The Wall Street Journal has a fascinating article on shifts in the US retail scene. Wal-Mart seems set to slip from being the sole industry-defining company, and will become one of several such companies. I think the writer misses a trick in not looking at the impact of high-priced oil (most of the items that Wal-Mart sells are imported, typically from China) and the whole environmentalist movement. Nonetheless, a topical and interesting read, especially at a time when the organised retail sector is set to boom big-time in India. Maybe the seeds of a few more business opportunities in here?
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 Inc. 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.
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 to $4. But success is no longer guaranteed.
- Mary Meeker’s 2014 Internet Trends report - May 28, 2014
- Andreessen-Horowitz raises $1.5B for its new fund - February 1, 2012
- WestBridge launches India “evergreen” fund - November 15, 2011
Tesco is a great company to watch, especially as a Walmart killer, especially in the U.S. Tesco in the UK does the same kind of pricing in small gas pump stores to medium sized corner 7/11 like stores to large box stores. At all locations you get the same pricing but depending upon the size, the selection is smaller or larger. Think about this! If you can get the same milk at the same price at your gas station store round the corner as you can at the large super grocery market, why would you drive all the way to the bigger store?
This is because Tesco has fined tuned its distribution so that the same medium sized van stocks the local stores as well as the big box store. This is where walmart slipped up.
It’s beyond just price, it’s also good quality and convenience of shopping. If tesco can provide all they can be a Walmart killer!
Thanks for pointing out to a great article.. it clarifies a few important points…
There is more to retail than price.
Retailers have been obsessed with the “sabse sasta” proposition for long. Though price remains a big draw, there is more to value than price. It would be great to see Retailers competing on other parameters like the experience factor, or the quality of service, depth and range of assortments, home deliveries, multi-channel retailing etc. There is still a lot of virgin territory that can be exploited.
Opportunities in the format type –
Subhiksha likes it ultra-small. Reliance bet big on the sub-2000sq.ft concept. Even Future Group which started with “Big” Bazaars have revisited their strategy with the launch of their Neighbourhood Supermarket format. What does this entail? Is the Hypermarket concept to inconvenient to reach sizeable audiences in India? I believe the model will evolve over the next 3 years and will need significant experimentation before we figure out the right formulae.
Btw there is a fantastic piece by Tom Peters called – Walloping Wal-mart. http://www.tompeters.com/entries.php?note=007977.php It’s a great revelation for retailers who want to look beyond price as the core proposition.