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.
The whole setup is built around the big feeder roads and where they intersect. I'd think as long as people live in those developments, they'll shop at the big box retailers.
There doesn't seem to be much chance for Mom&Pop alternatives to spring up in that environment.
I just don’t understand all of the animosity toward Wal-Mart. About 80% of my purchases there are grocery items, and their prices are better than anyone else (they sell the SAME stuff). I buy other household items but, generally, “quality” isn’t a huge concern with most of what I buy there. If I need tools or a home improvement product, I go to Lowes. Wal-Mart isn’t a “one-size-fits-all” place, no doubt, but it works for most of my purchases, and it doesn’t ream my pocketbook.
Their prices are better because their profit margins on the Chinese-made stuff more than makes up for the shortfall in their grocery profits. It's all about getting people in the door. In that sense, you might well think of their entire grocery dept. as being something of a "loss leader."
Dead on.
The company I worked for merged with a company that sold primarily to retailers. We did imprinted sportswear for businesses, they did them for resale at retailers. When we merged I was tasked with keeping up with the electronic invoicing program they saddle suppliers with.
EDI is a system they force you to use which is supposed to make purchase orders and invoicing electronic and “easier.” As a supplier you must find an EDI provider who sets you up with an account (for which you pay a monthly fee) and then all communication with that vendor is done via EDI (or sometimes their own supplier web site). Additionally, Wal-mart is very particular about packing, how the boxes are marked, how many items per box, etc., etc. If you sell shirts to Wal-Mart you must hang tag them yourself (in the exact place, with the exact hang tag, with the right kind of attachment), either put them on hangers (at your expense) or have them folded and bagged (at your expense).
Orders are received via the EDI system. One “order” may be for 50 or 60 stores, with each store getting different designs and different quantities of sizes. Some may be buying as few as a dozen shirts, some buying several hundred. You have a set period of time from when you receive the order to when you MUST ship, often requiring you to stop all other production and run only the Wal-mart shirts.
Many suppliers are not fully aware of the extra expenses that will be incurred when dealing with Wal-mart and subsequently find they are losing money with each transaction. Additionally, we found that Wal-mart would claim that a certain percentage of the shipment was either short or unacceptable and deduct them from their payment with no prior communication. When we asked for the “unacceptable” items to be returned, we were told that while we could pick them up, they would not ship them back to us or accept pre-paid call tags for them. Basically we had to trust them.
After I left the company, I found out that Wal-mart managers routinely claim products are unacceptable - especially from vendors unable to retrieve the product - because they are responsible for inventory levels and profitability and they have to make up for the “shrinkage” that occurs due to the high rate of theft in the stores. They can help cover for some of the theft losses by “creating” inventory. Some managers get so good at this that inventory gains - which should be impossible - occasionally occur.
Of course once you start supplying them, you can never increase your price, especially if there are other companies that can supply Wal-mart with the same or similar products.
All in all, a real deal with the devil.
You’re niave cynwoody. Companies like Walmart and the big banks lobby for the laws that are in place. They pay for direct access to Congress and frequently help write the laws that make it impossible for small American companies to compete. What we see is the result of a monopoly and control of the market. That is not a form of capitalism that will keep America strong.
For example, GE is pushing hard for the Cap and Trade bill to pass. Just like they did to get the CFL light bulb law passed.
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I submit: sheer BS!
Target is an online seller at Amazon
- Just-In-Time Stocking
- Manufacturer Delivery
- No State Sales Tax
- Instant Purchase (as at Amazon PRIME)
- Special Quick Delivery Plans (like PRIME)
Small “Mom & Pop” brick & mortar stores are not going to make a huge comeback
The self-appointed “expert/writer” is either selling a book or translucent bovine scat
Amazon increased profits by over 50% in the last quarter
What has Government Motors done with your tax dollars?
How did Robinson Plumbing make at the WTC in September 2001?
Mea culpa. I was over the top.
I’ve been debating soc libs on another thread.
I never mentiones Kenya, but the leftist economic theories nominally attributed to Maynard Keynes.
None the less, Manufacturing is moving overseas for reasons like those I mentioned, and which many here with actual experience in manufacturing can educate you in.
Suffice it to say, that a whole lot of compartmentalized thinking is required to thoink that you can make a competatively priced product today in the US (barring an exclusive patent) and those reasons have only pereferal connections to direct taxes or unions.
A friend of mine worked in the IT department. They made it mandatory to work 12-14 hours a day, 6 days a week and kept it up for 2 years.
After they guy sitting next to him had a heart attack at his desk my friend left.
Walmart today is not the company Sam started. They place no importance on treatment of their people.
The other day, I was looking for toilet paper. Walmart had Scott 1000-sheet 1-ply at 65 cents a roll in bags of 20. I passed, figuring I'd find it down the street cheaper. (However, I did buy ten tins of Alaska smoked salmon ("Best by 09-2014") at $6.88. Those cost closer to $15 at WFM, when they have them.) I next stopped at Demoulas, a down-market grocer. They had the very same 1000-sheet Scott at 55 cents. So I bought seven 20-roll packs. That should last a couple of years!
Checking online, I see a similar product at about 30 cents a roll. Add in shipping, and one case comes to $47.71, or 49.7 cents a roll. But there's a risk the product might be of lesser quality. BTW, WFM wants $1.49 for their version of 1000-sheet 1-ply (sold individually).
I can’t get past the incorrect spelling and grammar. Sorry.
Then you have identified a market niche.
Go ye forth and make a ****-load of money!
The problem is that there are certain things people are willing to pay more for quality and others they just aren’t, or at least not enough of them to make a quality for high price strategy profitable.
Cars are obviously an example of the first group, as are restaurant meals.
Gasoline and airplane tickets are examples of the second. Despite decades of trying, they haven’t been able to create brand loyalty.
I like Walmart. I recently went to buy another large flat screen TV at Office Depot. They were sold out so I headed to Walmart with the Office Depot advertisement.
Walmart will match the price if it is the same EXACT product. Walmart had it, the manager was chagrined at the price difference, but I got it at the huge savings.
ruh roh ruh roh spelling/typo nazi on the loose.
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those that can do, those that cant .... look for inconsoqwantial errors.
Love a$$holes on this boards ... If I want to listen to an a$$hole make noise ... I’ll pass gas
“Despite decades of trying, they haven’t been able to create brand loyalty.”
People who fly a lot for business tend to be very brand loyal. There is a huge difference between the airlines.
If Obamacare fails, Wal-Mart could make huge inroads by offering a lot of medical care. Here are the numbers:
To start with, some doctors have already learned that if the refuse insurance, Medicare and Medicaid, they save so much in administrative costs that they can charge cash patients 50% less. So Wal-Mart needs to insulate their medical business model in this way.
Because Wal-Mart deals in volume, at least for several years, a lot of their efforts will be in building a customer health baseline database. That is, for a low fee, customers get a detailed and elaborate diagnosis, looking for anything and everything. This will be their health baseline, to be compared with any future diagnosis.
Right from the start of this baseline diagnosis, they will spot a large number of problems and potential problems. For these people, they will enter them into a “measured health improvement system”, to systematically take care of their problems. This will be much like a layaway plan for medical care. When they have enough money, they take care of their next problem.
Then comes “health management”, to guide people to healthier living such as diet plans and stop smoking support—whatever they want.
Finally it is capped by urgent care treatment, and possibly even emergency dental care at a fraction of its typical cost.
Here is a diagnosis by Dr. Kye-Chung Song, a Korean B-school professor:
Ineffective people management, Song said, contributed to Wal-Mart's downfall in Korea. First of all, most of the Korean department stores have centralized locations downtown in areas easily accessible by subway. Wal-Mart has built facilities in remote locations. It is just not convenient. Wal-Mart's grocery shelves stock frozen fish rather than the fresh fish preferred for the Asian diet. The store's design was not altered to accommodate the average Korean's height; therefore, the shelves and displays are higher than in the other stores.Also, the brick and tile interior does not provide any sense of wealth or status, important points of Korean culture. Song explained that most of Korea's people are affluent enough to be able to pay higher prices than what Wal-Mart advertises. As a result, a low price equals low quality association exists. For them, Wal-Mart is a step down in quality.
According to Song, a big part of Wal-Mart's problems started with the fact that the corporate headquarters are in the U.S.A., and there was a lack of communication between them and the Korean division.
Maybe if they'd hired smart Koreans to run the new division and trusted them with full authority to bend the rules and adapt the model, they would have been successful.
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LOL!
Good shopping deal at Wally World potlatch!
Sure, when somebody else is paying the freight and you want to consolidate your FF miles.
But as far as I know, no airline has been able to pull off a marketing strategy of "we cost more, but we're worth it." Unlike quite a few, like SW, which have been highly successful promoting themselves as the low price option, even though they aren't always actually lower.
JM Fields
Globe
Grants
Ames
KMart
WalMart
What’s next?
The big box store life cycle is as follows:
Stage 1
Local big box stores are dirty and poorly run
New big box store opens
Store is clean
Merchandise is new
Prices are good
Employees are new and glad to have a job
Stage 2
Merchandise ages
Store ages
Unsold junk builds up on the shelves
Employees are layed off because of reduced sales
Remaining employees have bad attitude
New big box store comes to town
Customers move on
Big box store goes out of business
So far, WalMart has avoided the second stage by constantly remodeling their stores and merchandise. It will, however, eventually happen. It may not be Target, but it will be replaced eventually.
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