I’ve been writing for 15 years that the Wal-Mart model is unsustainable; and, will ultimately cannibalize itself.
Recent news that the president of its U.S. operations was replaced confirms the process is well underway.
Wal-Mart grew on fundamentally three pillars:
- Favorable government action, which included the expansion of the WTO to China; sweet handout deals from local politicians to build more and more stores; and, increased Federal benefits to poor Americans.
- Near sub-poverty wages paid to the company’s associates.
- Relentless squeezing of suppliers in the name of “lean”, “efficiency”, or whatever other buzzword-of-the-day could be used to justify the behavior.
Each of these has pretty much run its course.
China is no longer the manufacturing panacea that many thought it once was. (Maybe it never was...) Politicians have gotten wise to the negative impact a Wal-Mart store has on a local economy. Federal cutbacks have substantially reduced the amounts that poor Americans can spend at its stores.
Have you been to a Wal-Mart store lately? It is likely disheveled, with empty spaces on the racks and clutter on the floors. Wal-Mart is finding it very hard to hire good people. The word is finally out that the company is a bad place to work as an associate.
Most of the company’s 100,000 + suppliers can’t give any more. They’ve given more than they ever should have. And, now, the tanks are dry.
Investors have taken note. While stock markets cruise to record highs- rising more than 10 percent in the past year- the retailer’s shares have fallen 1.6 percent.
The future looks no better.