The Wal-Mart Effect, Part 8731

It seems like it never ends. Who would have thought 40 years ago that a little renegade business from northwest Arkansas would wind up ruling the land (well, at least the retail landscape)?

But that's the way it as, as we all know. And, for what it's worth, I like Wal-Mart. We shop there regularly for nearly everything. I am very much in favor of the free marketplace not only of ideas, but also goods and services. If WM can do it for less and do it legally, then I'm there.

Of course, not all feel that way, and to each his own. I have no problem with these differences. In Chicagoland, there are numerous billboards paid for by various trade unions encouraging all people to not shop at Wal-Mart, Meijer, Sam's Club, and a few other chains that utilize non-union labor. As for me, I keep a copy of the Wal-Mart edition of the Rand McNally Atlas in every vehicle so that if I find myself in a strange town in need of something, I can find a WM quickly.

The effects of Wal-Mart's sheer size are being felt in the grocery industry this year. To wit: Today's paper carried an update on Albertson's, the beleaguered grcoery chain that is trying to sell itself. (In naval paralnce, I think that's an SOS signal.) They've been trying since September, and have thus far attracted several suitors.

Albertson's, like rivals Kroger and Safeway, had formed a triumvirate oligopoly in food retailing by acquiring many smaller regional chains. But Wal-Mart slowly built up steam in its own grocery retailing operations, and several years ago catapulted to first place in the category. Ever since then, the future has not looked good for Albertson's And given what the analysts are saying, they'll probably never be the same, with the new buyer(s) pretty certain to split the company into pieces.

Last June Winn-Dixie, the once-powerful Florida grocer, announced it was closing 322 stores, which is about 1/3 of all their stores. They are exiting the Carolinas completely, and closing many stores in Florida. (You may remember Winn-Dixie in Texas and Oklahoma until a few years ago, but the Wal-Mart effect pinched them before as well...those stores were all closed. Maybe you remember a popular movie with that name in the title.)

Winn-Dixie had always positioned itself as the best meat seller in Florida, but their market position has been eroded steadily as Wal-Mart opens up new supercenters that sell groceries. And, Winn-Dixie is not the first chain to get squeezed out of this market: North Carolina-based Food Lion retreated hastily a few years ago as well.

It's interesting to note what the other big players in Florida are doing. Kash-N-Karry, which tried to compete on price, has now reinvented their entire DNA. They are in the process of renaming all of their stores SweetBay, and positioning themselves as an upscale grocer. They seek to steal Winn-Dixie's meat image, as well as claim the title for the best produce in town (e.g., fruits and veggies), along with giving solid value to customers. Note that I did not say low prices...value is different from low prices.

The other big player is Publix, a hometown favorite if there ever were one. Based in Lakeland FL, they have held their ground through Wal-Mart's insurgence. They continue to build their reputation for high customer service as well as clean stores, good selection, and overall innovation. They are doing so well that other big national players have looked at them seriously as an acquisition target. At present, Publix is exploring the possibilities of entering the organic food market, with tentative plans for a test store based closely on the Whole Foods chain based in Austin TX.

The evolution of the Wal-Mart saga inevitably leads to job displacement, because unless we start eating four meals a day, we simply do not need many more supermarkets. That Wal-Mart has raised the bar on competition cannot be disputed; the problem is that invariably some weaker competitors stumble over that bar and fall to the ground.

But displacement does not always mean job loss. It just means that some workers will have to trade in their apron for the blue vest of Wal-Mart.

I'll be looking for your store in my atlas.

Dr "Because of Wal-Mart" Gerlich