Posted on 01/17/2010 10:58:08 AM PST by Captain Peter Blood
The other night I was reading Nathan’s Economic Edge Blog, http://economicedge.blogspot.com/, and he had a link posted to an interview done by Eric King of King World News with Gerald Celente of The Trends Research Institute, http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/1/9_Gerald_Celente.html, where he gave his take on 2010.
Mr. Celente has a pretty good track record in discerning future trends in business, politics, social and world events. He has been at this for 30 years. You can examine his website at; http://www.trendsresearch.com/index.htm.
One of the things that caught my attention in this interview was his prediction for big box retailing, i.e. Wal-Mart, Target, Home Depot, etc.. His thesis was that we have seen the apex of big box retailing as we know it and it is now on it’s way down and with it a change will come to a new or I might say previous form of retailing to the public.
I will use Wal-Mart as the main example since I happen to work for them and see quite a bit of validity to what Mr. Celente was talking about.
All big box retailers, especially Wal-Mart, for the last 35 plus years have had a same formula for success and growth, a constant round of new store openings.
Even in past troubled economic times Wal-Mart has never Faltered, they have even prospered greatly in previous recessions. Until now Wal-Mart has never closed a store or laid off workers at the retail level.
One of the main problems Wal-Mart has had in recent years is where else to grow. They saturated most every market in the country along with all the other big box retailers. Their solution has been to build more stores in clusters around existing stores.
Example, you have two Wal-Mart Supercenters in a two to five mile radius, depending on population density, that are doing well. The company decides to build another Supercenter in the area knowing that it will cannibalize customers from the other stores, but based on sales figures it says that together all three will have a combined increase. Even though sales at the other two Wal-Marts will suffer to some degree.
Now you take an area like Southern California where this practice has gone to outer extremes. In a two the three square mile radius you have three Wal-Mart Supercenters, a Sam’s Club, and all the other big box retailers in a cluster. With rising wages and a expanding economy somehow all these stores can be supported to a certain level.
But in times like these, with a severe economic crisis with no end in sight and the California unemployment rate at 12.5% plus then that economic model can’t continue to work and won’t.
Wal-Mart and other big box retailers have hit the wall on growth, that is opening new stores. Stores open at least one year or more have had flat or declining sales and will continue to do so. The past Christmas shopping season was a disaster even for Wal-Mart, the fourth quarter numbers will tell the tale and I look for flat profit or maybe after we really dissect the numbers a loss.
Witness last week Wal-Mart announced that it was closing, primarily in California and Western States, 10 Sam’s Clubs. The Wal-Mart explanation is that they were barely profitable or losing money. The real explanation is that this economic crisis has made it nigh impossible to support all the big box retailers in these so called cluster areas.
In my opinion in the next few months the unheard of and unspeakable will happen, Wal-Mart in high population density suburban areas will start closing stores. I look for this to happen in states like California, Florida, Michigan, places where there is very high unemployment.
If we get another market crash and/or banking crisis, which I fully expect to happen in the next 12 months or so then Wal-Mart and all of the other big box retailers will be retrenching even more.
Mr. Celente’s theory is that big box retailing will be out and small box retailing in. Sort of the reverse Wal-Mart effect, the local Mom and Pop will make a comeback as people will want better service and will be willing to pay more for a quality product.
In a way I see this as a positive for the new long term rejuvenation of this country. By reversing that trend it could possibly promote resurgence in a domestic manufacturing base that we need to have along with a more balanced economy and then we can wean ourselves off the cheap Chinese goods we have been consuming like a ravenous beast for the last 15 to 20 years.
Our economy for the last 20 years had evolved into a consumer driven one where the consumer was 70% of GDP. That was never a sustainable long term viable economic model. We have to get back where we once were, that of a balanced economy to have any hope of once again being the prosperous Capitalistic country we were 50 years ago.
Joseph Schumpeter the Austrian Economist once said, “Capitalism by its very nature is a wave of destruction”. I took that to mean it is ever changing and evolving and with this country’s great resource of Entrepreneurs we can turn things around. At least that is my hope.
Walmart is one the few retail businesses consistently MAKING MONEY because they adopt to the changing economy. Walmart will be around for a LONG time. Walmart doesn't hire UNION workers and gives consumers VALUE for LESS money.
This article is a crock of anti-capitalistic propaganda.
He doesn’t provide enough explanation for why we’ll go back to Mom and Pops if Wal-Mart closes some stores. The model of low prices and one-stop shopping will remain popular if the products are reliable. Saving money is the prime motivator for most of us, Wal-Mart and other have proved.
Wally will be there to sell stuff cheap that folks don’t want to get online: groceries, cleaning supplies, stuff like that. Big boxes are good for that sorta thing. But not for everything, especially stuff that’s easy to get online like books. Big box bookstores are hurting. But Wally’ll be around. It’s growth’ll likely slow unless it can reinvent the wheel, but I don’t think it’s going anywhere. IMHO :)
“One of the main problems Wal-Mart has had in recent years is where else to grow. They saturated most every market in the country along with all the other big box retailers. Their solution has been to build more stores in clusters around existing stores.”
No there is no “saturation”. Clearly this individual has NO IDEA the market research that goes into where to uild a store. This is Businsess 101. Discretionary income, buying habits and customer profiles are purchased by Walmart and other retail stores to determine placement of a new store.
Walmart is also more closely aligning IN STORE merchandise to the AREA they put the store in. If it is a HISPANIC area they will have more products that CATER TO HISPANICS. Walmart has definitely fine tuned their merchandise even further to WHO LIVES IN THE AREA. It’s not a mass buyind decision allotated all of the country.
Walmart is also upping it’s product line to cater to the upper middle and upper class in areas where it makes sense. It’s WORKING TOO!
Clearly this blog ow whatever he is has NO CLUE on what Walmart is up to as it INCREASES and SURGES AHEAD of other retailers.
It’s not exactly anti-capitalistic but because his logic isn’t logic at all. The very basic objective of the consumer is price first and WM provides very competitive pricing which he doesn’t address.
For personal bias, Costco owner and president is a lib/big-time Rat’ donator, and even though I fantasize about Costco failing, it serve a specific niche market which is selling bulk for small businesses..unless you have an account with them.
For the guy “wally” as you call him, selling cheap stuff that nobody wants ... proves your brilliance. “Wally” as you jouously call him is the Number 1 retailer .. and you tell me they get that way from NOT selling.
Let me see if I can go back to my freshmen year of economics and figure out the model your superior intelect has produced
Sheesh!!!
Exactly!
As the economy tightens it will be more important to target the Walmart to specialize even more in meeting the needs of a particular area rather than a mass rollout of merchandise regardless of where the store is. Walmart is doing just that.
This author is incredible ignorant and has an agenda along with wishful thinking that Walmart and other stores like it will disappear and we'll go back to Ma and Pa small shops that offer NO volume discounts and limited variety. It won't happen.
“Walmart is one the few retail businesses consistently MAKING MONEY because they adopt to the changing economy. “
not really, they just opened more stores. Walmart failed miserably in South Korea and Germany.
” Walmart doesn’t hire UNION workers and gives consumers VALUE for LESS money.”
They give you less value for less money in many cases. A pair of pants or a drill at Walmart are not of the same quality as those in many other stores.
“This article is a crock of anti-capitalistic propaganda.”
Really, I thought part of capitalism was analyzing markets and trends and adjusting to them. Where do you see the anti-capitalism?
Wal-Mart will not fold, but they certainly will have to close some stores. It’s like Starbucks and Krispy Creme; too much saturation too soon.
I expect they’ll close down some stores and downsize during these times, but they’re not going to go under and fold; no way, no how.
Okaaaay. Pard, ya lost me.
It wasn’t that long ago, is I shopped carefully at Wal-Mart, I could find quality clothing...jeans, sweatshirts, stuff I live in around the house. I’ve had to replace some of those items, as well as some common household stuff. What used to be quite servicable is now really crap. My the fabric old paint covered sweatshirt is great. Replaced it with one that looked the same, minus the paint. In a couple washings, the fabric is thin, and balling up, out of shape and looks awful. I’m finding this same thing across the board.
I’m thinking there’s a point where places like Wal-Mart won’t be able to find cheap enough merchanise to keep staying in business. I think that’s what happened to the old “5 & dimes.”
“For personal bias, Costco owner and president is a lib/big-time Rat’ donator, and even though I fantasize about Costco failing, it serve a specific niche market which is selling bulk for small businesses..unless you have an account with them.”
THat’s why I don’t shop there.
BJ’s is partial to Republicans. Costco favors Demoncrats.
Like it or not Wal-Mart is here to stay. They might close some stores but they'll open others.
“For personal bias, Costco owner and president is a lib/big-time Rat’ donator, and even though I fantasize about Costco failing, it serve a specific niche market which is selling bulk for small businesses..unless you have an account with them.”
THat’s why I don’t shop there.
BJ’s is partial to Republicans. Costco favors Demoncrats.
“There is NO LIMIT to growth of Walmart and other stores like that.”
No limit? Hey I have a bridge to sell you since you live in fantasy land.
“No there is no “saturation”. Clearly this individual has NO IDEA the market research that goes into where to uild a store”
Clearly you are in love with Walmart.
“Clearly this blog ow whatever he is has NO CLUE on what Walmart is up to as it INCREASES and SURGES AHEAD of other retailers.”
In the South East it has lost market share in the grocery business to Publix Supermarkets.
Walmart has closed a lot of stores over the years, and dumped the staff when they do so.
This article doesn’t make much sense to me. Granted they may close a few stores in a bad economy, but people are still going to seek out their stores to save money. In a lousy economy people aren’t going to pay premium prices in mom and pops, that is the last thing they will do.
I love Wally. They’re a good way to sell certain things efficiently and cheaply.
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