many years I was addicted to the “talking heads” on CNBC, the financial news network that is currently owned by General Electric. The CNBC “news” formula is to bring in “experts” to share their reaction to late breaking financial and industry news. Many consider their comments self-serving and manipulative, but others consider CNBC useful in making sound investment decisions.
Some weeks ago, I was listening to a program in which CNBC was analysing Walmart’s (or Wal-Mart) retail sales and how a same-store-sale’s increase of 3.2% augured well for the retail industry. Well, I work in the retail industry and, quite frankly, Walmart’s same-store sales don’t strike me as a useful barometer of how well or how poorly the retail industry is doing. Since Walmart represents a disproportionately large percentage of total retail sales, does it necessarily follow that all retail sales increased in the same proportion or did Walmart’s “good” performance occur at the expense of local competition?
I, therefore, decided to do a bit of research and have now decided we all need to adopt a ”Walmart State of Mind” if we truly want to see where this is all heading. (Think Billy Joel’s New York State of Mind if you want to hum along). Trust me, it ain’t pretty.
Most people know that Walmart is the largest retailer in the world with 2009 sales of over $300 billion and close to two million employees. Wal-Mart’s sales are four times larger than the second-place retailer, Kroger. Even more, if you combine the sales of the retailers rated two through six (Kroger, Target, Walgreen, The Home Depot and Costco) this total only barely exceeds Wal-Mart’s total sales ($305 billion for Wal-Mart vs. $319 billion for the group).
While big and successful, Walmart has attracted a number of detractors ranging from criticism of their employment practices, third-world sourcing, the environment and the devastating impact on local businesses and the communities they serve. Stacy Mitchell’s Big-Box Swindle is perhaps the most disturbing analysis of how “Big Box” stores impact community life.
What is less well known is how Walmart’s scorched earth retail marketing strategies have permanently altered the economic and social landscape of many states in the United States. For instance, in seven states Walmart accounts for more than 50% of retail sales. In fact, in many states Walmart has managed to get tax breaks and incentives from State and Local governments to open stores to the detriment of many local businesses.
In a University of Illinois (“UIC”) study evaluating the opening of a Wal-Mart store in Chicago’s Austin neighborhood in 2006 concluded that it “has not increased retail activity or employment opportunities in the years since. Researchers found that stores near Wal-Mart were more likely to go out of business, eliminating the equivalent of about 300 full-time jobs – about as many as Wal-Mart initially added to the area.” UIC researcher David Merriman concludes that “‘What we’re seeing here is that placing a Wal-Mart in an urban setting is basically a wash in terms of sales revenue for the city and jobs for local residents.” There are even more alarming details of the economic consequences of big box stores from other resources.
This Blog Post is not an exposé of Walmart, whose “issues” are addressed by people far more competent that I am. A Walmart State of Mind addresses a far more fundamental question for independent storefront retailers: What must an independent storeowner do to survive and, hopefully, make a decent living with the dramatic changes that are occurring in today’s market place?
The question becomes significant for stationers when you learn that Walmart is selling individual greeting cards for $0.46. Furthermore, seemingly every store in town, from the local car wash to the grocery store, is selling identical greeting cards to the ones whose lines you have nurtured for the last 10 years or so. What to do?
There are many other examples where the joy of running your own business has now been superceded by the frustration of running faster to just to make ends meet. This is not good for your piece-of-mind, health or economic well-being. Short of closing our businesses is there anything we can do? In the next series of articles we will seek to examine several concrete strategies to avoid getting into a Walmart State of Mind. Some of these strategies may not be immediately “good” for your pocketbook, but they will focus your mind.
Richard W. May
Therese Saint Clair