Tuesday, June 1, 2010

Wal-mart, Target Think Small as They Grow as Grocers

I want to expound a bit on my comment on Digg earlier today.

Wal-mart has no business getting involved in smaller stores or expanding their grocery option. They do one thing and it's worked very well for them: Buy retail products from producers in bulk, at discount, and sell to the masses at a discount. The name of the game is volume. Groceries are, at their core, a local and regional affair. This is the antithesis of what Wal-mart does. Yes, I know, they carry some local products in their stores, but that's not where their bread is buttered and it is at best a cynical gesture to the legendary Wal-mart Haters Club.

They might bully their way into the grocery market, but it will be at great expense. Sacrificing what they did to get them big to try to enter a different market will punish their share price and make investors (and more importantly journalists) question their viability as a company. It's so formulaic: Big corporation maxes out in their core competency, tries to expand to other markets to appease the investor's insatiable need for growth, fails and takes a hit, returns to "core business." If this sounds like a short opportunity for Wal-mart, it is. Not quite yet, but soon.

1 comment:

  1. I work for a company that supplies fresh produce to WM.

    If they're serious about this, they need to make their barrier to entry a LOT lower. They are a major PITA to work with.