business news in context, analysis with attitude

That’s the question essentially posed in a page one story in this morning’s Wall Street Journal, which suggests that while Wal-Mart has changed how people shop, how suppliers manufacture products, and forever altered the landscape of American retailing, the company’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.

“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.”

This means that some manufacturers are going elsewhere to test market products or roll out new lines. It means that companies such as Procter & Gamble has seen the percentage of its sales done in Wal-Mart stores drop from 18 percent to 15 percent in just four years. It means that the retailer has backed off, at least in part, its RFID plans, simply because it couldn’t get manufacturers to fall into lockstep. And it means that Wal-Mart’s fleet of big-box supercenters have actually become part of the problem, so big that they are unable to respond to trends and consumers shifts with the kind of facility and nimbleness shown by other entities.
KC's View:
Stories like this make me nervous, because they sort of remind me of the little kid who keeps poking at the bear with a stock through the bars of the cage. Eventually the bear is going to get annoyed, and it isn’t going to go well for the kid.

Part of my concern is that there may be some retailers out there who will read this story and believe that the war is over, that Wal-Mart is in an inevitable and irreversible decline. I doubt that. That doesn’t mean that there won’t be some fundamental changes taking place in Bentonville – and I keep hearing whispers about how Lee Scott may have to go, though it is hard to know how much credence to give such rumors.

However, the reality is that the whispers are out there, and some of the issues are being debated on the front page of the Wall Street Journal. That must be at least a little troubling to Wal-Mart, and it must ramp up the pressure for the big, game-changing move. I’m not sure what that it, but you know that the company’s leaders have to be looking for it.