Thursday, August 18, 2005

Wal-Mart Gets Liquored Up

In a front page story in yesterday's Wall Street Journal the paper is reporting on the newly aggressive campaign by Wal-Mart to pump up its liquor sales. The story focuses on the unique difficulties that the company is facing retailing a product that is strongly regulated by the states. Difficulties aside, the paper underscores the determination of the retail giant to increase its liquor sales in the next five years, from 1 billion dollars to 5 billion dollars.

The Journal predicts that Wal-Mart is likely to shake up the liquor industry in the same manner that they've been able to shake up other product markets. In this case the 3 tier distribution system that governs liquor is likely to be targeted by a company whose business model is built on by-passing local distribution networks in the name of greater efficiency. Clearly, this would pose a grave threat to a great many small to mid-sized distribution companies.

The larger message here, of course, is that Wal-Mart is doing what it always does. Its goal is to be a "one-stop store catering to almost all of its customers needs..." With Wal-Mart there is no retailer who can feel safe when the giant is looking to expand into an area.

Fear is beginning to take hold among package store owners. In Waltham, Mass. a group of liquor store operators have banded together to form a buying group in order to better compete with Goliath. As Tom Williams, the leader of the group says, "Look what they've done to other catagories- independent pharmacies, optical shops. They've crushed them"

This is all an object lesson for the liquor store owners of New York City: the handwriting is on the wall. There is simply no retail catagory that is safe from the Wal-Mart tentacles. As Tom Williams sees it, if we don't all come together and fight a great many stores of all kinds will be "crushed".