Wal-Mart's Midlife Crisis

What's happening to Wal-Mart -- and why should it matter to other retailers?  Wal-Mart has pursued the single-minded strategy of low prices to fuel its explosive growth.  That has made it the world's largest retailer, at $345b in revenues, with stores in 13 nations -- the biggest concentration being in the US, where Wal-Mart has close to 3,500 stores.  Through its phenomenal growth, Wal-Mart has kept going by sticking to low prices, and opening stores at an alarming pace.  In 2006, the company boasted a new store everyday.  It has done this on the backs of suppliers, employees, communities and competitors -- and the price has been so high, that the company now faces significant socpolitical challenges to its continued expansion strategy.

Wal-Mart isn't slowing down however. CEO H. Lee Scott Jr. is determined to continue the new store openings, suggesting that the 1-new-store/day pace can be sustained for the next five years. Meanwhile, performance at Wal-Mart's existing stores continue to suffer. Wal-Mart's own findings point to the fact that their top 800 stores perform 1000% better than the bottom 800 -- and, 25% of its stores, fail to meet its own expectations. Wal-Mart doesn't seem to know what to do to fix the problems with the stores. They continue to be understaffed, unkempt and under-merchandised -- while Wal-Mart continues to place bets on attracting middle-income shoppers who will drop cash for higher margin merchandise, and turning on the dime to embrace environmental concerns.

The challenge Wal-Mart faces is the same many large retailers face -- or will face -- if they stay disconnected from their customers, their lives and the world in which they live in.  Wal-Mart at times appear to pay lip-service to the environment.  While there are many who are cheering the company's green epiphany, I remain a skeptic.  Wal-Mart's treatment of employees, suppliers and their merchandise sourcing strategy continues to say a lot about the nature of the company.  Just because they've decided to embrace their critics with a few timed, well publicized actions, doesn't make the company different.  Wal-Mart is still about low costs at the cost with the burden transferred to the rest of the world.

Anyway, looking at the scale of corporations like Wal-Mart and their continuous drive for growth -- one has to ask: just how big is big enough?