The Age of Wal-Mart

In The Age of Wal-Mart, Retail Forward explores five likely growth strategies Wal-Mart may pursue, examining rationales, prospects, and likely effects on competitors and suppliers. These possible growth strategies include:

1. Food. Wal-Mart’s growth in the past decade was largely the result of its enormous foray into the food market. Although Wal-Mart is now the market leader, it still has a long way to go. Retail Forward predicts that, by 2006, there will be over 2,000 Wal-Mart Supercenters in the US and food sales at Wal-Mart Supercenters will account for approximately one-third of the national increase in spending on food.

2. Foreign. While further foreign acquisitions are expected, Wal-Mart will not be successful as a global retailer if its only advantage is price. It must also provide a superior shopping experience, strong localized merchandising, and a clear differentiation from competitors. However, it is unlikely that Wal-Mart’s overseas expansion will move swiftly enough to fuel the company’s growth engine. The company’s most probable courses of action will be 1) to grow its existing businesses in the US, extending customer reach, and 2) to move into other businesses in the US with the same velocity it moved into food.

3. Fashion and Family. To get more out of existing stores, and to attract a more affluent consumer, Wal-Mart must ramp up efforts in apparel and home goods. Wal-Mart is already a major apparel force in certain categories, Retail Forward’s annual shopper survey indicates. If Wal-Mart succeeds in convincing shoppers to view the retailer as a destination for fashion needs, it will have a huge impact on the market. Wal-Mart will need to focus on expanding its range of merchandise, improving the quality and variety of its non-food assortment, and developing strong private and exclusive labels.

4. Format. To reach more markets and more consumers, Wal-Mart will drive growth through multi-channel delivery of its core businesses. By opening smaller food stores, developing formats for urban shoppers, and potentially leveraging its strengths by developing drug, dollar, and convenience stores, Wal-Mart could overcome the limitations created by its Supercenter focus.

5. Fringe. Wal-Mart will seek to test the outer boundaries of what consumers are willing to allow Wal-Mart to be. The company will seek to expand at the fringe of its core business by developing sales in highly new and unusual categories. Wal-Mart’s aggressive rollout of fueling stations could be followed closely with the company selling used cars, financial services, home improvement, and foodservice.

The Age of Wal-Mart Awaits

Wal-Mart’s growth over the next five years will revolutionize global retail markets and render the retail industry and supplier industries far more consolidated than they are today. However, its size will test the limits of its organizational scale. The challenge for Wal-Mart will be to sustain growth without straying from its core strengths, and without spreading its wings too thinly.