3 Reasons the Walmart Empire Is Collapsing

[Playinghardball]

Walmart (WMT) bills itself as a company that sells goods at the lowest prices but the empire was really built on controlling costs.

Founder Sam Walton built massive, inexpensively constructed stores in rural areas where the land was cheap. To fill those stores he bought from vendors in bulk quantities, demanding that they give him discounts. The vendors were happy to comply because they knew Walton would come back with more huge orders.

With the money Walton saved by wringing the costs out of the system he was able to charge customers less. The customers were happy to drive a little farther to get the better deals. "Mom and Pop" local small town merchants may be romanticized but the truth is everyone wants to pay less and Walmart had better prices.

With this formula Walmart has grown beyond anyone's wildest dreams. In 51 years Walmart has grown into the greatest force in retail the world has ever known. Last year the company had revenues of $470 billion. That works out to $1.3 billion every day. In the time it will takes to watch the attached clip, Walmart will sell more than $150 million worth of that low price merchandise.

Walmart now employs more than 2 million people, by far the most of any company and behind only the US Department of Defense, the Chinese Army, and China's state owned railway system.

Not all of those employees are happy. Walmart has been dogged by charges of unfair labor practices for years. The tales of alledged abuse are legendary including multiple charges of locking employees in the stores overnight to clean the stores. In some cases those workers have proven to be illegal immigrants.

As the company as grown so has resentment. The vendors who once so happily accepted Walton's huge orders now complain that the company has monopoly-like power over them. Small town residents love the low prices but local merchants have been put out of work.

Some of the allegations are fair and others are simply backlash against the company's success. Either way growth has slowed to a crawl and international expansion efforts are meeting stiff resistance.

Like every empire to come before it, Walmart (WMT) is beginning to rot from the inside out. It may appear to be rolling but under the surface the Walmart empire is in rapid decline.

Here are three of the dozens of headwinds the company is facing:

1. The Stores are Decrepit

The average Walmart store takes up more than four acres of land. The Walmart protest website MakingChangeatWalmart.org says the company's Supercenter stores occupy 20 to 30 acres of land, including the parking lot.

All those cost savings on the construction of Walmart haunt the company when it comes to upkeep. Maintenance costs eat into profits. Store managers, forced to keep expenses at a minimum per Walmart tradition occasionally go rogue and get lax on hiring and labor practices in the name of saving a few bucks.

Shopping in such a monstrously huge store is a daunting and occasionally baffling experience. When the only competition was a hodgepodge of inefficient local stores with much higher prices, customers couldn't resist. Now that companies like Family Dollar (FDO) have closed the price gap, it has become apparent that not everyone wants to shop at a store the size of almost four football fields.

Brian Sozzi of Belus Capital Advisors says it's going to be all but impossible for Walmart to revamp the stores on the fly. "It takes 10 days to update a Family Dollar," Sozzi notes. "To update a Walmart it can take months."

See reasons # 2 and 3 at: http://finance.yahoo.com/blogs/breakout/3-reasons-walmart-empire-collapsing-164315981.html

[PoliticAverse]

1. The real problem is the heirs aren't Sam Walton. n/t

[madrchsod]

2. there`s a very small DG down the street

i shop there at least 5 times a week. the prices are as good or cheaper than walmart. there`s one check out and i do`t wait as long as the walmart store.
the only reason i go to walmart is no one in a town of 18,000 sells pet bird food. i have to drive round trip 25 miles to buy it.

[murielm99]

9. What is a DG?

Is this someplace I shop, too? I shop in Ronnieland a lot. I got a speeding ticket there the other day. It was my first ticket in fifteen years.

[PoliticAverse]

10. Dollar General...

http://www.dollargeneral.com

[madrchsod]

3. before walmart there was the A&P grocery chain

http://www.npr.org/2011/08/23/139761274/how-the-a-p-changed-the-way-we-shop

[geek tragedy]

4. How on earth did they not mention Amazon in that analysis? nt

[DinahMoeHum]

6. Methinks it's because they're talking about "brick-and-mortar" stores.

Amazon is primarily an online store shipping from brick-and-mortar warehouses.

[geek tragedy]

7. The two sectors compete against each other now. nt

[global1]

5. Two Things I Have Found At Wal-Mart....

1. Many products are out of stock. A lot of shelf space going empty. I don't know if it has to do with their stocking policies - like just in time stock - but it is getting worse.

2. The employees that work for Wal-Mart - don't care. They are impolite and downright rude to customers. They don't know anything about the products they sell. They are not helpful.

One thing I've learned is that if your employees are unhappy and don't treat the customers right - it's not long before the customers become unhappy. With so many stock outages - it makes more sense to shop at stores that might be a tad more expensive - but have the product on their shelf. No one wants to got to Wal-Mart - not be able to purchase a product you need - and then have to go to the higher priced store anyhow. Might as well just go their to start with and not deal with the Wal-Mart frustrations. And yes - their stores are becoming too big.

With an aging population - the bigness of their stores will begin to haunt them as people that might be getting mobility challenged will look for better alternatives.

[Dawson Leery]

8. I cannot fault them for being impolite.

Wal-Mart treats their employees like serfs.

[global1]

13. Don't Get Me Wrong - I Don't Fault Them For Being Impolite......

I know why they are - and it's exactly like you said - it's their treatment. In my opinion - this will ultimately be the downfall of Wal-Mart. It will bleed Wal-Mart to death.

[PoliticAverse]

11. I think the heirs have taken 'penny wise pound foolish' to a new level. n/t

[randome]

12. When I worked for Nestle, I saw firsthand how their much-vaunted inventory system is breaking down.

I see that personally now, too, and more often. It used to be they would never be out of something but now I frequently find that they are.

Like the dinosaurs, they have become too big to function properly.
[hr][font color="blue"][center]You should never stop having childhood dreams.[/center][/font][hr]

[starroute]

14. There have been a lot of stories lately on the Walmart stocking problem

http://www.nakedcapitalism.com/2013/04/walmart-continues-to-deny-it-has-a-staffingstocking-problem-after-e-mail-deluge-to-bloomberg.html

After NC got its own mini comment deluge on our post yesterday about devolution and cost-cutting gone rabid leading to declines in service, with Walmart as the featured example, Bloomberg has a follow up story on customer complaints about Walmart stock levels. Recall that the news service had reported that the Bentonville giant was losing customers because its stores increasingly had gaps on its shelves, leaving customers frustrated at their inability to get what they’d come for. This was purportedly happening with such frequency that customers were shifting their buying to the slightly pricier and more reliable Costco and Target.

Predictably, Walmart issued a denial about problems in its stores.

Now amusingly, Bloomberg’s report has been confirmed by over 1000 reader e-mails expressing their frustration over inventory levels at Walmart. And in predictable corporate-messaging-imperatives-dictating-reality, Walmart continues to insist it has no problems, that the complaints sent to Bloomberg as so small in number relative to Walmart’s shopper base as to be an aberration.

If you believe that, I have a bridge I’d like to sell you.


http://business.time.com/2013/04/09/the-trouble-lurking-on-walmarts-empty-shelves/

In Walmart’s culture, one of the company’s central missions is to be an agent for its customers. That is, discover what the customers want or need and provide same. The last part of that mission is getting the goods onto store shelves. And according to reports in Bloomberg News, the New York Times and elsewhere, Walmart has cut employee hours so deeply that it doesn’t have enough associates on hand to get stuff from back-of-the-store staging areas to the shelves. . . .

Walmart is supposed to have the most sophisticated supply chain management system in the industry. Along with its biggest vendors, such as Procter & Gamble, it has been an early and powerful practitioner of automated replenishment. As goods are purchased nationwide, the computers in Bentonville automatically spew resupply orders. Tons of programming muscle has gone into making sure everything from Pampers to potatoes are delivered to stores with incredible efficiency. Even the trucks are programmed to take the most efficient routes, so as to waste neither time nor fuel.

And then all of it is unloaded into those back rooms at the rear of the stores where employees using pallet jacks and hand trucks transfer the goods to the shelves. (Except for products that are “direct store delivered” —DSD— such as bread, chips and soda, which are replenished by route drivers, for Pepsi, say.) And this is where the system may be breaking down. In the course of covering the company, I’ve been in the back rooms of hundreds of Walmart stores. They are marked by a bit of organized chaos (and the smell of bulky bags of dog food), which is why the stockers are really important. Ultimately, no amount of supply chain computer wizardry can eliminate Walmart’s need for muscle power to get the goods on the shelves.

[NightWatcher]

15. What's killing WM is that their employees can't afford to shop there anymore

What percentage of WM employees are on some form of public assistance because the pay is too low? If wm payed more, most of their employees would put that money right back in the store. WM's target demo can no longer afford to shop there.

[Ratty]

16. Last time I was in Walmart

It was very hot inside and we had to leave after 20 minutes because the heat was exhausting while pushing a cart up and down those aisles. This was a couple years ago during the worst of the recession and I remember thinking they must have turned the air conditioning down to cut costs. I was never a Walmart shopper but I'd go with my family on occasion because they enjoyed it. And yeah, I hated myself for kind of having fun looking around and seeing ALL THAT STUFF, whatever you could think of almost and you could buy it right there. But the heat took that pleasure away.

[CK_John]

17. Retail has about a 50yr life cycle. People just tire of them, just like Sears and Montgomery Ward.

[LWolf]

18. I was hoping one of them would be:

"LWolf won't spend her money there," lol.

Collapsing? It can't happen fast enough.