The Reports of Wal-Mart’s Death Are Greatly Exaggerated

Forgive me, but I’m going to defend Wal-Mart today. Yesterday, the Wall Street Journal ran a front page coverstory called, “Wal-Mart Era Wanes Amid Big Shifts in Retail” and in it the article discussed how Wal-Mart’s numbers weren’t so hot, it was struggling in the international market, it was having trouble getting new customers in the US and how other retailers were kicking its behind.

All may be true.

But the tone of the article was one announcing the death of Wal-Mart.

Wal-Mart’s story is over. Fini.

One of the examples cited was where Pepsi decided to launch a new energy drink in Whole Foods, instead of going with Wal-Mart. According to the article, Wal-Mart is Pepsi’s largest customer, accounting for $3.16 billion in sales of drinks and snack foods. And apparently, this decision to go with Whole Foods on this one item, means that it’s “over” for Wal-Mart.

PepsiCo said:

“We thought that was the best place to introduce and test it,” says PepsiCo spokesman David DeCecco. Whole Foods customers’ “health and wellness” profile better match that of likely Fuelosophy buyers than Wal-Mart’s, he says. He declined to name which other retailers were considered for the rollout.

Since when is Whole Foods even Wal-Mart’s “competitor”?

If, in this example, PepsiCo had decided to give the business to Target instead- then yes, I would be a bit more concerned if I were Wal-Mart.

But they’re not even in similar consumer space. Wal-Mart’s average customer has an income of $30,000 and Whole Foods is something like $55,000 or $60,000. Whole Foods opens its stores in certain demographic neighborhoods that are wholely in opposition to where a Wal-Mart would necessarily open. I would also hazard to guess that most of Wal-Mart’s customers have never been in a Whole Foods.

These are completely different markets.

The article takes Wal-Mart to task for struggling to “overhaul its down-market, politically incorrect image while other discounters pitched themselves as more upscale and more palatable alternatives.” All of this amid, what the author describes as, “the country’s growing affluence.”

Really? Are we really that much richer?

Does this Wall Street Journal writer live in Manhattan? If he does, then, yes, I would think you would believe the country is growing more affluent. Otherwise, the middle class and lower middle class look pretty much unchanged to me.

What gets me about the article is that it’s almost like the author is saying there is something wrong with catering to the lower class masses. This is exactly what Sam Walton wanted to do with his stores. His stores weren’t Neiman Marcus and that was just fine. The lower classes (and yes, I’m calling them that) also need somewhere to shop that is, frankly, cheap.

That’s not to say that I don’t think there are things wrong with Wal-Mart’s business model right now. Rival Target has managed to grow its market by taking the cache of the wealthy and the products they love and offering them at low prices (such as the clothes by worldwide designers.)

But that’s not why I go to Wal-Mart. Or why my 87 year old grandmother goes there. As she told me a few months ago, “I go to Wal-Mart to buy my hair dye. It’s only $2.50 a box.”

And that is why the death of Wal-Mart is, frankly, premature.