El fin de la era Wal Mart

Its influence on the economy is profound and lasting. But for the first time, the world's biggest retailer is having a tough time providing what consumers want.

By The Wall Street Journal
The Wal-Mart era, the retailer's time of overwhelming business and social influence in America, is drawing to a close.
Using a combination of low prices and relentless expansion, Wal-Mart Stores (WMT, news, msgs) emerged from rural Arkansas in the 1970s to reshape the world's largest economy. Its co-founder, Sam Walton, taught Americans to demand ever-lower prices and instructed businesses on running a lean company. His company helped boost America's overall productivity, lowered the inflation rate and strengthened the buying power for millions of people.
Over time, it also accelerated the drive to manufacture products in Asia, drove countless small shops out of business and sped the decline of Main Street. Those changes are permanent.
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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. It can still disrupt prices, as it did last year by cutting some generic prescriptions in the United States to $4. But success is no longer guaranteed.
Convenience, selection and quality Rival retailers lured Americans away from Wal-Mart's low-price promise by offering greater convenience, more selection, higher quality or better service. Amid the country's growing affluence, Wal-Mart has struggled to overhaul its down-market, politically incorrect image while other discounters pitched themselves as more upscale and more palatable alternatives.
The Internet has changed shoppers' preferences and eroded the commanding influence Wal-Mart had over its suppliers. As a result, American shoppers are increasingly looking for qualities that Wal-Mart has trouble providing.
"For the first time in a long time, quality has a chance to gain on price," says Lee Peterson, a vice president at WD Partners, an Ohio brand-consulting firm.
Now, the big-name brands that fueled Wal-Mart's climb to the top are forging exclusive distribution deals with other retailers or working to reduce their reliance on its stores.
PepsiCo (PEP, news, msgs), which favored mass-market campaigns a decade ago, recently skipped Wal-Mart when launching a new energy drink in favor of Whole Foods Market (WFMI, news, msgs). Consumer-products giant Procter & Gamble (PG, news, msgs) gets 15% of its revenue from Wal-Mart, down 3 percentage points from 2003. Wal-Mart's effort to expand internationally has had mixed success in affluent markets. Last year it exited South Korea and Germany after failing to adapt to local tastes and achieve economies of scale. In Japan, the company's low-price, high-volume approach has struggled in a country where low prices often equate to low quality.
Wal-Mart remains an enormous force in retailing, of course. Its worldwide sales are almost three times those of France's Carrefour, the world's second-largest publicly traded retailer. Wal-Mart's U.S. revenue is four and a half times that of discount-store rival Target (TGT, news, msgs) and four times that of the second-largest U.S. food retailer, Kroger (KR, news, msgs). Wal-Mart's clothing and shoe sales last year alone exceeded the total revenue of Macy's (M, news, msgs), the parent of Macy's and Bloomingdale's department stores.
The company's unquenchable thirst for scale has been the secret to its market-changing power. "What we are is a supercenter with one-stop shopping," said Wal-Mart Vice Chairman John Menzer at an investors conference last month.
The company expects each year to build an additional 170 to 190 of the 18,000-square-meter supercenters that are its hallmark and convert 500 smaller discount stores to the bigger format over the next five years.
"We would love to wave a magic wand and (make) every one of our discount stores a supercenter," Menzer says.
08-10-2007
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