business news in context, analysis with attitude

The debate continues about Wal-Mart’s role in the retail continuum. (You can check out the past discussion points in the MNB archives…just click on the button on the top of the home page.)

There has been much discussion about where Wal-Mart puts it supercenters, and whether it deliberately puts them in places that cannot support a Wal-Mart and anyone else…therefore, despite its protestations to the contrary, putting everyone else out of business.

MNB user Steve Antaya chimes in:

“I've been watching this debate unfold about the small town supercenters lately and there are some holes that need to be filled in as far as the Charlotte, MI store goes.

1) There are a handful of smaller towns surrounding Charlotte such as Olivet, Potterville, and Nashville. These are the areas I feel that they are attempting to draw from with this store as well as Charlotte proper. You also see this in St. Johns, which is north of Lansing and currently has a Wal-Mart discount store. If they think anyone from Lansing proper or the closer suburbs are driving to Charlotte, think again. It is a good 15-20 minute drive down the freeway one way from the far west side of Lansing. I live just Northwest of Michigan State and it would take me a good 40-45 minutes.

2) This store was converted from discount store to a supercenter at the beginning of this year. This was mainly because Meijer had opened on the outskirts of Charlotte in the previously year. This has been the pattern in many Michigan cities were there was a traditional discount store where Meijer decided to locate. The common belief is that Wal-Mart's food distribution system is not yet were they would want it in Michigan in order to support a full scale roll out. They only seem to build or add on a supercenter where Meijer decides to build a new store close to an existing discount store. Examples: Charlotte, Howell, and I believe Big Rapids up north. St. Johns was scheduled to be converted but was then dropped once Meijer put on the shelf plans to build a store there.

3) There is a new discount store located in Delta Township(a true suburb of Lansing and large retail area) that services the greater Lansing population. There is also a new discount store being built in Meridian Township (the complete opposite side of town). There is a third store in the planning stage for the center of town in a new shopping center that is being built. This one is supposedly going to be a supercenter. The discount store in Delta Township has the plumbing and foundation laid for the supercenter addition when they built the store.

4) If the gentleman from Wal-Mart thinks that any one from Michigan State University is going to travel to Charlotte for anything he is sorely mistaken. I attended Michigan State('99) and I bet if you asked 100 students "How can I get to Charlotte from here" you would be lucky to get one person who could tell you the answer (and that would probably be because they grew up in the Lansing area). Most people that I knew while at Michigan State were lucky to know where the Kroger was and that was within biking distance from campus. The student traffic just does not flow to the west side of town (which is were both Charlotte AND Delta Township are).

Just thought I would fill in the blanks to add a little fuel to both sides
of the fire.”

Thanks…we can feel the flames already…

MNB user Richard Coulter adds:

“Wal-Mart sets the price. You can't compete on their turf. Look at Kmart. Only Target has the opportunity because they chose a different playing field.”

Exactly. You can’t play Wal-Mart’s game…but that doesn’t exactly exhaust the possibilities. You just have to be smarter, tougher, and willing to wage a different kind of guerilla warfare.

On the subject of how Wal-Mart may not offer its employees the same flexibility as unionized shops, one MNB user wrote:

“My unionized neighbor works for the king of stores in our area. He recently took 3 of his 9 weeks vacation, on his first night back he called…and used one of his 12 sick days. I bet you can't do this at the non-unionized Wal-Mart! Enough said!”

True…though we have to say that if the neighbor called in sick because he just didn’t feel like working after three weeks’ vacation, that isn’t in our mind an endorsement of the positives of the unionized system. (If he was sick, and the timing was bad, that’s another matter.)

One other note: Nine weeks’ vacation?????????????????????

And MNB user Ken Robb (who, bless his heart, started this whole discussion track about a week ago), writes:

“Forty years ago, people made fun of Sam Walton. They said he was "a hillbilly who more or less slept with his dogs." Even today, David Glass, former Wal-Mart CEO, likes to tell the story of his first impressions of Sam Walton and Wal-Mart. It goes like this...

‘In those days, word was starting to get out that a guy named Sam Walton had some interesting retailing ideas, so I drove down from Springfield, where I was with Crank Drugs at the time, to see a Wal-Mart opening. It was the worst retail store I had ever seen. Sam had brought a couple of trucks of watermelons in and stacked them on the sidewalk. He had a donkey ride out in the parking lot. It was about 115 degrees, and the watermelons began to pop, and the donkey began to do what donkeys do, and it all mixed together and ran all over the parking lot. And when you went inside the store, the mess just continued, having been tracked in all over the floor. He was a nice fellow, but I wrote him off. It was just terrible.’

But don't think for one minute that Sam Walton couldn't foresee the future. His yearly sales forecasts for Wal-Mart were legend. From his first forecast of $1 million for store #1 in Rogers AR to his subsequent forecasts into the hundreds of millions, Sam Walton knew exactly where his company was headed and how to get there.

“His book remains a best it ranks #3,348 overall on in Fayetteville AR it ranks #12. And according to one reviewer who says he works for Wal-Mart, the book is "required reading by everyone in the manager in training (MIT) program."

“Sam Walton may have been folksy, but he was no fool. And neither is Wal-Mart's current management. One doesn't need to rely on Sam's ten year old quotes about strategies and tactics...there are plenty of recent quotes from other Wal-Mart managers, including these...

“In response to a Grocery Headquarters reporter's comment that Wal-Mart controlled 7% of total U.S. retail sales, John Menzer, then Wal-Mart CFO said, "We're now focusing on the 93% remaining to be captured."

“Explaining to a Money magazine reporter why Wal-Mart was building so many new stores, Lee Scott, Wal-Mart CEO said, "We've been willing to cannibalize our stores rather than going into a defensive mode where we insist each store has to make a certain amount of profit."

“Quoted in the Arkansas Democrat Gazette on the occasion of Wal-Mart's fortieth anniversary this year, Don Soderquist, former Wal-Mart COO, described Wal-Mart's aggressive expansion strategy as "stretch out and back fill."

“Yes...Wal-Mart does (over) build new supercenters in towns under 10,000 population (and in counties under 25,000 population), although I would be hard-pressed to characterize these new 100,000 to 200,000 sq. ft. supercenters simply as "upgrades" for older 50,000 to 75,000 sq. ft. discount stores, none of which included full-line grocery departments.

“And as to shopping in the same county, retailers with experience in rural areas know that their customers exhibit traffic patterns that are unlike their cousins in the cities. According to market research conducted in rural areas, 35% of those interviewed would not think to shop at another store, even in the same county, because it "was in the wrong direction." In other words, it doesn't matter that a store might be nearby, they wouldn't shop there because they don't usually travel to that area of the county. The assistant grocery manager at the Wal-Mart Supercenter in Viroqua WI knows that. When they opened the new supercenter that "replaced" the older and smaller Wal-Mart discount store directly across the street, he told the local newspaper that "the impact of Wal-Mart selling groceries wouldn't be as great in the little towns 20 or 30 miles away (as it) would be more apparent with the other grocery stores in Viroqua." And indeed it was apparent. Of the two supermarkets in town, one closed within a month and the other lost nearly half its volume to the new Wal-Mart Supercenter.

“But then, Wal-Mart does not just overbuild in small towns and small counties. Consider the case of Oklahoma City. According to Wal-Mart's website, there are 10 Wal-Mart Supercenters and 7 Neighborhood Markets in the Oklahoma City metropolitan area. This is in addition to the 9 older Wal-Mart discount stores that were already there. And now I understand that Wal-Mart has announced plans to build two new Neighborhood Markets in the Kansas City area, only two miles apart on the same street, at both 92nd and at 103rd on Metcalf Avenue in Johnson County. According to MNB, Wal-Mart has plans for "a major ramp-up of its Neighborhood Market division, with a list of 233 specific locations that it would like to have open by the end of next year, and a total of 523 that it would like to have in operation by the end of 2006."

“Could it be that Wal-Mart is indeed trying to capture the remaining 93% of retail sales?”


Onto other subjects…

We wrote yesterday about Safeway apologizing to Genuardi’s shoppers via a new ad campaign that attempts to address the problems that the Pennsylvania division has had since Safeway took it over.

MNB user George J. Ward writes:

“Once a very loyal Genuardi's shopper, my wife refuses to go back until Genuardi's bring back Boar's Head Deli meats. She drives an extra 5 miles to McCaffery's for high quality name brands, not Safeway Select wanna-be's and great customer service. Have you ever tried the awful tasting Safeway Select premium ice cream. No thanks. We are sticking with name brands please.”

MNB user Ted Gold writes:

“Same issue in Dallas with the Safeway buyout of Tom Thumb. Just as a bad apple when put in a barrel of good apples does not improve, a 3rd rate retailer that buys a 1st rate retailer does not get to be a better retailer. It is the good that always get dragged down. The poor never get pulled up!”

And MNB user David Dawson adds:

“Safeway totally ruined Genuardi's, they took out the best lunch meat in the area, Boars Head, and put in their own. They shoved Safeway Select private label products down the customer throat. Genuardi's demographics are upscale shoppers. Safeway never bothered to check this out. It is too late, the stores are empty and I hear from inside sources that Genuardi's sales are down over 32% since Safeway took over. Safeway only choice is to see them off. They really messed up a great retailer.”

These arguments clearly take on even greater currency considering the problems that Safeway is having in Chicago with Dominick’s.

Though we have to disagree with Ted. We think it is possible for a big retailer to learn from a small retailer that it acquires. But it means wanting to…it means being willing to embrace humility and create an infrastructure that makes this kind of learning possible.

Acquisition should not necessarily mean assimilation.

Regarding today’s vote in Oregon on the issue of whether to require products containing genetically modified organisms (GMOs) to be labeled as such, MNB user Scott Johnson writes:

“This isn’t even the craziest thing on the ballot in Oregon on Tuesday…Oregonians will get the chance to choose cradle-to-the-grave government health care for every citizen. When corporations (and their employees) are taxed to pay for that, watch Oregon become a pariah to industry and a draw to every loser who flocks there for free care. Maybe it is good for the other 49 states. Then Oregon can serve as a bad example…like the kid about which your mother would say, “Look what happens when you act like an idiot, you end up in big trouble!”

And finally, continuing the discussion of Stew Leonard’s, MNB user Jim Schloss writes:

“The views regarding Stew Leonard's have indeed been interesting from a shopper's viewpoint and I will give you one from the Vendor's perspective. Stew Leonard's exemplifies what I think a vendor in a perishable category looks for from a customer. They are accessible, interested in what you have to say, always interested in new products, have an insatiable appetite for what is working with other retailers, once you give them an idea they give you feedback most of the time with even a better spin to your idea and what is most impressive is that every time I call on them it involves a complete store walk through which always includes a number of "how would you make our sales and service better". As for meeting with Stew Jr. it is wild. Just bring your notepad and brain because it is non-stop "out of the box" business building discussion and the meetings last until the ideas for the moment run out. ‘In Search of Excellence’ had this one pegged right from the get go.”
KC's View: