Monday, June 13, 2005

Wal-Mart and Saturation

Lee Scott isn't shy about Wal-Mart’s plans for growth:

During a recent speech in Chicago, the chief executive officer of Wal-Mart Stores Inc. painted a mind-boggling picture of the long-term growth potential of his $285 billion company.

Wal-Mart, Scott noted, has U.S. market share of only about 10 percent; in contrast, European retailer Tesco, he said, has 30 percent of the United Kingdom's food market alone.

"We're a $200 billion U.S. company. If we were a $600 billion U.S. company, we'd only be as good as Tesco," Scott said at an Executives' Club of Chicago luncheon last month. "So there's an extraordinary amount of growth ahead of us because there aren't many people who can say, `I see a clear path to adding $400 billion to my sales.' But we can."

In an interview afterwards, Scott said he wasn't necessarily claiming that Wal-Mart would become a $600 billion business, although some retail analysts have predicted that Wal-Mart could reach the $500 billion mark by 2010. Rather, Scott said he was trying to convey the importance of daring to dream when you're already the world's biggest retailer.

This year, Wal-Mart plans to open as many as 530 new stores, the company said in its annual report. That includes 165 international locations.
Wal-Mart has the right to continue to desire expansion but communities too have a right to be wary of a company with such an aggressive growth model. When Wal-Mart enters a market the mega-retailer deliberately attempts to saturate it, constructing a number of stores and supercenters within close proximity to each other. Take this story from Ohio where a new Wal-Mart supercenter is going to replace a regular Wal-Mart across the street:
The city of Xenia may be next on the Wal-Mart Supercenter list.
Xenia officials confirmed that a 203,000-square-foot Wal-Mart Supercenter is planned for a 22-acre site across the street from the existing Wal-Mart store along U.S. Route 35.

Bentonville, Ark.-based Wal-Mart has earmarked the Dayton market for growth.

The retail chain already has seven Dayton-area Supercenters that have opened or are under construction in Moraine, Englewood, Huber Heights, Sugarcreek Township, Troy, Sidney and Butler Township. Another is planned for Miami Township, near the Dayton Mall.
This saturation is due, in part, to a desire to crush competition even if that means having various Wal-Marts compete with each other. We believe that the antagonism shown to Wal-Mart, especially in New York City, is in part due to the fact that people know if it gets into the city it won’t be happy with just a few stores. If there are already 7 supercenters in the Dayton, Ohio area what will happen in the ripe New York market?

As we outline in our conservative case against Wal-Mart, neighborhood residents are worried about losing their quality of life and unique mixture of residential areas and walk-to-shop commercial strips. They do not want to see New York City become another cookie cutter suburb, something that would be accelerated by tens if not more 100,000 + sq. ft. Wal-Marts.