Tuesday, October 27, 2009

(empo-tymshft) What comes after Wal-Mart?

Business history over the last 100+ years has consisted of a predictable cycle. A business is established. A new business comes along that cheats and steals and does unfair things, knocking the old business from the top of the heap. Then everyone loves the new business, and gets irritated when an even newer business emerges to threaten the new status quo.

Those who complain about Wal-Mart today and talk about the virtues of the regular supermarkets were probably not around when people were complaining about how the regular supermarkets were destroying A&P, which in turn was the subject of derision when it wiped out the local butcher and baker and candlestick maker.

Wal-Mart is just the latest in the cycle, and while it has demonstrated some staying power, it won't stay around forever. General Motors certainly didn't stay around forever. Microsoft has seemed to stay around forever, but it appears to be an exception to the rule - so far.

So who will have us longing for the good old days of Wal-Mart? One candidate has emerged in France, and BusinessWeek talked about it. And it's not Carrefour.

Over the past decade, Auchan (pronounced oh-shon) has expanded rapidly into China, Russia, and Eastern Europe. Based near the northern French city of Lille, the privately held company is now the world's 14th-biggest retailer, with 1,200 stores in 12 countries and annual sales of $59 billion.

True, that's small change compared with Wal-Mart's annual sales of $405 billion. But by many measures, Auchan is outperforming its bigger rivals in key global markets.

BusinessWeek notes that Auchan's Chinese stores provide "wider aisles, better lighting, and a higher-quality product range" than its rivals. And this makes a difference, at least in one market:

Wal-Mart's "everyday low price" strategy has backfired with Chinese shoppers, who often assume cheaper products are unsafe or counterfeit.

Make your own observation here.

But Auchan's success is not limited to China. It is also the dominant Western retailer in Russia, by virtue of the fact that it's the ONLY major Western retailer in Russia. Wal-Mart and the UK's Tesco have no stores in Russia, while Carrefour opened two stores and then retreated.

Make your own observation here.

But will this "high quality" strategy work in the United States? In a sense, it's bound to, since any store that wants to rival Wal-Mart has to differentiate itself from Wal-Mart in some way. The failure of anti Wal-Mart groups such as the former Ontario Mountain Village Association (whose website, stopwalmartontario.com, no longer exists) is that they said that Wal-Mart was really bad - for example, all of their stuff was made in China - without differentiating between Wal-Mart and their preferred union supermarkets, which ALSO sold stuff made in China.

The eventual successor to Wal-Mart will effectively position itself as a "good value" retailer, not a "cheap" retailer. Perhaps they'll claim to have knowledgeable staff. Perhaps their restrooms won't attract graffiti. And to make a profit, they certainly won't be discounting all the time.

Which will result in a hue and cry from people who will miss the days of the good old stores like Wal-Mart, which provided affordable merchandise to the working classes, including low-priced prescriptions etc., and can't we just have our Wal-Mart back?
blog comments powered by Disqus