Wal-Mart’s annual meeting is taking place this week, and investors have plenty of reason to celebrate, given that the retailer is prevailing while others are struggling during the recession.
But this article asks a question we hadn’t given much thought to: “Can these gains last when the economy improves and shoppers once again choose to shop elsewhere?”
“The battle among retailers is to get footsteps in the store,” says Gilford Securities analyst Bernard Sosnick. “I don’t know what’s going to happen three years after a recovery, but I know what’s going to happen at its inception — whoever’s got the footsteps will benefit.”
Before things started going down hill, Target would consistently post better monthly sales than its larger rival. Will we see another shift whenever this crazy economy stabilizes, or is Wal-Mart’s dominance here to stay?
Counter Culture 
Wal-Mart’s gains in the future probabbly won’t be as hefty as they are right now on a percentage basis, although given their increase in market share the total dollar amount can be maintained or increased. The real key here is they are amassing enormous amounts capital that will support massive amounts preferred lending and that will go back into an major expansion program that other retailers won’t have the financial backing for. I would predict the next big Wal-Mart expansion program to begin before the recession ends and other retailers can even consider reacting. Being the first one out of the blocks will also put them in an advantageous position to garner tax benefits from states and municipalities for “Investing Capital & Creating Jobs” The longer this recession continues….is purely and almost exclusively to Wal-Mart’s benefit, leaving the balance of the retail community at even more risk.
My guess is that some of their more affluent customers will migrate upstream to Target at some point but I think that many customers will remain highly leveraged and will stay at WM to pay down their debt and build up their savings.
Don’t forget that Wal-Mart is currently in the middle of a push to burnish its image (by increasing emphasis on green products, improving its store environment, etc.). This means that the new shoppers being pushed there by economic concerns are getting a dose of the “new” WM, and may stick around at a higher rate than they would have if this were happening 3-5 years ago.
The merchandising plan of today’s Wal*Mart is a far cry from five years ago. Today you see a merchandising strategy that provides consumable goods to a broad consumer base, not just the “value” based consumer.
If there is to be a shift on the horizon for Wal*Mart, it may come when consumers get tired of buying “Made in China” products. China has provided Wal*Mart with products that has allowed them to control profit margins. The days of old when Wal*Mart was pushing “Buy American” have faded. However, as our ecomony continues to endure the loss of “American” wage earners, and the visibility of “off shore” manufactured products become more evident, there will be a “shift” in consumers willingness to shop Wal*Mart. It’s not about quality, it is however about protecting our American dreams….
I would appreciate any feedback on this prediction.
Joe R. McElroy
customer loyalty is difficult to measure as reflected in the reduction in sales being experienced by TARGET and many others!!!It should be noted that Wal Mart is FORGING ahead by seeking the next and future generation of customers by the introduction of the “MILEY CYRUS” line … Sears, Kmart, and those merchants who’ve disappeared from the “SCENE” failed to reach out to the next generation !!! HOW MANY OF TODAYS CONSUMER HAVE BEEN INTO A SEARS AND OR KNOW WHAT SEARS and their like ARE SELLING …Wal Mart is seeking out the next generation. There will be some customer loyalty however Wal Mart is investing in the future IE the MILEY CYRUS..SS…
What recession? We are in a depression! So far the government is only reporting the “official” numbers. But the TRUE BLS U-6 Rate is MUCH HIGHER. Here are the links for you to view yourself:
http://redfishemergingmarkets.com/blog/2009/05/08/unemployment-update-8-may-u3-to-89-u6-to-158/ (BLS U-6 Rate: 15.8%)
Here’s another one:
http://chartingtheeconomy.com/?cat=9 (Suffering Rate is: 17.8%)
So now comes into question:
– Where are the customers going to come from? They’re not.
– Who’s going to fill up all those empty spaces that have gone out of business? Nobody.
And with all this and the coming holiday at the end of the year; there is going to be LESS OF NO SPENDING on gifts. And when the retail numbers come in for the first quarter of 2010, you’re going to see MORE retail businesses going under. Which means “Ghost Malls.”
“Ghost Malls” are going to be a very common household word. We are WAY overbuilt in this country. Look at this article:
http://www.lvrj.com/business/43165932.html
http://dealbook.blogs.nytimes.com/2009/04/16/general-growth-properties-files-for-bankruptcy/
This is one out of many malls already. We’ve had two MAJOR malls here in Houston, TX (The Woodland Mall and Willowbrook Mall) that have already filed bankruptcy over a month ago.
And again, this is just the beginning. Still don’t believe me? Okay… Remember that “smack in the face” we got back in September of ‘08 with all that Sub-Prime Debt garbage we went through? Our dow went from around 14,000 points to around 7,000. Now let’s look at this. We have another:
– $600 Billion in “Option Arm” loans that will be defaulting (starting in Mid 2010 and peaking the end of 2010).
– $1 Trillion in “Alt A” loans that will be defaulting (starting in Mid 2010 and peaking the end of 2010)
– $3.7 Trillion in Real Estate loans that (as you can already see) starting to default.
– $2 Trillion in the printing of all this bailout money (between now and next year).
– Goodness knows how many Trillions in Defaulting Credit Card Debt that is also happening now.
With around – what, $8-10 Trillion (it could be more or less, give or take a couple of Trillion – I can’t believe that I’m even saying it like that; like it’s a couple of dollars here or there – we’re talking Trillions !!!) of ALL this uncollected defaulting debt, how can we print our way out of this one? And, how can this nation recover from a hit like that? Simply put… it can’t.
This situation needs to run it’s course. So places like Walmart will (in my opinion) be around for while. They might close a some places, but it will be NOWHERE NEAR other retail businesses going under. BTW, all of what I just shared is just my opinion…
BTW, Hi Ian. Hope all is going well for you…
Walmart is for a gold rush. Not only will they dominate now but they’ll squeeze out the competition so when the good times come rolling back the foothold they will have will make it near suicide to try and compete with them.
In time, Wal-Mart will fall from grace – like Sears, Woolworth and the Roman Empire.
Jodi Summers
The SoCal Investment Real Estate Group
Sotheby’s International Realty
jodi@jodisummers.com
http://www.SoCalGreenRealEstateBlog.com
http://www.SantaMonicaPropertyBlog.com
http://www.SoCalMultiUnitRealEstateBlog.com
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Be kind whenever possible. It is always possible. – Dalai Lama