Crumbling Wal?

For the last decade or so the retail landscape has been dominated by the Bentonville giant. Numbers from as recent as 2004 reflect the hold it has on retail market. But like changes in every field, the one in retail also came swooping and W*M has some challenges on its plate. I came across a very good article by Paula Rosenblum of Retail Systems Research on the challenges facing the giant. Some key observations cited by Ms. Rosenblum that I found interesting were pertaining to how retailers have responded to W*M's presence - "In a post Wal-Mart world, retailers could not differentiate on operational efficiencies, or selling commodities. Wal-Mart owned that space. Retailers like Target, who made hay by selling really cool stuff cheap (or somehow making commodities seem cool), Costco who made warehouse shopping chic, and Whole Foods, who gained its customers trust by being at the forefront of eco-friendly and healthy, started knocking the ball out of the park by NOT being like Wal-Mart". The article goes on to recommend how W*M can use IT to bring back its "mojo". One very interesting part of this recommendation was the use of RFID instore to track stock movements. However given some of the technological (hardware) problems related to RFID, I am not sure how practical that is. Only the future will tell if the Wal's crumbling or the Mojo's Risin.....

Shopping Portfolio

I alluded to the US retail market possibly moving to more innovative store formats driven by greater diversification of the customer base due to more varied life style choices in my previous post. I found a very interesting observation made by Brian Gildenberg of MVI in this article featured on the Hub magazine. Mr Gildenberg explains how Tesco could be capitalizing on the rapid change in the US markets indicated by the following 4 trends
"1) The apparent end of retail consolidation; 2) fragmentation of consumers and retail formats; 3) shoppers using a portfolio of formats to meet their needs; and 4)natural foods, energy efficient processes and an environmental message." Each of the trends are discussed with insightful details but the part which struck the most was an interesting statistic
"store sizes are becoming more polarized. When you aggregate stores that are more than 100,000 square feet and stores that are less than 15,000 square feet, both are actually growing markedly faster than the market average".
This might indicate that there are big store formats getting created to cater to a certain segment while more innovative formats are getting created at an equal pace to cater to a different demographic. A unique buying pattern is seen to be emerging where a customer uses a collection (portfolio) of stores to meet their requirements -
"The continued proliferation of the U.S. retail landscape into a variety of formats is leading to what we call a “portfolio theory” of shopping behavior. A typical shopper might visit a combination of club store, supermarket, specialty grocer and chain drug store to fulfill a variety of specific needs based on which format meets each need best."

Climbing the Wal

As Walmart's same store sales growth has slowed down, some interesting insights have been done on the reasons behind it. I found one such insight on Reveries.com website based on an article in Wall Street Journal by Gary Williams. One thing that I found interesting was "The pricing gap between Wal-Mart and rivals has narrowed, and more customers are now choosing convenience over wading through a supercenter". I used to wonder if I was the only one who got lost and confused in a gigantic WalMart super center. There was just too much signage and the one in my neighbourhood was so crowded that it would be difficult to find an associate to help out. Which brings in another interesting point - on an average (as per a study which I need to dig up and link it here) a shopper spends 22 mins in a Wal Mart store but how much of that is spent searching and how much is spent doing aisle crossover (which is what the super centers are counting on to up their avg top line sale)? I wonder if this is a fundamental issue with the supercenter format itself? As life becomes faster (can it get any more faster???), if its time for more smaller lifestyle dedicated convinience based formats? Do I see a Tesco lurking somewhere!!!!!