Wal Mart was in the headlines twice in Chicago last week. Locally, the City Council of Chicago approved the second Wal Mart store within the city limits. The store will be built on an abandoned industrial site on the south side of Chicago. This decision was made after several years of resistance from labor unions and others who felt that Wal Mart did not pay its workers enough and was anti-union. The need for jobs and the desire to bring a modern store with grocery and household staples to areas of the city that had no major retailers finally prevailed.
The first Wal Mart in Chicago was opened several years ago. It sits on the site of a factory that originally produced cans when it was owned by Continental Can and then was bought by Helene Curtis. Helene Curtis used the building as a warehouse and then a factory producing anti-perspirant products sold to Wal Mart and other retailers. Since I spent almost 12 years working just down the block at another Helene Curtis facility, I am very familiar with this Wal Mart’s neighborhood. Other major retailers have joined Wal Mart – there is a Home Depot, CVS, Menard’s, and an Aldi grocery within a few city blocks. The expectation is that the next Wal Mart will attract other retailers in similar fashion.
The second headline last week was that Wal Mart continues to dominate the list of top retailers in the U.S. The National Retail Federation reported that Wal Mart had 2009 sales in the U.S. of $304.9 billion followed by Kroger at $76.7 billion, and Target at $63.4 billion. Wal Mart generated almost as much revenue as the next 5 retailers on the list. It does not take much of a crystal ball to imagine Wal Mart achieving $1 billion a day later in this decade.
Wal Mart has become 30 – 40% of almost every category of consumer goods that it sells. I worked for three different marketers of consumer goods through the 80’s and 90’s and witnessed how they adapted to Wal Mart’s approach to supply chain management and pricing philosophy. I cannot say that I agree with everything that Wal Mart does, but the resulting dominance is impressive. Every consumer products supply chain is more efficient and delivers lower cost products as a result of Wal Mart’s leadership. Especially in the current economy, consumers vote with their wallet. This makes competing with Wal Mart that much tougher.
We have all heard some version of this saying: “Nothing goes up forever.” If you look back several decades at the list of the leading companies in the U.S., there have been lots of changes and missing names. What innovation in retailing might drive a competitor to challenge Wal Mart in terms of scale? Let me know if you have an answer.
Herb Shields on Consumer Goods and the Supply Chain news feed
