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.
Fair enough. If there are enough people like you, then those items will continue to be produced.
I had a long discussion a while back with someone who couldn’t understand why a WM toaster, price $15, didn’t last as long as the one he’d bought in the 50s, which adjusted for inflation would have been a couple hundred bucks.
There is an extremely small market for high quality small appliances, and this by itself increases the cost per unit. You may want the higher quality and be willing to pay more to get it, but many items just won’t be available due to market forces.
I think it would be safer to say that retail sales in general are bound to get flushed down the toilet when the unemployment rate is north of 10%.
Zayres and Jefferson Ward also are now gone.
I forgot Service Merchandise. Another one bit the dust.
In a severe recession people will pay more for service and a quality product? Sure they will.
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.
There will be NO resurgence in manufacturing in America until we kill OSHA, the EPA, and half a dozen other regulatory agencies that have driven manufacturing out of America (kill in a figurative way of speaking, you leftist FR watcher morons). That, or as Rush says, export liberalism so that the Chinese, Mexicans, Vietnamese, Thais etc. all are unable to manufacture goods any more cheaply than we can because they're regulated to death.
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.
I've never understood what journalists mean by the above statements. A functional economy gives people what they want. What we need to become the prosperous capitalistic country we were 50 years ago is to do as I said above - reduce regulations and taxes.
He doesn’t provide enough explanation for why we’ll go back to Mom and Pops if Wal-Mart closes some stores.
Specifically to namvolunteer - you are exactly right. He had a good article going until he veered off into some areas he doesn't even begin to understand, the parts that I cut and pasted above.
nonsense, you do not know what you are talking about.
One of you doesn't, but YOU are confused as to which of you it is.
I will suggest to your my fellow Freepers that you likely have a mild case of Keynesianism. That could cause the delusion (Suffered by you driftdiver) that a bureaucracy could push environmental regulations to the point where biodegradable products like Glycol required for hydraulic die-casting and injection molding machinery costs more to dispose of than the labor costs without driving production overseas.
I will proscribe obtaining a more diversified work experience, and suggest that you wear earplugs in the short term because you are going to draw a lot of ridicule on yourself of exactly the same nature as the ridicule global warming believers are now experiencing. Certainly you are going to experience it here.
One of the main reasons, I hate going to Wal-Mart is the checkout. I have never seen more than 3 registers open in any I went to in the past 5 years.
The only way I go there myself, is if I know I will save $50 or it is the only store open that has what I need. Something is seriously wrong when it takes longer to check out than shop.
“There is an extremely small market for high quality small appliances, and this by itself increases the cost per unit”
I think you underestimate the market size for small appliances. More and more people are learning that price is not everything.
I don’t want them to go out of business. I like competition.
Bookmark
I'm guessing this is the same guy I see advertized in spammy ads at some business-related web sites.
Anyhow, the way that smaller stores can compete is to niche-ify, and offer more selection. Walmart has recently scaled back product selection. That is now their weak point, but thus far, not many are exploiting it, in part because of the idiotic trend of single-supplier sourcing for product categories.
Not quite sure what universe this person lives in but it is a strange place.
Then again, they may still see a lot of growth through changes in its product and service offerings.
I think a company like Wal-Mart could make a ton of money by cutting a deal with a second-rate auto manufacturer like Government Motors and expanding their existing stores to include certified auto repairs for second-rate GM cars.
Of course it's fair. If the Sheeple support labor, environmental, and tax laws that are incompatible with efficient business, then they have no right to blame China for out-competing them. They can just consume the cheap Chinese goods. They must either accept the economic loss or make up for it by success in other economic areas.
I you READ my post I did blame myself.
That doesn’t change the fact that they still sell crap!
Excellent observation. This tells me that Wal-Mart is marketing primarily to people who don't value their own time very much.
They do not, but they survived thr great depression.
They were succesful until someone else came along with similar selection at better prices. Certainly they were both still big in the sixties.
Which will happen to walmart, Already in North Texas they have cut back on stock and thir grocery items are no longer much cheaper than roger or Albertsons. Men’s casual clothing here has been cheaper at places like Academy sports for some time.
What the HELL are you talking about? You piece of communist garbage to start throwing insults that like just because I think walmart sells a lot of crap.
It has nothing to do with govt control. Nothing to do with Kenya. It has everything to do with a consumer not swalling the marketing hype and thinking for themselves.
The title couldn’t be more wrong even if written by a horde of Hollywood writers.
True, we will see change, and remember...the only thing that never changes is change itself...and death. Will they re-focus? Sure. Might they downsize to accommodate the, then, current economy? Of course. But, demise?
Wal Mart has something no other single entity on the planet has. They have Global “boots on the ground”. This puts them in a unique position of being on the highest “perch” in the business world. They see everything, as it happens, not on a spreadsheet, or in a 10Q, or a Gov’t report. The ramifications of this advantage are too many to enumerate.
Now, had you said Target or K-Mart-Sears, you may have been closer to reality.
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