business news in context, analysis with attitude

  • The Denver Post reports that the National Labor Relations Board (NLRB) has given the go-ahead to employees of a Wal-Mart tire and lube department there to hold a unionization vote. According to the paper, nine out of 17 employees in the department petitioned in join the United Food and commercial Workers (UFCW) last November, a move that Wal-Mart opposed on the basis that a single department could not be an individual bargaining unit. The entire store employs some 400 people.

    The NLRB rules that the tire and lube department was a separate enough entity to be considered individually.

    Wal-Mart says it will appeal the decision, though the NLRB told the paper that an appeal would not necessarily delay a vote.

    The retailer has long resisted attempts at unionization, though unionization has been successful at a few Canadian stores. In the US, when a group of meat cutters at one of its Texas stores voted to join the UFCW, Wal-Mart promptly announced that it would no longer use meat cutters throughout the company. And the company has hinted that at least one of the Canadian stores where unionization has taken place is unprofitable and may need to be shuttered.

  • Apple Insider reports that Wal-Mart is preparing to sign a contract with Apple Computer that will have it retailing the company’s new iPod Shuffle digital music player, which is designed to be a value-version of its blockbuster iPod.

    Conservative estimates are that Wal-Mart could easily move a quarter million iPod Shuffle players.

  • The Wall Street Journal reports this morning that Wal-Mart “has discovered a surprising trait among Japanese consumers: low-priced products don't always attract them. The misunderstanding is one reason why the retailer expects to report big losses in Japan for last year.”

    While the company makes it clear that it is not abandoning its low price approach, it will broaden its assortment to include more high-end items.

    Wal-Mart bought into Seiyu back in 2002, and now owns 37 percent of the company with options to increase its stake. It has been remodeling the company’s stores to make them more modern and consistent (and, some would say, more western), while working with the company to streamline its supply chain logistics.

  • Published reports say that Wal-Mart will be sourcing more products from India than ever before, with plans to buy $1.2 billion worth of goods there in 2005, up significantly from the $300 million Wal-Mart spent there in 2004.

  • The New York Times has an interesting piece speculating that, in fact, Wal-Mart’s growing market clout was an impetus for last week’s announcement by Procter & Gamble that it was acquiring Gillette for $55 billion in stock.

    While P&G CEO Alan G. Lafley denies it, the NYT writes that P&G may have been prompted by Wal-Mart’s growing willingness to introduce private label items that directly compete with its national brands, and its ongoing tendency to press manufacturers for lower and lower prices, no matter what the supplier’s costs.

    By acquiring Gillette, the speculation goes, P&G is able to also acquire just a little more marketing clout because it will control a greater number of brands sold by the company.

    Still, the writes, Wal-Mart remains in control. While 17 percent of P&G’s sales and 25 percent of Gillette’s sales go through Wal-Mart’s front end, the two companies together represent less than 10 percent of Wal-Mart’s sales.

KC's View:
We joked about this last year, but it was a jest that a lot of people thought struck very close to home. It seems to us that if Wal-Mart announced next week that in order to keep costs down and provide the best value to shoppers, it would henceforth carry only two brands of laundry detergent - Tide and its private label – in two sizes, there would be almost nobody who would stop shopping there. They’d just buy what Wal-Mart was selling…

For companies that do an enormous amount of their volume at Wal-Mart, this is a huge problem. For Wal-Mart, it seems to us, this is no problem at all…just an opportunity to cement its various reputations.

The questions that suppliers must answer are: How at risk are they because of Wal-Mart’s marketing clout? And what are they going to do about it?

As for competitive retailers, the questions are exactly the same. But it seems to us that, just maybe, they could be doing the same kinds of decisions - cutting back dramatically on the products lines that offer little or no differentiation, and expanding on those opportunities to create for themselves a unique and compelling image in the mind of the consumer.