Tuesday, November 30, 2004

Why Wal-Mart is struggling. By Daniel Gross

"The stock market unexpectedly cheered the Nov. 17 Sears-Kmart merger. For years, the two legacy chains had been seen by financial and retailing cognoscenti as hopeless laggards that would inevitably succumb to Wal-Mart's superior strategy and execution. But even before the merger announcement, the shares of both Sears and Kmart were walloping Wal-Mart. . . . [u]nited under the smart management of Eddie Lampert, a resurgent Sears and Kmart could become a more effective challenger to Wal-Mart.

Of course, Wal-Mart still dwarfs the combined entity in sales and profitability. And few predict that Kmart and Sears can realize the same kinds of efficiencies that Wal-Mart does. But in retail, distribution and low prices only take you so far. At some point, merchandising—selecting the right product mix at the right price at the right time—makes a difference. . . . James Cramer of TheStreet.com today dissed Wal-Mart: "The stores are dowdy. The aisles are ugly. There's nothing exciting or different or even colorful at Wal-Mart. It feels almost Soviet in its selection and presentation."

Ouch. The larger issue for Wal-Mart investors and management isn't simply decor. It's existential. Could it be that Wal-Mart has reached the limits of its cheapness?"

This is an excerpt from a story on Wal-Mart that appears in today's issue of Slate. I have posted some thoughts on Wal-Mart recently and figured this would be a nice counterpoint. (The full article is available through the embedded link on the post title.)

Of course, this doesn't mean that Wal-Mart is going away, but it is nice to hear negative news about the company now and again.

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