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Report: Wal-Mart Likely to Focus on Food, Other Strategies for Future Growth

COLUMBUS, Ohio - In five years, Wal-Mart could be twice as big as it is today if it increases its market share in major categories such as food and apparel and newer areas such as gasoline, predicts global consulting and market research firm Retail Forward.

"The Age of Wal-Mart," authored by Dr. Ira Kalish, chief economist for Retail Forward, explores five likely growth strategies Wal-Mart may pursue, examining rationales, prospects, and likely effects on competitors and suppliers.

"In order to grow, Wal-Mart will need to sell new categories of merchandise, operate in new geographic locations (including those in the U.S. that it has not yet tapped), appeal to new consumers, obtain greater share of wallet from its existing customers, and operate in new business sectors," Kalish said.

In the next five years, Retail Forward expects Wal-Mart to focus on five key growth strategies:

1. Food: Wal-Mart's growth in the past decade was largely the result of its enormous foray into the food market. Although Wal-Mart is now the market leader, it still has a long way to go. Retail Forward predicts that, by 2006, there will be more than 2,000 Wal-Mart Supercenters in the U.S., with food sales accouting for approximately one-third of the national increase in spending on food.

2. Foreign: "While further foreign acquisitions are expected, Wal-Mart will not be successful as a global retailer if its only advantage is price," Kalish said. "It must also provide a superior shopping experience, strong localized merchandising, and a clear differentiation from competitors." However, it is unlikely that Wal-Mart's overseas expansion will move swiftly enough to fuel the company's growth engine. The company's most probable courses of action will be 1) to grow its existing businesses in the U.S., extending customer reach, and 2) to move into other businesses in the U.S. with the same velocity it moved into food.

3. Fashion and Family: To get more out of existing stores, and to attract a more affluent consumer, Wal-Mart must ramp up efforts in apparel and home goods. "Wal-Mart will need to focus on expanding its range of merchandise, improving the quality and variety of its non-food assortment, and developing strong private and exclusive labels," Kalish said.

4. Format: To reach more markets and more consumers, Wal-Mart will drive growth through multi-channel delivery of its core businesses. By opening smaller food stores, developing formats for urban shoppers, and potentially leveraging its strengths by developing drug, dollar, and convenience stores, Wal-Mart could overcome the limitations created by its Supercenter focus.

5. Fringe: "Wal-Mart will seek to test the outer boundaries of what consumers are willing to allow Wal-Mart to be," Kalish comments. The company will seek to expand at the fringe of its core business by developing sales in highly new and unusual categories. Wal-Mart's aggressive rollout of fueling stations could be followed closely with the company selling used cars, financial services, home improvement, and foodservice.
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