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.
Umm...what?!? I live in the heart of the south and have 3 walmarts within 5 miles of me. I go to the one I can actually find a parking space at.
not really, they just opened more stores. Walmart failed miserably in South Korea and Germany."
Hilarious. Wal Mart netted $13,400,000,000 last year. 75% of the stores opened in 2009 were international stores and 600 new stores abroad are slated in to 2010. As second world countries with billions of people slowly become capitalist societies, Wal Mart will be far ahead of the curve, there to provide goods faster and at a lower cost, while providing obscene profits for their shareholders.
Wal Mart is like a 10% tax cut for every American.
“With respect, that’s not the only choice.”
A few years ago 25% of everything Proctor and Gamble sold was sold at Wally world.
Sure companies can go elsewhere, some do and some dont. Those that don’t have to reduce their costs somehow. Many many products achieve this through poor quality. Electric tools, clothes, bikes, BBQ grills and shoes are all examples.
Don’t complain about YOUR POOR CHOICES TO ME!
Blame yourself.
Most everything is made in China or Asia because Americans typically cannot afford UNION prices. Manufacturing in general is ALL MOVING OFF SHORE. So you’d better wise up on your buying decisions.
Worse yet, China is MORE CAPITALISTIC than the U.S..!
I seem to remember Wal Mart closing a few stores and pulling out but it was because of pressure from Unions and local government to unionize them...
Anyone whio thinks WAL MART will go away is sadly mistaken.
Wal Mart is one of the best run companies in America and they know exactly what they are doing.
Every product in their stores are being converted to their own version called” great value” and are directly competing with the name brands of Proctor Gamble, Del Monte, etc.
Walmart did have an increase in overall revenue.
That doesn’t change the FACT that they FAILED in those two countries.
“Wal Mart is like a 10% tax cut for every American.”
They are ok for some things. You statement is simply nonsense though.
I’m sorry, I can’t get past the misuse of the word ‘it’s’ in the title:
Wal-Mart, Big Box Retailing And It Is Inevitable Demise.
Please...It’s “its”!!!
Hudson Belk, Macy’s to name two.
“Most everything is made in China or Asia because Americans typically cannot afford UNION prices.”
eh? thats a stupid statement
” Manufacturing in general is ALL MOVING OFF SHORE.”
nonsense, you do not know what you are talking about.
” So you’d better wise up on your buying decisions.”
Yes, use care when buying anything at walmart or other discount store full of cheap crap.
Totally agree.
We're definitely on the same page.
So here in Arkansas, we have a Wal*Mart Neighborhood Market within walking distance from a New Wal*Mart Super Center. Headquarters kept the grocery store open just to see if it could stay in business next to a new Super Center.
The first two weeks, there were barely enough cars in the grocery stores parking lot to notice the place was even open. Yet, after the "novelty" of the Super Center wore off..our Neighborhood Market thrived once again.
The "smaller" store retained its popularity because we can get in and out quickly. We don't need rollar skates to go from the front to the back just to pick up milk.
I've often wondered if a "Wal*Mart Express" type store wouldn't do extremely well. They could link it up with a Gas Station. Sort of an old time 7/11 convenience store with very low prices.
sw
Walmart does NOT have a large presence in the SOUTH.
Hey, go to Publix. It’s dirty, less selection and price competition is probably about the same since Public and Walmart BOTH buy from the SAME SOURCES for the same or similiar merchandise.
Well, DUH!!!!!
The reason is the smarter paperwork-savvy leeches from urban areas have figured out how to access Section 8 housing, richer county EBT services, etc.
It's a chasing game - leeches follow affluence and abundance - and then destroy it. Regardless, overall WalMart will not be diminished if it follows its formula. It makes sense to close stores when a high percentage of your business are EBT'ers; they don't by high-end, higher profit items (if, of course you don't count the 60" widescreens around April when they get their EIC. refunds).... So, if they close one store and open a new one, for example in the county where I live (besieged by upper income flighters from EBT counties). Profit is still profit.
To claim they used the same model as today’s big box stores is a fallacy.
The issue headline is the pending demise of “big box retailers”....
Not gonna happen.
That was my point.
The Wal-Mart model is more than low prices and one-stop shopping.
They are almost never out of stock of an item. Their logistics network fill a slot almost immediately after it becomes available.
Every SKU Wal-Mart sells is number one. They sell more of every item than anybody else does.
Their model for the pharmaceutical department will revolutionize that industry I Zero is held at bay.
How do you have a radius measured in square miles?
“Saving money is the prime motivator for most of us”
This writer on one hand, says unemployment will cause these Big Box stores to close.
Yet, he thinks where these high unemployment areas are, the unemployed will be more than willing to pay more for their goods at mom and pop stores?
I suggest he keep his job as a greeter at Walmart and leave economics to the professionals.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.