Planetary Shifts
With all due respect to the choirs of financial analysts and company executives who’ve been singing endless refrains about the various causes of Walmart’s woes of late — including, but not limited to, a sustained drop in store traffic, its fourth consecutive quarterly sales decline, a 21 percent comparable-profit dip in Q4, and an underperforming stock price — I cordially beg to differ.
To be sure, the planet’s biggest retailer faced a tough year in 2013, capped by a particularly bruising −0.6 percent comp-sales blow. Accordingly, it’s little surprise to see the wheels of blame spinning wildly about what’s troubling Walmart, including its pricing strategies that one analyst deemed “too expensive for millions of shoppers finding themselves more pinched”; a drop in SNAP benefits for its low-income customer base; a restructuring of its Sam’s Club division, where it’s laying off 2,300 associates; and the scourge of bad weather.
No question, two of the four above reasons are perfectly valid — and also identical to what every other food retailer is currently confronting. But I also believe there are other contributing factors than what’s concurrently being assigned to the once unstoppable retail engine, which appears increasingly disoriented in an ever-changing climate that finds many of its foremost competitors stepping up and swinging better, faster and stronger — here’s looking at you, dear readers.
Indeed, in an era where retail saturation and omni-channel innovation is at an all-time high, Walmart is no longer the only viable act in town, and has begun to wear out its welcome in many markets. Further, supporting local and regional companies and destination stores that offer distinct points of difference, as well as reasons to linger beyond perfunctory purchases, is where many shoppers/spenders want to be these days. And by all accounts, those sentiments among consumers aren’t predicted to change anytime soon, if ever.
Small Steps
Thus, for its next act, Walmart is once again thinking big about its small-store format, which it’s toyed with in fits and starts for the better part of the past decade. Armed with a plan to significantly accelerate small stores in more than 300 locations during the present fiscal year (which has since been expanded from last October’s forecast of 120) alongside 115 planned new supercenters, execs from the Bentonville, Ark.-based chain said the mandate to change in tandem with consumers’ changing expectations is non-negotiable.
Declaring that consumers “want to shop when they want and how they want,” Bill Simon, Walmart U.S. president and CEO, recently told investors that “we are transforming our business to meet their expectations.” Exemplifying the progress of its small-format stores, comp sales for Walmart’s Neighborhood Market locations rose 4 percent for fiscal 2014.
The fill-in-friendly Neighborhood Markets are “performing comparable or favorable to leading grocers,” Simon said, adding that the company’s small-store expansion, alongside its flagship supercenter banner, is poised to help “usher in the next generation of retail,” with a combined thousand points of physical access with digital retail experiences that include initiatives such as Site to Store and Pay with Cash.
Notwithstanding the extent to which Walmart is successful in persuading the investor community of its rejuvenated small-store and online expansion plans — some of whom are beginning to openly wonder whether Simon’s job will still be solid when the smoke clears — the litmus test for success will be largely measured by its ability to decisively put the genie back in the bottle.
In the meantime, the escalating competitive cred of our core food retailer audience, coupled with the increasing clout of Amazon and well-established existing small-format operators, as well as other pending shakeups in the conventional retail ranks, should make for another fascinating chapter yet to unfold in the action-packed retail food world.
I believe there are other contributing factors than what’s concurrently being assigned to the once unstoppable retail engine, which appears increasingly disoriented in an ever-changing climate.