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Wal-Mart, Big Box Retailing, And It’s Inevitable Demise
Self | 1-17-2010 | Captain Peter Blood

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.


TOPICS: Business/Economy
KEYWORDS: retail; retailing; walmart
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To: Captain Peter Blood

My money is on Wal Mart. They are the epitome of mass marketers.


161 posted on 01/17/2010 5:34:53 PM PST by Loyal Buckeye
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To: cynwoody
First of all, most of the Korean department stores have centralized locations downtown in areas easily accessible by subway.

This attitude is Wal-Mart thinking since forever. The first thing they do in a new small town is build outside the main drag and just kill it off, as customers flock to their location. Doesn't work that way everywhere.

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.

Kind of proves the point and is typical of large organizations. They are slow to adapt and are positive that their way will work no matter what you tell them. Instead of adapting, they keep pouring money in and then just give up.

162 posted on 01/17/2010 5:54:40 PM PST by packrat35 (Democrat Healthcare is a 9-11 Attack on the Constitution)
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To: Crusher138

You are very right in what you say. They are very exacting and will refuse or claim shortages that don’t exist to keep their bottom line. Dealing with Wal-Mart has put more than one company in bankruptcy, kind of a deal with the devil.


163 posted on 01/17/2010 5:58:29 PM PST by packrat35 (Democrat Healthcare is a 9-11 Attack on the Constitution)
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To: dalereed

BJs Wholesale is a warehouse club like Costco and Sams. They aren’t trying to be funny with you. Most people just call it BJ’s.


164 posted on 01/17/2010 6:01:32 PM PST by packrat35 (Democrat Healthcare is a 9-11 Attack on the Constitution)
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To: PAR35

I blame Wal-Mart for that one as much as the government. They should have known what the rules were (no matter how stupid) and just skipped the German market altogether.


165 posted on 01/17/2010 6:03:25 PM PST by packrat35 (Democrat Healthcare is a 9-11 Attack on the Constitution)
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To: mewzilla

My wife reads a lot of series and just has to get the new one when it comes out. I couldn’t believe some of the prices. Sure they had a discount table and I picked up a few good deals but for everyday, too damn high.

I could get most of the books I wanted at Amazon and have them delivered to me cheaper.


166 posted on 01/17/2010 6:06:23 PM PST by packrat35 (Democrat Healthcare is a 9-11 Attack on the Constitution)
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To: packrat35

Never heard of it.


167 posted on 01/17/2010 6:08:29 PM PST by dalereed
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To: dalereed

They don’t have them in Memphis, but I hear they are big out west.


168 posted on 01/17/2010 7:03:39 PM PST by packrat35 (Democrat Healthcare is a 9-11 Attack on the Constitution)
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To: packrat35

They aren’t in Southern California.


169 posted on 01/17/2010 7:09:03 PM PST by dalereed
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To: nmh

I love BJ’s and was very sad that the ONLY store they opened in my state they closed after Costco came in and build a store literally 3 blocks away. They had a great selection, all the stuff I wanted, great prices and a very high quality house brand. I currently have to keep a membership at Costco and Sams to get what I used to get from one store. My savings do make both memberships worth it but it irks me. Plus neither Sams nor Costco consistently keep stock in the same stuff. I hear the rational all the time but these are name brand products that don’t just disappear. BJ’s managed to consistently keep the items I purchased in stock and I could always count on them.


170 posted on 01/17/2010 7:29:27 PM PST by visualops (Freepin' on my Pre!)
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To: nmh

Plus I guess this guy doesn’t realize that walmart sells online too.


171 posted on 01/17/2010 7:33:07 PM PST by visualops (Freepin' on my Pre!)
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To: dalereed

Look, I was just explaining that BJs Wholesale is a real place and that people were not messing with you. You can easily do a google search. They are a large major corporation.


172 posted on 01/17/2010 7:35:44 PM PST by packrat35 (Democrat Healthcare is a 9-11 Attack on the Constitution)
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To: dalereed

Looks like they are a East Coast operation.

BJ’s Wholesale Club has over 180 locations in 15 states:
Connecticut
Delaware
Florida
Georgia
Maine
Maryland
Massachusetts
New Hampshire
New Jersey
New York
North Carolina
Ohio
Pennsylvania
Rhode Island
Virginia


173 posted on 01/17/2010 7:37:23 PM PST by packrat35 (Democrat Healthcare is a 9-11 Attack on the Constitution)
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To: Captain Peter Blood

The writer has no clue.

Walmart is not successful because of the way it sells. Walmart is successful because of the innovation in the way buys


174 posted on 01/17/2010 7:37:52 PM PST by bert (K.E. N.P. +12 . Tax the poor. They have no stake in society)
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To: visualops

Some people prefer to be ignorant.

It’s a CHOICE!


175 posted on 01/17/2010 8:04:54 PM PST by nmh (Intelligent people recognize Intelligent Design (God).)
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To: driftdiver
Greated at the front door by 3 very cute young ladies instead of a grumpy old guy. The store was very clean.

I have never seen that grumpy old man greeter in a Wal Mart, your little shopping tales and anecdotes do not ring true. It is just a bunch of anecdotal nothing, as you seem to have some personal vendetta against Walmart.

It is because of guys like you and the left's war against Wal Mart, that San Diego does not even have a Superstore, and we are the 8th largest city in America. We get the Democrat Costco, but no Walmart superstores.

"The Regulation of Superstores: The Legality of Zoning Ordinances Emerging from the Skirmishes between Wal-Mart and the United Food and Commercial Workers Union George Lefcoe, University of Southern California"

Having saturated the less populated heartland of America, Wal-Mart is carrying its supercenter expansion program to major urban areas. Wal-Mart supercenters merge discount retail with full service grocery stores under the same roof. Because supercenters compete head-on with unionized supermarkets, they place downward pressure on grocery worker wages. The United Food and Commercial Workers, the largest representative of grocery workers, has joined other Wal-Mart critics at city halls across the country in using zoning laws to restrain Wal-Mart’s supercenter expansion program. A smattering of law suits have ensued, and more are sure to follow."

"This paper describes the types of anti-superstore zoning ordinances favored by the UFCW, and the legal objections Wal-Mart can expect to be raised against them. At the top of the legal checklist are equal protection, pre-emption by the National Labor Relations Act, and prohibitions against the use of zoning to regulate economic competition. Anticipating these objections, the UFCW and its allies can make a public record sufficient to insulate virtually any anti-superstore ordinance from being invalidated in court. But this cannot be accomplished easily or inexpensively, because enacting jurisdictions wanting to avoid remand will need to commission studies to fit the claimed rationales for these laws. Market impact assessments sensitive to the local trade area will almost always be required, and in a handful of states, including New York and California, so will environmental impact reports. If the UFCW and their grocery chain allies find the zoning effort too costly and cumbersome, they may wish to consider extending ‘living wage’ controls to grocery workers, a move more likely to be resisted in the political arena than blocked by courts."

176 posted on 01/17/2010 8:10:07 PM PST by ansel12 (anti SoCon. Earl Warren's court 1953-1969, libertarian hero, anti social conservative loser.)
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To: Captain Peter Blood; nmh; namvolunteer; mewzilla

This “so-called” analysis makes no sense -
It starts with the premise that the big box stores are going to run into some trouble because of overbuilding and concludes that consumers will go back to mom and pop stores for service and quality. Uh?

Talk about a non-sequitur!!!

I don’t know how WallMart will fare in the future, and after reading this I know even less.


177 posted on 01/17/2010 9:56:29 PM PST by aquila48
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To: aquila48

I worked for a small mom and pop organisation that has weathered the storm quite well. Everything they sell is at very high margins, but they have really good customer service and much of what they sell is unique, ie, you won’t find it anywhere else.

The only thing I’d like to have is WalMart’s inventory system. :) It’s nice being able to look at a screen and be able to tell what you have of everything.


178 posted on 01/17/2010 10:10:13 PM PST by BenKenobi (;)
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To: Captain Peter Blood

bttt


179 posted on 01/17/2010 10:13:56 PM PST by Pelham (ObamaCare, it comes with a toe tag)
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To: BenKenobi

I’m sure there is and will continue to be plenty of room and demand for both types (and more) of retail operations.


180 posted on 01/17/2010 10:21:31 PM PST by aquila48
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