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Pundit’s Mailbag — Are Supermarket Chains Catching Up to Wal-Mart?

Among the many pieces we have run related to Wal-Mart was one entitled Pundit’s Mailbag — Wal-Mart’s Market Managers, which analyzed Wal-Mart’s new “Market Manager” position and, specifically, how their food support staff — which outsiders might call food merchandisers but are officially called Market Grocery Managers — were impacting merchandising. That piece was prompted by a letter from Keith Anderson of Management Ventures, Inc.

Now Keith sends along another note:

You’ve probably seen Wal-Mart’s June 1 announcement of plans to scale back the opening of new Supercenters, their most profitable retail format and primary growth driver in the US. I wanted to make you aware of some fresh forecasts and analysis MVI has completed on the subject.

According to our latest estimates, Wal-Mart’s US sales will grow at a compound annual rate of 5.6% from 2006 to 2012, lagging the overall US chain retail average of 5.9%. In the nearly 20 years MVI has closely followed the retail industry, this is the first time we have predicted Wal-Mart will grow at a rate below the overall US chain retail average.

— Keith Anderson
MVI (Management Ventures, Inc.)

Right now in Dallas, MVI is doing one of its presentations to help vendors explore these issues more thoroughly, so we appreciate Keith’s taking the time to send us a note.

He draws attention to an immensely important point: That Wal-Mart, it is projected, will for the first time since supercenters started rolling across America, grow more slowly than the average U.S. retail chain.

This is really the subtext of the recent series we have done on Wal-Mart:

First, we looked at the change from DC assignments to dollar-value assignments, plus looked at the growth of “opportunity buys” in our piece Wal-Mart Continues To Change Its Buying Practices.

Second, we spoke with Ron McCormick, Vice President/Director of Produce and Floral for Wal-Mart, who explained Wal-Mart’s reorganization of procurement, including distinguishing between strategic and tactical vendors. We entitled that article, Ron McCormick Of Wal-Mart Elaborates On Its Procurement Reorganization.

Third, we ran Wal-Mart’s Changing Treatment Of Suppliers, which was built around a letter sent from a supply-side member of the industry decrying how vendors on the fruit side of the business felt they were being treated.

Fourth, we addressed the many calls we had received from Wal-Mart vendors that differed in specifics, but all seemed to feel things had changed for vendors at Wal-Mart and in a negative way. We named this piece, Calls On Wal-Mart Point To More Vendor Negativity.

Fifth, we ran ‘Anyone But Wal-Mart’, which pointed out the enormous psychic switch as Wal-Mart, which once was the preferred customer, has suddenly being the one everyone wants to diversify away from.

Sixth, we asked if Wal-Mart’s thirst for lower prices on produce is symptomatic of a value-shift in Has Wal-Mart’s Desire To Buy Cheaper Changed Its Values?

Seventh, we looked at whether an increased use of “opportunity buys” at Wal-Mart meant a lessening of emphasis on other issues, such as the use of RPCs, RFID and food safety. This piece was entitled Wal-Mart’s ‘Opportunity Buy’ Policy Reveals Much About The Company

Eighth, we looked at how an initiative to audit payments from Wal-Mart made to produce vendors was being handled in From The Frying Pan Into The Fire — Wal-Mart Finds Another Way To Alienate Suppliers

Ninth, we heard from a vendor who spoke in defense of Wal-Mart and claimed that suppliers had abused the Wal-Mart system. The piece was entitled Pundit’s Mailbag — In Defense Of Wal-Mart.

What all these articles focus on is changes in the procurement system focused on increasing gross margin. What is interesting is that not too long ago all the buzz was that Wal-Mart had supermarket chains down on their knees.

Yet today the news is all about how Safeway, Kroger and SuperValu are doing just fine — even with Wal-Mart as competition.

It is as if Wal-Mart has shifted focus and, instead of competing aggressively with a phalanx of loyal suppliers at its side, it has decided to boost margins, slow growth and, in doing so, let those competitors that were down for the count rise to fight again.

In the history of retailing, it may prove to be an epochal decision.

Many thanks to Keith and to MVI for bringing this important fact to our attention.

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